Dos And Dont's

• Don't sign a lease longer than the warranty on the car. You don't want to be paying for repairs on a car you don't own. On Ford, General Motors and DaimlerChrysler cars, three-year warranties would call for no longer than three-year leases.

• Don't sign a lease with mileage limitations that are unrealistically low for your driving pattern. Excess mileage costs and the end of the lease can be very expensive. You will likely save money negotiating up front for a limit higher than the typical 12,000 miles a year if you need it.

• Do protect yourself against theft or serious collision loss early in the lease. If the vehicle is stolen or totaled, your insurance will pay only the depreciated market value of the car at that time, which may be less than the total you owe on your lease. So-called "gap insurance" will pay you the difference between your insurance settlement and the total amount you still owe on the lease. Most leasing companies offer this coverage, and it is one of the few add-ons it makes sense to accept. Gap insurance as part of the lease usually won't cost you any more than getting it from your insurance agent and is more convenient.

Watch Out For These Too.

Potential pitfalls are not, of course, limited to leasing. While you want to check to see if the dealer can beat your preapproved loan deal, be very cautious when dealing with the finance and insurance specialist, commonly known as the "F&I guy." He or she will not only want to convince you to take dealer financing but will also want to sell you other things. That probably includes an extended-warranty contract--rarely a good idea with a new car. Your new-car warranty will cover all repairs for at least three years or 36,000 miles, and longer with many brands. The cost of the extended warranty is probably more than you will ever collect from it.

The dealership may also pitch credit life insurance that would pay off your loan if you die or are disabled. That's not necessarily a bad idea in concept, but you can likely get the same thing done more cheaply with term life or disability insurance.

What are some other things to think about?

Published on 04/28/05