Car Leasing: Maintenance, Repairs, and More

Get key information about a car lease before you sign on the dotted line.

Many new car drivers lease, rather than purchase, their vehicles. Although leasing can be a good deal for some people, for many it's not. Before the dealership persuades you that leasing is the answer to your prayers, you should have a good understanding of the advantages and disadvantages of a lease, where to get a good lease deal, how to get all the facts about cost, and what happens if you have to cancel the lease early.

What's a Car Lease?

When you lease a vehicle, you don't own it. You get to use it during the lease term, for a monthly fee, but must return it at the end of the lease. In many leases, you have the option to buy the vehicle at the end of the lease.

Advantages of Leasing

There are two main reasons people lease, rather than buy, a vehicle:

  • People who like to drive a new car every few years will usually pay less by leasing rather than buying. And they also don't have to deal with getting rid of their old car—they just turn it in at the end of the lease period.
  • Lease payments are usually lower each month than loan payments for any given car. As a result, many people lease in order to drive a more expensive car than they could afford to buy.

Disadvantages of Leasing

Although you may be eager to drive an expensive new set of wheels, consider the following disadvantages to leasing a car before you make your final decision:

  • If you continually lease your cars, you will have never-ending car payments. If you look forward to paying off your car and owning it free and clear, don't lease.
  • If you decide to buy the car at the lease-end, you'll pay several thousands of dollars more than if you had bought it initially. For example, if you buy a car, paying $500 a month for four years, you'll pay a total of $24,000. You might be able to lease it for only $400 a month (total payments of $19,200), but you'll probably have to pay another $8,000 to keep it—and if you finance that $8,000, you'll pay even more.
  • Most leases charge you as much as 25 cents per mile if you exceed the annual mileage limit—usually between 12,000 and 15,000 miles. If you drive extensively, leasing probably isn't for you.
  • It's expensive to break a lease early. If you no longer want or can't afford to keep your car—for example, because you lost your job or your financial situation changed—you will have to pay a hefty early termination fee.
  • If the car you lease turns out to be a lemon, in most states the leasing company has to do the complaining—remember, you don't own the car—in order to get redress. California is one state that doesn't follow this rule.
  • Leasing companies often require you to purchase very high levels of insurance, which can be expensive.

Maintenance and Repairs

Your lease agreement will specify who must pay for maintenance and repairs during the lease term. In addition, the agreement should come with a manufacturer's warranty. Ideally, it will cover the entire length of the lease and the number of miles you are likely to drive.

Most lease agreements require you to pay for excess wear and tear. This means that when you return the vehicle at lease-end, the dealer could charge you to fix anything deemed excessive by the lease agreement. Read this portion of the lease carefully. After all, every car is going to have a little wear and a few nicks after three or four years' use, and you want to be sure that the wear and tear standards are reasonable.

Gap Insurance

Look for a deal that includes "gap insurance" or waives "gap liability." If the vehicle is stolen or totaled, gap insurance will pay the difference between what you owe under the lease and what the dealer can recover for the vehicle—a difference that could amount to thousands of dollars. Some leases waive gap liability.

Canceling Your Lease Agreement Early

Usually, you cannot cancel a lease agreement before the end of the term, unless you're willing to pay a substantial penalty.

Canceling a lease. If you want to cancel your lease, look carefully at the provision describing what happens if you default or want to terminate the lease early. Ask the dealer or lessor to calculate how much it would cost you to terminate the lease early.

Breaking a car lease if you're in the military. Under certain circumstances, if you're a member of the military and you're ordered to move or you're deployed, the federal Servicemembers Civil Relief Act allows you to cancel a car lease—and you won't have to pay an early termination charge or penalty. (Learn about how to break a car lease if you're in the military.)

To learn more about leasing a car, see Nolo's Encyclopedia of Everyday Law, by the Editors of Nolo.

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