Is a High Mileage Lease Right for Me?
Driving a car is essential for many people. If you have a car you love that is reliable and affordable, or if you live in a city with great public transportation, you’re very lucky! But if not, you’re probably thinking about how and when to get one.
Getting a new car is exciting, but the process of getting a new car can be complicated, frustrating and unnecessarily costly if you aren't careful. There are so many important questions to answer beforehand: should you get a new car or a used car? Foreign or American-made? To buy or to lease? How will you pay for it?
Once you figure out how much money you can spend, you can start to think about the exact make and model of a car instead of just the idea of driving one. There are many questions to be answered, but the one we are dealing with here has to do with buying versus leasing, specifically, "Is a high mileage lease right for me?"
Buying vs. Leasing
There are advantages and disadvantages to both buying and leasing a new vehicle. The right choice depends mostly on the individual's personal tastes and driving style. If, for example, you like the idea of driving a new model every two or three years or so, then a lease is likely your best option. By the same token, buying is probably best if you simply can't get past the feeling that you don't own the vehicle you are driving. Another important consideration that is often overlooked is mileage. Drivers who intend to spend a lot of time behind the wheel may think that leasing is the way to go, believing that it is better to put that heavy mileage on a vehicle that they will be turning in and soon won't have to worry about.
Standard leases, however, come with annual mileage limits and if a lessee goes over the limit, it can cost a pretty penny in additional fees.
Mileage Limits Explained
Normally, standard auto leases come with annual mileage limits of 10,000 to 15,000 miles, most coming in with 12,000-mile annual limits. Since average American drivers put about 12,000 miles on their car each year, a standard auto lease works well for most. Drivers who put on more miles than the annual limit pay additional per-mile fees of $0.10 to $0.25. That may not sound like much, but if you pass the annual mileage limit a lot, and regularly, your lease costs can skyrocket. Fortunately, lessees have an option: the high-mileage lease.
High Mileage Lease
The high mileage lease is one that is written with a higher mileage limit, to begin with, usually 18,000 to 20,000 miles. That way the lessee can drive further per year without running up against those pesky and expensive over-the-limit per-mile fees. The catch is that you will make higher monthly lease payments. So, considering the trade-off between higher monthly payments with a high mileage lease and above-limit per-mile fees with a standard lease, is a high mileage lease worth it? The answer is, in most cases, yes.
The bottom line is what is important here, and the closer you get to the mileage limit on a high mileage lease, the more you will save. On the other hand, if you estimate that you will only accede a standard lease mileage limit by a few hundred miles, you are more likely better off with a standard lease and paying the additional per-mile fees.
How to Get a High Mileage Lease
Ask for one. Most major dealers have one or more high mileage lease options. Availability, however, may depend on a number of factors, such as model or geographic location. The devil is in the details, so be sure that you have taken the time to estimate as accurately as possible the number of miles you intend to put on the vehicle each year, and that you clearly understand the terms of the proposed lease. Definitely, run the numbers through your calculator before signing on.
Lessees often have some wiggle room when it comes to leasing terms, so don't be afraid to negotiate such items as the monthly payment, annual mileage limit, and over-the-limit per-mile fees. That way you have the ability to fine-tune the bottom-line costs to your advantage.
High Mileage Leases and Extended Warranties
Another factor to consider is purchasing an extended warranty on your new and newly leased car. Let's say, for example, that you sign a three-year high-mileage lease on a brand-new vehicle with a three-year or 36,000-mile warranty. That averages out to 12,000 miles a year, which means that if you intend to drive your vehicle more than that (which is what a high mileage lease is for), then you will have some period of time during the latter stages of your lease where the vehicle is out of warranty.
And that means you'll be on the line for all additional repair and maintenance costs, which could add up considering the high mileage that will be on the vehicle by then. A good reason to consider footing for an extended warranty upfront.
Is it Better to Lease Or Buy A Car?
Deciding whether it is better to lease or buy a car depends on your current financial situation. Yes, you will typically pay more in total if you take out a high mileage lease than if you buy a used car and pay it off, but with a lease, you’ll typically have lower monthly payments, won’t have to deal with the hassle of selling your car, and always will be protected by a warranty. It’s always worth doing the math and making a pros and cons chart to see if your individual situation merits leasing vs. buying a vehicle outright.