Leasing your SUV represents an affordable way for you to enjoy a new model without the huge expense. Since when you lease an SUV, you are financing the use of it during ownership, you end up paying much less than you would with a vehicle loan–where you finance the SUV’s total cost.
This method is also beneficial in that you have more flexibility for the future. This means if you want to forgo owning an SUV for a few years or even upgrade to a larger size to accommodate your family’s growth, you have the freedom to do so without incurring additional costs.
However, leasing isn’t a perfect solution for everyone. If your plan is to own the same SUV for the foreseeable future then leasing isn’t the best option, since you’ll end up paying more relative to having a vehicle loan.
In addition, there are common mistakes people make with leases that could cost you. To help you avoid these fees, here are some common leasing mistakes and actionable steps you should take to avoid them.
Failing to Account for Mileage
When dealers lease SUVs, they do so in hopes of retaining maximum value when you bring it back to the dealership. That way after you finish your lease, they are still able to charge top dollar. One of the ways they do this concerns the amount of mileage you are allowed to place on the leased SUV.
Your lease outlines the amount mileage you can drive. The amount of mileage varies based on the terms of the lease such as its length. If you exceed the total mileage you’ll have to pay a fee for every mile driven over the amount.
To demonstrate, say you have a three-year lease on a Chevrolet Equinox and the contract states you can put up to 36,000 miles on the SUV during those three years, equating to 12,000 miles annually. However, during the time you had it, things might change. Your family might plan on taking more trips; your kids could be growing up and joining sports teams, requiring more miles driven annually.
Using these examples, when you take the Equinox to the dealer you have driven $38,500 miles, which is 2,500 miles over the amount specified in the lease. For every excessive mile driven, the fee is $0.25, totaling $625. This is the amount you would have to pay to close out the lease.
While it’s hard to predict your future, you should keep your driving behaviors in mind. Before signing up for a lease, think of the last vehicle you owned and how many miles you drove it annually. Do this for the past three years then take the average. If the average exceeds the number of miles the lease allows you to drive annually, you can do two things.
First, you can opt for a higher mileage lease. With this option, you have more flexibility on how many miles you are allowed to drive the SUV annually. This provides you with more flexibility should your requirements change. The only drawback is you’ll pay a higher monthly payment because the more you drive the SUV, the less value it retains.
The second option is to forgo a lease entirely. If you want the freedom of driving your SUV whenever you want without having to look at its mileage in fear, then a lease isn’t a smart option.
Declining GAP Insurance
When you are filling out the multitude of paperwork, the dealership’s representative might mention GAP insurance as something you can add to the lease for a small fee. GAP insurance protects you in the event a theft happens or an accident totals your SUV. Here’s how it works in further detail.
Say an accident happens and insurance decides to total out the SUV. When determining value, the provider will account for the fair market value of the SUV. And since the SUV is no longer considered “new” once driven off the lot, that value might drop significantly. In this case, the insurance payout might be less than what you owe on the lease, meaning you would need to pay the difference to close it out.
This is where GAP insurance comes in. GAP insurance pays the difference–up to a specified amount–between what you owe on the lease and what your insurance pays for the totaled SUV. GAP insurance is inexpensive and can save you a significant amount of money if your SUV is totaled or stolen. If the dealership doesn’t offer this coverage, you can check with your insurance provider, as many of them do provide this protection.
Failing to Take Care of the Vehicle
When you lease an SUV, it’s no different than renting a property. If you fail to take care of it–it becomes dirty, things break, etc.–you will pay damage fees once you turn in your SUV.
Keep in mind dealerships want their SUVs back in near perfect condition. While most won’t penalize you for normal wear and tear that occurs, if you fail to clean it adequately, they are well within their right to charge you for it.
Cleaning is only one aspect they look for. Vehicle maintenance is another area you must be mindful of when deciding to lease an SUV. Luckily, this shouldn’t be an issue as it’s inexpensive to maintain a leased vehicle.
The reason for this first concerns warranty. Since most leases last between two to four years, you’ll be under the manufacturer’s warranty for most of the SUV’s parts during this time. This means if a part malfunctions, you won’t have to pay for it.
Furthermore, many dealerships make maintaining leased SUVs affordable. Often, you receive free maintenance for the first few years of ownership. This includes oil changes, tire rotations, even vehicle inspections. Therefore, there’s no reason to neglect to maintain your SUV, as you will incur few expenses to do so.