The basic idea in leasing a car is that, when you lease a car, you don’t own it! Usually, a leasing company owns the car, which lets you use it for a specified period under an agreement. At the end of the agreement, you must return the car or you can even choose to buy it. Lower monthly payments and interest rates; flexibility of contract period and most importantly the freedom of driving the desired car in every few years are a few factors that make leasing a preferred option towards owing a car for many people. Though, there are a number of potential pitfalls in leasing a car, that can’t be ignored! Here are some of them:

• If you continually lease your cars, you will have never-ending car payments. Thus, if you want to own a car free and clear for a lifetime, then leasing is not the best option for you.
• Even if you want to buy the car at the end of the lease period, you will find that you are paying significantly more money than if you had bought it initially.
• Usually a lease contract sets out how many miles you may drive in a year. If you exceed the annual mileage limit, you will have to pay extra. Therefore, if you need a car for extensive driving, leasing probably is not for you!
• If you want to end a lease before it expires, you may end up paying very high. Early termination fee for a lease could be huge, since you might have to pay everything owed on the remainder of the contract. Even if you don’t have plan for early termination, it can happen in the form of auto theft or an accident.
• If the car gets stolen, your insurance will reimburse for the car’s market value only, not for what you still owe on your lease. However, you can consider buying extra gap coverage to protect yourself against such a situation.
• If you return the car damaged at the end of the lease contract, you may be charged for repairs and restoration.

This entry was posted on Friday, February 20th, 2009 at 9:28 am and is filed under Buying a Car. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.