Insurance Do’s and Don’ts When Leasing a Car

Screen Shot 2016-07-08 at 8.14.15 AMIf we don’t live in a place that offers reliable public transportation to get point A to point B, getting any place is going to be struggle. Once we’ve had enough of the hassle in trying to get to work, leasing a car doesn’t seem like a bad idea. Sure, we’ve heard some horror stories, but we won’t be like those other saps who fell into a raw deal. To be sure that we don’t, following (or at the very least) being familiar with what and what not to do should help us out.

Making the Right Choices: Leasing a Car

Doesn’t it seem strange that there isn’t some sort of class that teaches us how to buy or lease a vehicle before we graduate from high school? Besides that, not all of us have the parents who can teach us themselves—so it’s left up to us to learn. Leasing a car is a big decision and we want to get it right; it isn’t really the time to learn a big life lesson in how not to lease a car. No one wants to make a big mistake when money is involved.

DO: Research the Car

Before you head down to the car lot, know what kind of car you’ll want to drive. Research vehicles with top safety ratings and make sure your car of choice is equipped with top-of-the-line safety features. According to the technology blog MakeUseOf, cars.com, autoweb and autotrader offer excellent information about vehicle models and their track record. Knowing the safety ratings and cost of the vehicle before you head to the lot will put you a step ahead in the game.

DO: Read the Contract

We get so excited at the prospect of driving a new car that we sometimes put down our John Hancock before we read the fine print. If we don’t take the time to read the contract in detail, we could be signing our names to a less than optimal agreement. Keep in mind that while the dealer’s website says “low monthly lease,” they will try to upsell you. Make sure that what you have agreed to pay is listed in the contract.=

DO: Lease a New Model

Probably one of the best things about leasing a car is getting your pick of the newer models. Edmunds reports that a big advantage of leasing a new vehicle is driving a superior vehicle at a reduced cost every month. The Wall Street Journal says that by choosing a car with good gas mileage, superb safety ratings and high dependability, your insurance premiums will be lower and your lease affordable.

DO: Get Auto Insurance Coverage

When you decide to lease a car, you will be expected (and required) to get an auto insurance package by the bank or auto dealer financing your leased vehicle. The non-profit Insurance Information Institute (III) tells prospective leasers that they will be required to purchase comprehensive and collision coverage on top of their state mandated insurance policies.  While this may initially sound like it’s going to cost you a lot of money, it won’t. When you look for auto insurance quotes online, websites like CoverHound will help you find an insurance-bundled package that combines all of the above policies into one cost-effective monthly rate.

DON’T: Put a Down Payment on the Vehicle

RealCarTips advises that you do not put a down payment (also referred to as capitalized cost reduction) on your leased vehicle. Remember, leasing a vehicle is not owning a vehicle. In the event that your leased vehicle should be stolen, your insurance company will pay the leasing company for the loss, not you. This means that you are out the down payment and a car to drive.

DON’T: Cancel Your Lease

If you decide you don’t like your car or found a great deal online for a used one you would prefer to buy, wait to cancel your lease. If you cancel your lease before the agreed-upon end date, the leasing company can charge you a hefty fine. If you do want to get out of the lease, try finding someone who is willing to take it over, this will save you from draining your bank account.

DON’T: Customize the Vehicle 

As we discussed earlier, leasing a car is not the same thing as owning a car. When you lease a car, you are essentially “renting” it for an agreed-upon period of time. Therefore, it is not your car to customize. Think of it this way, when we check out a book from the library, we don’t write in its pages or cut out the pictures to make it a better book, we leave it as is because it isn’t ours. The same can be said of the leased vehicle; because it isn’t technically yours, you can’t paint it a new color or have it lifted.

DON’T: Have an Open-End Lease

An open-end lease forces the lessee (you) to make an inflated payment at the end of the leasing contract. Commonly referred to as a finance lease, an open-ended lease essentially takes money from you without any reward.

Now that you have the tips, go out and find that car!