Consider Beginning, Middle, and End-of-lease Costs
At the beginning of the lease, you may have to pay your first monthly payment; a refundable security deposit or your last monthly payment; other fees for licenses, registration, and title; a capitalized cost reduction (like a down payment); an acquisition fee (also called a processing or assignment fee); freight or destination charges; and state or local taxes.
During the lease, you will have to pay your monthly payment; any additional taxes not included in the payment such as sales, use, and personal property taxes; insurance premiums; ongoing maintenance costs; and any fees for late payment. You’ll also have to pay for safety and emissions inspections and any traffic tickets. If you end your lease early, you may have to pay substantial early termination charges.
At the end of the lease, if you don’t buy the vehicle, you may have to pay a disposition fee and charges for excess miles and excess wear.
You can Compare Different Lease Offers and Negotiate Some Terms.
Consider . . .
- the agreed-upon value of the vehicle—a lower value can reduce your monthly payment
- up-front payments, including the capitalized cost reduction
- the length of the lease
- the monthly lease payment
- any end-of-lease fees and charges
- the mileage allowed and per-mile charges for excess miles
- the option to purchase either at lease end or earlier
- whether your lease includes “gap” coverage, which protects you if the vehicle is stolen or totaled in an accident.
Ask for alternatives to advertised specials and other lease offerings.
Know Your Rights and Responsibilities
When you lease a vehicle, you have the right to:
- use it for an agreed-upon number of months and miles
- turn it in at lease end, pay any end-of-lease fees and charges, and “walk away”
- buy the vehicle if you have a purchase option
- take advantage of any warranties, recalls, or other services that apply to the vehicle.
You may be responsible for:
- excess mileage charges when you return the vehicle. Your lease agreement will tell you how many miles you can drive before you must pay for extra miles and how much the per-mile charge will be.
- excess wear charges when you return the vehicle. The standards for excess wear, such as for body damage or worn tires, are in your lease agreement.
- substantial payments if you end the lease early. The earlier you end the lease, the greater these charges are likely to be.
Lease Squeeze
If you’re among the one in three new-car shoppers who favors leasing, you may be surprised the next time you trade in for a new lease. The lease that cost you $300 a month, may now cost you $400 for the same model. Financial institutions are setting lower, more realistic residual values on new leases and charging higher payments. Lower payments are usually limited to models the dealers want to promote. Lease deals o remain, just don’t expect them to be as widespread as they once were. Here’s how to get one:
- Unearth promotions. When car makers, lenders and dealers want to push a model, they can cut lease payments one of three ways: inflate the residual value, cut the capitalized cost, or charge a low interest rate (or “money factor”).
Residual Value
To see how the residual value compares with the industry norm, go to http://www.carwizard.com. There you will find the Automotive Lease Guide (ALG) estimate of what your car will be worth at the end of the lease term, expressed as a percentage of the price. If the residual value is two percentage points o more above the ALG value – a less common occurrence nowadays – you’re being offered a promotional lease.
Capitalized Cost
To figure out if the capitalized cost has been cut, look up the dealer’s invoice cost at the same site. You’re getting a favorable deal if the capitalized cost is no more than $500 over the dealer’s invoice (including options).
Money Factor
You should try to get the money factor below 5%. It appears in dense-looking decimals such as 0.001430. Don’t be daunted, multiply that figure by 2400 for an approximate annual interest rate (3.4% in this case).