When you buy an automobile, the hard bargaining and stressful confrontations often come at the beginning of the deal. In contrast, leasing is quite simple at the onset but potentially complicated at the end. When you turn the car in, problems may develop. They can be avoided by reading the fine print, sentence by sentence, 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. It is expensive to purchase separately. Ask if it is included without charge to the lessee.
- 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 returned.
- 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 outset.
- Lower Mileage. Driving too little can also saddle you with unnecessary costs. Since you do 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 are for sale. 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. Many leases 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. You may 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 big cause of disputes.
REMEMBER —LEASING A CAR IS DIFFERENT FROM BUYING A CAR — WHEN YOU BUY, YOU’RE THE OWNER. YOU PAY FOR THE CAR, YOU KEEP THE CAR. WHEN YOU LEASE, YOU PAY TO DRIVE A CAR OWNED BY SOMEONE ELSE. AT THE END OF THE LEASE, YOU GIVE IT BACK OR IN SOME AGREEMENTS, YOU CAN BUY THE CAR.