5 Tips for Leasing a New Car - NYCM Insurance Blog

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Jun 8, 2022

5 Tips for Leasing a New Car



Make Sure You Know These 5 Tips Before Leasing Your Next Vehicle!

 

Whenever you are asked to sign a lease it’s a good idea to do your homework first, and this is especially true when it comes to leasing a new car. Signing a lease is a big commitment and between the overall cost, down payment, residual value, mileage limit, and other factors, you have a lot of things to consider before you make your choice.

 

While leasing a new car may not be for everybody, it can be a great option for people who want to drive a new car every few years with a payment that’s generally less costly than buying and financing a car. If you’re new to leasing, you are probably on the lookout for tips to ensure you get the best deal possible. We’ve got you covered: continue reading to learn five tips for leasing a new car!

 

Shop Around

 

Exploring your options before leasing a vehicle will benefit you in a number of ways. First, by visiting multiple dealerships and test driving the cars you like, you can narrow down your options and get an idea of what you want.

 

You may be asking “Can I negotiate the price of a lease?” and the answer is yes! This is another benefit to shopping around: you can give yourself multiple options to find the best deal. If your negotiating efforts come up short and you can’t come to an agreement on a lease, don’t feel pressured! Move on until you find a lease you are comfortable with.

 

Consider the Cost

 

When you lease a car, you are essentially renting it and paying the lessor for the estimated amount of depreciated value over a set term. This is unlike when you buy and finance a vehicle, where you are slowly paying to own it over time. For some people who are hoping to move onto a new car again in a few years, this is a good option because a payment on a lease is often cheaper than a payment to buy and own a car. But for others, it may be more cost effective to explore other options.

 

A big factor that will determine your payment amount is the vehicle’s residual value, which is the estimated value of the car at the end of the lease term. The residual value is what the car can be bought for should you wish to buy it after your lease. Another variable is the interest rate you will be paying. As with any loan, your credit score will affect the amount of interest you pay—the higher your credit score, the less you will pay on interest and vice versa. Plan ahead to know your budget so that you can find something within your price range.

 

Know Your Mileage Needs

 

Before signing a lease, it is a good idea to understand how much you will be driving your leased vehicle. A leasing mileage cap is established before a lease is signed dictating how far a car can be driven over the duration of the lease. It’s common for leases to offer limits of 10,000, 12,000, and 15,000, with leases increasing in price as the mileage limits increase.

 

Because a vehicle loses value the more mileage it has, a fee is predetermined in a lease for exceeding a mileage limit. While you may be inclined to opt for a lease with a limited mileage cap to save some money, make sure you plan accordingly to avoid paying additional fees and penalties if you happen to go over.

 

Think About the Term

 

The term of a lease is the length of time you will rent – and consequently pay for – the car. Short-term leases can range from 12 months to 36 months, and long-term leases from 36 months to 60 months. The shorter the term is, the higher your payment.

 

Before you sign a long-term lease, remember that a lease is a binding contract and while you can get out early, there will probably be some penalties for doing so. On the other hand, if you aren’t ready to part with the car at the end of your lease, some lessors may allow you to extend your lease. While it can be difficult to know your vehicle plans a couple years down the road, try to plan ahead and put yourself in a place you want to be when your lease is up.

 

Protect Your Wallet with Gap Insurance

 

Once you have decided on a vehicle and are ready to purchase car insurance, don’t forget about gap insurance! Some car leases may already require and include gap insurance, otherwise known as guaranteed asset protection insurance, but it’s something you should consider regardless.

 

Because of car depreciation, in the event that your leased vehicle is declared a total loss, you could be in jeopardy of footing a hefty bill. For example, if your new car becomes totaled or stolen while you owe $15,000 on it, and it is determined the vehicle is currently worth only $12,000 because of depreciation, you would have to pay the $3,000 out of pocket.

 

Gap insurance exists to help cover the gap between a vehicle’s actual value and how much you owe on it. It can be especially helpful in the first year of a new car’s lease, as it can depreciate up to 20 percent during that time frame.

 

The Insurance Institute of America recommends that anyone who is leasing a vehicle should protect themselves with gap insurance. Click below to contact an agent today to discuss your options!