I currently find myself in a major pickle. As I’ve stated before, I’d rather spend a little extra cash on things I use every day such as my car and my cell phone. Up until a few months ago, my spending had never gotten me into any trouble. Fast forward to today and unfortunately for me, I can’t make that same statement.
A couple years ago, I was in the process of getting a new car. At the time, I was unsure whether I wanted to buy or lease a car. I ended up leasing, with the rationale that I’d rather drive a new car every couple years than be stuck with the same one for an extended period of time. Now, I find myself in a not so envious position. At the time, I lived five miles away from work, so putting too many miles on my car was a nonissue. Now, my daily commute logs about 130 miles on my odometer. Do you see where I’m going with this?
Let me break it down for you. My current lease is for three years and 45,000 miles. Driving 10 miles roundtrip to work and home at my previous job was no problem at all. Driving 130 miles roundtrip now is an absolute killer. I’m stuck with my car until April of 2013 and as of right now, I’m nearing 44,000 miles. YIKES!
As much as I wish I could limit my driving to 1,000 miles over the next seven and a half months, I easily have a better chance of winning tonight’s $110 million Powerball. So, what are my options? I’m currently looking to move closer to work, which would cut down on my miles, although not enough to make up for all the driving I’ve done this summer. I came to the realization about a month ago that I was going to hit my predetermined mileage way ahead of schedule. For those of you who find yourself in the same jam as me, below are some of our options.
Pay the extra mileage fee. Each dealership is different when it comes to paying for the amount of miles you exceeded. The fee per extra mile could be as low as $.10 per mile and as high as $.30 per mile. After determining how much you owe per mile, do the math. Say you owe $.15 per extra mile and you exceeded your mileage by 1500 miles, you’d owe $225. However, if you’re in a situation like me and expect to be closer to 8,000 miles over, I’d have to pay $1,200. It all comes down to how much you’re willing to pay to end your lease.
Purchase the car. When you decide to lease a car, you agree to pay for the car’s depreciation. The remaining price is the residual, which is the same as the lease-end purchase price. If you choose to buy the car at the end of the lease, you’re agreeing to pay for the part of the car’s original price that you haven’t already paid.
Here’s where it gets tricky. When you originally signed for your lease, you agreed to a certain price you could purchase the car for at the end of the lease. That purchase price was determined by the number of miles for the lease. For example, say your lease is for three years and 45,000 miles. If you go 7,000 miles over your lease mileage and want to purchase the car at the end of the lease, you’ll be paying the price of a car that has 45,000 miles on it instead of the 52,000 it actually does.
Park it. If you don’t want to pay for extra miles and don’t plan on purchasing the car when the lease is up, another viable option is to park it. With this method, you’ll need some extra cash or friends that are willing and capable of driving you everywhere. If you decide to not drive the car anymore and have some extra dough, you can go out and purchase a cheap used car that you can drive until your lease is up. This is certainly an option, although it gets to be a bit of a hassle when you consider you’ll have to pay for a new registration, insurance, etc.
If purchasing another car for the time being is too much, cut down on your miles by carpooling to work and any other place possible. If you know you’re going to go over your mileage, you can at least try to minimize the damage to your wallet by driving only when absolutely necessary.
Start saving. Get a head start on the money you’ll owe for the overage miles by saving now. The sooner you start saving, the less you’ll have to worry about when the time comes that you have to start paying for the miles. For instance, if the scenario I presented above is correct and I owe $1,200 after my lease is up in April, I could start saving $25 per week from now until then. If I did that, I’d have approximately $675 ready to put toward the extra miles.
After you signed the lease, it’s out of your hands. You’re obligated to its terms and conditions. For those of you on the opposite end of the spectrum and who find that you’re under your allotted miles, you’re prize is a big…whopping…nothing! You don’t get a refund unless you purchased extra miles for your lease.
How many of you have been in a similar situation than the one I find myself in? Are you looking to move closer to work to save on mileage? Let me know in the comments section below or contact a home loan expert today!
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