There are many benefits to leasing a car, but there are also a few limitations to deal with, and one of them is the lease mileage limit. The following will explain everything you want to know about your mileage limit and what happens when you go over it.
Why is the Limit Vital?
The leasing company does not have ulterior motives when they set those mileage limits. What you should keep in mind is cars depreciate, and you are just paying for the estimated depreciation value during your lease. This estimation includes a specific range of miles, which is the reason you are limited.
Every mile driven takes away from the value of the car, which is the main reason leasing companies put these limits on you. The problem is leasing companies do not check on you to make sure you are honoring your contract. The company is going to just count the total miles at the end of the lease.
What Happens if you go Over the Limit?
It can be hard to keep tabs on the number of miles you drive in a month. This is not to say that it is impossible rather that it is a little difficult. A person’s life is filled with many distractions, from work to children, so many people just do not have time to pay attention to the amount of miles that are driven each month.
First off, it is important to remember that the charges for the extra miles you drove are not really penalties. You are paying the leasing company the unexpected depreciation that you inflicted on the car. You agreed to not exceed the limit, but you did.
The rate you end up paying per mile depends on the leasing company and the car itself. Of course, cars that do not cost much will have lower rates than mid-priced cars or even luxury cars. You have to remember that you agreed to how much you were going to pay per mile when you signed your contract, so there is no wiggle room there. Most economy vehicles charge about $0.15 per mile while mid-priced cars can be $0.20 or $0.25 per mile. Those who lease a luxury car will likely pay up to $0.30 for each mile they go over. You have to pay the total accumulated amount at the end of your lease, too.
There is a lot you can do if you know you are over your mileage limit. For one, you can stop driving and start using other modes of transportation like public transportation, carpooling, or ride-sharing apps. Doing this should definitely save you money at the end of your lease.
Some people decide to just buy the car and avoid paying the extra miles, but this is not always the best idea because the costs of buying the car often exceeds what you would pay for those miles.
You should also avoid the idea of returning your car early just because you found out that you went over your limit. Early termination fees and penalties are simply too much to deal with, so it is better to adjust your lifestyle for the remainder of the lease. It might be a good idea to start calculating how much you are going to owe in additional fees now. This should give you a good idea of how much money you should save so that you can pay those miles without it hurting so much.
Those who merely suspect that they went over should check as soon as they can so that they have more time to prepare for the charges that you will not be able to escape. You should also download apps that help you calculate how many miles you are driving per day from now on. Every mile driven is one more that you are going to have to pay at the end of your lease, which makes it pretty important that you know how much you are driving every time you start your car.
You should also consider calculating just how much you actually drive per year. Knowing the estimated amount of miles you need every year should give you an idea of how many miles you need to buy the next time you lease a car. The miles you purchase at the beginning of your lease are non-negotiable, so knowing the exact amount of miles you need per year should help prevent this issue from sneaking up on you again.
You can talk to your car leasing agent if you have additional questions about your mileage limit or the fees that you are going to pay at the end of the lease. Hopefully, you found out early so that you can use some of the suggestions here. Do your best to pass along this information to friends or family members who might appreciate the tips, too.
Those who have leased a new car know that it comes with a lot of benefits worth smiling about. Perhaps this is the reason some ask if it is possible to lease a used car. Leasing a used car would mean lower monthly payments with perks that simply do not come with purchasing. You will be happy to know that you can lease a used car, but this is a pretty small market.
The Appeal of the Used Car
There is no doubt that used cars are appealing because they are priced lower than new cars. Depreciation has already slowed down, which should help keep the monthly installments desirable. Of course, one of the best perks of leasing a used car from a dealership is they are certified.
Of course, you will return the car once the lease term is over. You know that purchasing a car could force you to pay those payments five to eight years. That is a pretty big commitment that those leasing do not have to deal with since most lease terms last about two to four years.
All this might sound good to you so far, but now you are wondering why used car leasing is not popular. The truth is that there are a few reasons why this is the case.
Why Used Car Leasing is Not Popular
Leasing a used car represents a greater risk to you and the leaser, which is one reason this type of leasing has not caught on. This is not to say that there are no ways to reduce the risk. Most people know that a car that is three years old is twice as likely to have car problems than a one-year-old car.
The warranty could be gone meaning repairs are now going to come out of pocket, and you know how expensive auto repairs could be, not to mention the hassle of finding a trustworthy mechanic. There are a number of things you can to reduce this risk. For one, you can make sure that you keep up with your maintenance appointments that should help prevent major problems. It is also important to consider purchasing the bumper-to-bumper warranty that is offered, and it should last the entire lease term. This should make it easier to avoid car repair expenses.
It should also be noted that predicting how much a used car is going to be worth at the end of the term is a little harder. A leaser that believes the car will not be worth much might make the payments higher than they should be. A dealership that predicts high value retention might make the car’s price higher than it should be.
What you want to do is make sure that you study the cars you are going to lease. It is up to you to find out which cars may retain their value better than others. One thing to remember is that most luxury cars retain their value and so do sports cars and a few SUVs. Try to go online and figure out what car works for you before you lease your used car.
You can also ask the dealership itself or a number of them to figure out which cars they believe will retain their value well. You want to stick to those cars so that you will end up paying a reasonable monthly payment without paying more than you need to.
Yes, all this does seem like you are going to be working more than you would have if you just leased a new car, but try to remember that you will not be paying large monthly payments or a big down payment that can hurt a person’s finances.
Be sure you remember some of the following tips when you lease a used car:
–Leasing a used car means there may be some wiggle room. Try to bargain with the dealership to get a better deal. There may be some resistance, but the likelihood of them figuring out a way to accommodate you is high as long as you are persistent.
–You want to make sure that any warranty offered lasts as long as the lease does. Remember, you still have the option of purchasing a car service contract from a third party, so use this fact to see if you can get what you want.
–This is a used car, so make sure you treat it as such. You want to make sure you inspect its history. Vehicle history reports are online and should be able to reveal major accidents or any other information that you can use to get a better deal if you still want the car after reading the report.
–Be sure to talk to a trusted mechanic to have the car inspected. Yes, the car has been certified, but a third party could double-check and give you an unbiased diagnosis.
Hopefully, these points made used car leasing a little easier to understand. Now, you just have to figure out if this is the best choice for you.
Understand the Taxes
The first thing you should know is how taxes are charged because this is one way that leasing helps you out. Okay, so you know that purchasing a car usually means you are financing it. The financing process involves an entity buying the car for you, and now it is up to you to pay the lender back. This company is not going to lend you money without getting something in return, which is why you end up paying interest. Keep in mind that the new car loses value immediately.
It should be noted that purchasing the car means the monthly car payments are going to be based on the entire value of the car and so are the taxes. Now, every state is different, so the amount of taxes you are going to pay to purchase a car is going to be different depending where you live, but purchasing is still going to yield a higher tax.
When you lease, you do not have to worry about paying taxes on the entire value of the car. You are going to be paying the depreciation value during the lease term, which is calculated by the leaser. The taxes you are going to owe are going to derive from the estimated value. Again, this can change from state to state, but you can be sure that it is going to be cheaper than what you would pay if you buy the vehicle.
This is a difference that benefits anyone who leases a car, but there is still more to tell.
Tax Benefits for Business Drivers
Those who use their car for business purposes might be able to claim even more benefits on top of the ones mentioned. You may be able to deduct the business portion of the lease payments on your taxes. It is important to consider the fact that the amount that is deductible can change at any given time, meaning that what you deduct one year may not be the same the next. This is why it is highly recommended that you talk to a tax specialist to ensure that your numbers are being entered correctly.
If you feel this is not enough, you may be happy to know that you can also deduct maintenance expenses and even gas when you use your car for business purposes. Of course, details are very important to be able to do this accurately, which should avoid any problems with the IRS.
First, you will need to keep a copy of every receipt for your expenses, such as gas and your monthly installments. You are going to want to keep an accurate time log that shows when and how you used your car for business purposes.
You want to make sure that you jot down all of this information digitally and back it up using paper and cloud services. There are even some apps you can download that might prove helpful. You do not want to find yourself needing this information during tax season and discover you lost it. Entering all of this information digitally helps ensure that you double check your information to avoid errors that could cost you money later.
Those who do not use their leased car for business purposes should consider starting up a side business that requires driving so that they can take advantage of some of these benefits.
Be sure to consider having a tax consultant deal with all of these numbers for you because the possibility of errors increases when you start calculating these benefits.
You can see why many people are opting to lease a car instead of buying one. It is a good idea and a win-win situation for you because of all the money you get to save while enjoying a reliable, new car.