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Disadvantages of car leasing

Early Termination of the Car Lease - There are most likely fees involved in the early termination of a lease, fees for which you will be responsible to pay. Early termination can be involuntary as well. If the vehicle is stolen and not recovered, or totaled in an accident, the lease is forced to end. Very often your insurance reimbursement will not cover the entire balance due on the lease. Therefore you pay the rest. However, many leasing companies offer gap insurance, which provides you financial protection in such an event.

Also, when paying a car lease, you are paying for the depreciation plus interest. The depreciation is calculated as the difference between the cap cost and the residual value. While the depreciation is paid off evenly over the lease term, the depreciation of a car is not linear. The difference in the actual depreciation and the paid depreciation is known as the gap amount, and will also be paid in a prematurely terminated lease.

Additionally, some leasing companies will require you to pay off the remainder of the car lease contract before releasing you from the lease. Others will require a flat rate termination fee. Make sure you read all the fine print before signing your lease contract.

Insurance Costs - Leasing a car can bring on higher insurance rates since you may require more coverage than you're used to paying. Contact your insurance agent to get an idea of what you insurance costs will be before signing a lease.

Car Mileage - Most leases have a limit on the number of miles you may drive, usually anywhere between 12,000 and 15,000 allowable miles per year. Excessive mileage equals more money, usually about 10 to 15 cents per mile over the agreed upon yearly figure. This can add up fast, especially if you drive a lot.

Wear and Tear - Like mileage, there are limitations on the wear of a vehicle under a lease. Exceeding these wear limitations may result in more fees.

Credit worthiness - Since the car you will be driving belongs to someone else, that someone else needs to be confident that you will keep the car in good condition and make your payments on time. This means that credit requirements are more stringent on potentially leasing a car. Therefore, if your credit history is spotty, your chances of getting approved for a lease will be spotty as well.

http://www.automotive.com/auto-loans...sing-faqs.html