Millennials like to lease cars, but watch out for these pitfalls

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Millennials like to lease cars, but watch out for these pitfalls
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Forget about the much-hyped predictions of millennials abandoning car ownership en masse.

Leases among those aged 18 to 34 grew by 49% between 2012 and June 2016, according to numbers from DealerTrack. (Full disclosure: DealerTrack and Cox Media Group are under common ownership via Cox Enterprises.)

Clearly, millennials won’t be relying on Uber or public transportation their entire lives! Since leasing is a favorite method of getting into a car for today’s millennials, what does Clark have to say about it?

‘Leasing is usually a bad deal because manufacturers and dealers like to trick people into getting more car than they can actually afford. They do that by using up-front fees to create ultra-low monthly payments. That disguises the true cost,’ the consumer champ says.

‘It may seem cheaper than buying, but you’re mortgaging your future. After a few years of leasing a vehicle and making payments, you own nothing. And stay away from four- or five-year leases unless you want to face financial Armageddon!’

Read more: 3 things every driver should know before buying gas

The worst leasing gotchas

If you do decide to lease, beware of these common gotchas…

Low mileage allowances

Make sure your lease agreement doesn’t come with an exceedingly low mileage allowance. If you drive 15,000+ miles annually and your lease only allows for 12,000 miles each year, you’re going to have to fork over extra cash.

It’s not uncommon to pay 20 cents/mile over your mileage allowance. So in this example, you’d be responsible for an extra $600 annually or $50 monthly. Watch out and know what you’re getting into based on your driving habits.

Excessive wear-and-tear assessments

Clark has said that the average leased vehicle gets hit with wear-and-tear charges to the tune of nearly $2,000 when it is turned back in at the end of the lease.

When you lease a vehicle, be sure to take extensive photographs of the interior and exterior before you drive off the lot so there’s no question that you’re returning it in top shape.

If you do spill something in the car or tear the upholstery, fix it before returning the car. It will be much cheaper for you to have it repaired on your own than to let the dealer charge you their inflated repair prices. 

Totaling your car in an accident

If your leased vehicle get totaled in an accident, you could be responsible for a giant gap between the amount the insurance company will pay and the stated residual in the lease. Ask the dealer when you lease for free gap insurance to protect you.

When does Clark thinks it’s acceptable to do a lease?

There are only two circumstances when he suggests doing a lease. The first is if you like new wheels all the time and you only want to worry about gas, oil changes and routine maintenance on your vehicle. Then it’s fine to lease a new car every two or three years, but no longer than that.

The second instance is when luxury automakers offer factory-subsidized leases where they eat a lot of the cost. The luxury nameplates hate to cheapen their brands with a bona fide ‘sale,’ so often they offer such leases to help move extra product.

Is it possible to get out of a lease?

The good news is yes, it is!

It is possible to get approval for a qualified person to take over your lease. LeaseTrader.com is one site where you can begin your search. It’s an auto lease transfer marketplace, which means you can find someone to assume your lease obligation and you walk away lease free. 

But you’ve got to be realistic and make sure you have a car that would be desirable to a potential fellow lessee.

Read more: These are the 7 best American cars you can buy

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Theo Thimou About the author:
Theo has co-written several books with Clark Howard, including the New York Times #1 bestseller Living Large in Lean Times. As a single widowed parent of two young children, he strives to bring unique savings tips to men and women like him who must face life without their spouses. He can be reached at [email protected]
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