| |
Some important things to keep in mind when leasing .
At the dealership, negotiate a fair price for the car and get a price
commitment on your
trade-in. Ask the salesperson to have the
agreement written up as a lease.
Money Factor
This is the rate used by leasing company to calculate a lease's total rental
charges (service charge). A money factor is expressed in a figure,
i.e.,(.00189). The lower the money factor, generally the less your monthly
payments will be.
For a full explanation see
TERMS TO KNOW. You Can Negotiate the Gross Capitalized Cost
Negotiate a gross capitalized cost somewhere between the MSRP and the dealer
invoice price. The lower the cap cost, the better the deal. If the gross
capitalized cost is too high, tell the salesperson to cut items that increase
the total cost. If the salesperson claims that capitalized cost is a fixed
figure and can't be lowered, find another salesperson. Use the required
disclosure form as a worksheet. On the form, compare the agreed upon value of
the vehicle with the gross capitalized cost to see what charges have been added.
Ask the salesperson to fill in the disclosure form and give you the figures. Be
sure that you check the box near the middle of the front page in order to get a
step-by-step calculation of the monthly payment. At this time, lessors are not
required to provide data on the money factor used to calculate the equivalent of
the annual percentage rate of interest (APR) charged on vehicle loans.
Review the Disclosure Form
Read the disclosure form closely and ask for explanations of any items you do
not understand. Be sure that the trade-in allowance reduces the gross
capitalized cost. A past, a common leasing complaint was that consumers were not
given credit for the trade-in. To prevent this, look at the line on the
disclosure form titled capitalized cost reduction. This total amount should
include rebates, down payment, and trade-in allowance. If you paid a deposit, be
sure you get credit for it.
Take the Lease Home Read it.
Once the lease is written, don't sign on the spot, ask for an exact copy to take
home and read. Given the importance of the document, the obscurity of its terms,
and its legally binding status, a quick decision is not smart. If possible,
avoid giving a deposit since there is no deal until you sign the lease.
At home, compare the figures on the lease with those on your disclosure form.
Look for unexplained changes. Use your calculator to check the math. Verify the
accuracy of the most important figures: lease term, gross capitalized cost,
capitalized cost reduction, residual value, and rent charge.
A short-term lease, up to 24 months, means larger payments and more money spent
for depreciation. A longer lease, up to 48 months, should have smaller payments,
but may be less flexible. Experts recommend a lease length that coincides with
the length of the vehicle's warranty.
The End of the Lease
When you buy an automobile, the hard bargaining and stressful confrontations
often come at the start of the deal. In contrast, leasing is quite simple at the
start but potentially complicated and expensive at the end. When you turn the
car in, problems may develop. They can be avoided by reading the fine print,
before you sign. Some of the important items to look for are:
-
Gap Insurance.
If the lease car is totaled or stolen, your auto
insurance may cover replacement - but not the payments still
required. Gap insurance covers the difference between the replacement value of
the car and what is still owed on the lease. To learn more about the importance of Gap
insurance
click
here.
- Excess Wear and Tear. At the end of the lease, if the car has
visible damage, the consumer will probably be charged to repair it. To protect yourself,
get a copy of the written guidelines or checklist issued by leasing companies. Of course,
the longer the lease, the more likelihood of an excess wear charge. Some leasing companies
have made the marketing decision to downplay minor dings, scratches, and upholstery
stains. If no damages are assessed, the security deposit will be mailed to you shortly
after the automobile is turned in.
- Excess Mileage. The yearly mileage limit should exceed your
normal driving needs. If it does not, find out the charge for additional miles. Try to
negotiate a more favorable rate for added miles at the start.
- Lower Mileage Driving too little can also cost you
unnecessarily. Since you will not get a credit for the value of the unused miles, you
would be giving the lending company what amounts to a windfall when it resold the vehicle.
- Disposition Fees. this end-of-lease charge covers costs
associated with picking up and processing the returned car . Some leasing companies do not
charge a disposition fee or an acquisition fee, but instead include the costs in the
monthly payment. Also, some dealers will absorb the fee if the customer is planning to
sign another lease.
- Purchase Option. Leases normally include the chance to buy the
automobile at the end of the lease. The disclosure sheet should tell you if the purchase
price is pre-determined or negotiated at the end of the contract. In cases where the
residual value has been boosted to a very high level, do not pay more than market price
for a car. When examining the contract, see if there is a purchase option fee.
- Early Termination and Default. It's possible to incur
significant penalties if you break the lease. For example, you may be required to pay 100%
of all the remaining payments. A detailed explanation of early termination fees is
required by the disclosure form. Although some leases can be broken with less penalty than
others, early terminations are a major cause of disputes.
If you already are in a lease
and want out or if you want to know about assuming a lease
click here for more details.
|