There are many advantages to leasing a vehicle. Whether you buy or lease depends on your own personal situation. Nevertheless, care should be taken when signing a lease as there are some important factors that must be considered.
The Finances You Should Consider
Deciding between leasing and buying a new car can be very confusing. If you’re in the market for a new car, you should definitely watch this excellent video that compares your financing options:
Lease Clauses and Fine Print
Some lease agreements contain clauses that could make life very difficult for you. For example, there can be charges for excess mileage over the lease term, charges for wear and tear of the vehicle or even a clause requiring that all repairs to the vehicle must be done at the leasing dealership. Imagine being 1,000 miles away from home, having an automobile accident and your lease requires that repairs be done by the leasing dealership.
Recently, an individual who leased a luxury automobile on a 36-month lease found his lease contained a clause that required the automobile be repaired with “new parts”. Insurance companies are required under their insurance policy to repair your automobile with parts of “like kind and quality”. This means that if your car is two years old, parts from a two year old car can be used to repair your vehicle. The difference in price between new and like kind parts can be significant.
In the case of our individual, the vehicle was a 2006 luxury automobile and a serious accident occurred just after the 30-month mark. The difference between the new and used parts on this vehicle was $12,000. That $12,000 was not covered by his insurance policy!
If your lease contains this clause, please let us know. Coverage may be available to pay for “new parts” for a limited period of time (Note: this time period may be less than the term of the lease). Ask us about availability before you sign the lease.
Remember, a lease is a legal document. Read it carefully and if there is anything you do not understand, don’t sign it! We suggest you have the leasing company add a clause to the contract giving you three or four business days to review the agreement and cancel it without penalty if there are any points with which you don’t agree.