Car Care

Lease Driver Beware: Avoiding Large Penalties When Turning in the Vehicle

You may have breezed through all the small print on the lease contract and went straight for the dotted line because you could not wait to get your hands on the keys to the new lease vehicle that you could not really afford but were dying to drive. You could deal with the fact that you had to make a security deposit, title and license fees, first and last monthly lease payment, and a minimal down payment. Now, reality is setting in as your realize just how few miles you really can drive let alone all the other penalties that may hit you at the end of the lease. That low down payment and reasonable monthly payment does come with a few catches!

Do not feel trapped! Enjoy the vehicle and learn from your experience by following some helpful tips that will help you keep those costs to a minimum when your time is up with your beloved ride.

How Much????? The World of Lease Fees

There are a number of costs that come a calling at the end of a lease. Get out your calculator and take a deep breath:

Be aware that if you sign an “open ended lease” versus a closed-end” lease, you will have to cough up more money for an “end-of-lease” payment if it turns out the residual value of the vehicle is higher than the actual value. Not sure what that means? The dealer will put an estimated residual value in your lease contract, which is an approximation of what the vehicle is believed to be worth at the end of the lease. If the vehicle remains in sterling condition, it could actually appraise for more and you could receive a refund, but sometimes people are surprised that they end up owing more on the vehicle than its worth.

By the time you add up all the costs that could be involved in the lease, it might have been the same to buy the vehicle on credit. However, when a person does not have much of a down payment, the lease seems like the way to go.

What Not to Do with a Lease

There are some decisions that will cost you even more, such as trying to end an auto lease early. Even if you do have a good reason, the dealership will not let you off easy. It is important to remember that a lease is a financial contract, so there are no free rides. If you want to do a buyout, this is not going to come cheap because the difference between what you paid on the contract and the market value of the vehicle now that you have had it for a while may cost you thousands not to mention early termination penalties. Ouch!

There are some ways to lessen the pain:

There is a “do” however. You may want to consider “gap” insurance on a lease. If the vehicle is stolen or totaled, it will cover the difference between the value of the car and what you owe on the lease. Otherwise, you could get stuck with still paying lease payments.

Maximizing the Value of a Leased Vehicle

There are a number of steps you can do to ensure a cost-effective vehicle lease experience:

Do not be afraid to haggle with the dealer over the sales price of the lease vehicle if you are interested in buying it. The dealer would rather get rid of the vehicle sooner than have it sit on the lot for any period of time because this drives up their inventory costs.