Lease-End Fees and Your Credit Score: What to Watch Out for
Leasing a car has become an increasingly popular option for people in recent years. It is a great way to get behind the wheel of a brand-new car without the hefty down payment that comes with purchasing one. However, there are some things you need to be aware of when it comes to lease-end fees and your credit score.
First, let's talk about what lease-end fees are. When you lease a car, you are essentially renting it for a set period of time, usually between two to four years. At the end of that lease term, you will need to return the car to the dealership. However, when you return the car, there may be some additional fees that you need to pay.
There are a few different types of lease-end fees that you might encounter. One is the disposition fee. This fee is charged by the dealership for inspecting and cleaning the car after you return it. The fee can vary, but it is usually around $300 to $500.
Another fee that you might encounter is the excess wear and tear fee. This fee is charged if the car has any damage beyond normal wear and tear. For example, if there are scratches or dents on the car, you may be charged for them. The amount of the fee can vary, but it is usually based on how severe the damage is.
One other fee that you might encounter is the mileage fee. When you lease a car, you are given a set number of miles that you can drive each year. If you go over that amount, you may be charged a fee for every extra mile. The fee can vary, but it is usually around $0.10 to $0.25 per mile.
So, why do these fees matter when it comes to your credit score? Well, if you don't pay them, they can end up on your credit report as a delinquency. That can have a negative impact on your credit score. Additionally, if you decide to lease another car in the future, the dealership may look at your credit score and see that you have delinquencies for previous lease-end fees. That could make it harder for you to get approved for your next lease.
So, what can you do to avoid these fees? The first step is to make sure that you understand your lease agreement. Read through it carefully and make note of any potential fees that you might incur. That way, you can plan ahead and avoid any surprises when it comes time to return the car.
Next, make sure that you take good care of the car throughout the lease term. Regular maintenance and upkeep can go a long way in preventing excess wear and tear. Additionally, be mindful of your mileage and try to stay within the allotted amount. If you know that you are going to go over, talk to the dealership ahead of time to see if you can negotiate a higher mileage limit.
Finally, make sure that you budget for the potential fees. As mentioned earlier, some of these fees can be upwards of $500. That is not an insignificant amount of money. If you know that you may have to pay these fees, start saving well in advance so that you are not caught off guard.
In conclusion, lease-end fees can have a big impact on your credit score. Make sure that you understand your lease agreement and plan ahead to avoid any surprises. Take good care of the car throughout the lease term, and budget for the potential fees. By doing these things, you can minimize the impact that lease-end fees have on your credit score and enjoy your leased car without any worries.