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Forgetting gap insurance
The value of any new car drops significantly after it's driven off the lot -- and leased cars are no exception, says David Jacobson, CEO of CU Xpress Lease in Hauppauge, N.Y., which originates and services car leases for credit unions.
If a leased car is stolen or totaled and the car insurance company makes a payment for the value of the car, that amount may not cover the consumer's total obligation under the terms of the lease, he says.
The driver would likely have to come up with the balance out of pocket unless he has gap insurance. In that case, the policy would cover the difference, he says.
At the beginning of any car lease, consumers should ask if the contract includes this specialty gap insurance coverage, says Jacobson. If it doesn't, the customer should consider finding a car with a lease plan that does.
"There is exposure without gap insurance," he says, "So, I would not lease a car without it."