When leasing a vehicle, it is important to remember that the car will need to be returned to the dealer in a relatively similar condition to what it was in when you bought it. Any damages, or even simple wear and tear, will need to be addressed before returning the vehicle at the end of the lease term or you may be charged for the repair costs.
Small damage includes tiny nicks and dents in the frame of the vehicle, worn tire treads, chipped or faded paint and any stains or tears on the interior fabric. While most lease agreements let you off the hook for normal wear and tear, there are a few things to look out for. For example, if the tread on your tires is less than 1/16th of an inch thick by the end of your lease term, the tires will need to be replaced. You’ll save a ton of money by replacing the tires yourself. Likewise, any dent that is larger than a quarter will need to be repaired, and a local repair company will charge much less than the dealership mechanic.
If your tire tread is thicker than 1/16th of an inch or you have a dent that is smaller than a quarter and no paint has been removed, you’ll probably be OK.
Big damage includes things like a bumper that’s falling off or a windshield that has a large crack in it -- you’ll definitely be held accountable for these kinds of issues. You’ll also be held responsible for any mechanical work that the vehicle needs, such as brake pads that have to be replaced or an air conditioner that has stopped working correctly. While many of these things are expected over the lifetime of a vehicle, it is up to you to ensure that the vehicle is in proper working condition when you return it the dealership, so have your own mechanic check it over for any potential issues. If you don’t repair these damages by time the dealership sees them, it will insist on having its own mechanics look at the vehicle or ship it back to the manufacturer and charge you top-dollar prices on everything from new tires to a new transmission.
Your best bet to avoid extra charges is to know what to expect during your end-of-lease inspection. If you go over your mileage, for example, you'll be charged between $0.15 and $0.30 per mile, at the time of publication. However, you could purchase the vehicle or renew the lease with a lower annual mileage allowance to avoid paying the charge. To avoid being charged for damages, however, you'll need to ensure that you get those damages taken care of before your inspection.
As can be seen on this sample condition report from Toyota, the customer had two scratches on the exterior of the vehicle that totaled $155, but the customer was not charged for those repairs because the scratches were considered "normal wear and tear." However, the customer also had a stain on an interior floor mat that cost $35 and was charged because the damage was considered to be excessive.
You can often roll over most, if not all, of the debt you incur on repair costs of one leased vehicle to future payments made on a new lease agreement.
If you total your car in an accident and the vehicle is beyond repair, your insurance company will probably pay the dealership for the remaining value of the vehicle. Because most lease agreements require drivers to have “full coverage,” which includes both comprehensive and collision insurance, you should be protected from any major damages that would otherwise put you in the position of needing to replace the vehicle. Collision coverage protects you from accidents while comprehensive coverage protects you from any non-accident-related damages, such as tree limbs that fall on your car or theft.
If, for whatever reason, you don’t have full coverage insurance, you will have to pay for the cost of the vehicle out of pocket.