New Car Lease

From LoveToKnow Buy

New car leasing is a popular route to car use in the U.S.. It is definitely not car ownership, because leasing a car means living beyond your means for folks who can’t afford the payments of new car purchases. New car leasing deals are tempting. Purchasing a car outright with financing over a time period that may exceed five years could result in payments nearly twice that of your leasing fees.

Leasing is “cheaper” if you don’t mind becoming entangled in a deal that locks you in for 36 months or so, then you should take an advertised deal. The only trouble is, after the lasing period is over, you’ve got to return the car. And while you “own’ it, there are several restrictions about what you can or cannot do, mostly mileage related. Leasing includes fees at the front and back ends, and higher finance charges as well. If you don’t like your deal, unlike true car ownership, you can’t trade-in or sell your car and buy another. You’re stuck with the deal until the lease expires, or risk paying substantial penalties.

Leasing options

In most cases you'll have four options to choose from at the end of your lease: buy the leased vehicle, use it as a trade-in on a new car, return it or you can extend your lease for another specific period. LeaseGuide.com is one online help source you should use before you decide on an option. With cars, the better deal is to buy one and drive it until the wheels fall off, hopefully long after the loan is paid. But car financing requires good credit. Poorer credit ratings make for higher payments and higher interest rates. If you have credit problems, you should Check Your Credit Reports at lease six months in advance in order to begin the cleansing process and Improve Credit Score so you can get a better deal.

Don’t focus on the new car leasing payments alone

Unwary consumers get stuck with bad deals simply because they can’t look beyond the “low” monthly payment carrot dangling before their eyes.. Leases are based on manufacturer's suggested retail price (MSRP) with extra charges for insurance, extended warranties, delivery fees, and other items added on for good measure.

When you lease, you don’t pay for a car’s full value, only depreciation, or how much the car‘s value declines while you tool around town. A car can lose 50% of its value over a three-year period. What’s left is its residual value. Leasing a car for residual value is ideal, resulting in lower payments.

But leasing deals are offset with mileage restrictions, limiting use to 10,000 -15,000 miles a year. Most drivers average 12,200 miles a year, so you already are backed into a corner. And isn’t the purpose of having a new car is the freedom to travel where and when you want?

Other added fees include a $600 “lease acquisition fee," slapped on by the automaker or finance company that underwrites your lease. A security deposit may also be required, equal to one month's payment, usually refundable.

When your lease ends and you turn in the car, get set for a $400 "lease disposal fee," and excessive mileage fees of 15-30 cents a mile, and miscellaneous charges for "wear and tear," which applies to anything mechanical or cosmetic.

New car leasing disguised finance charges

These are usually called "money factors." To get an idea how expensive it is to lease, take the current interest rate and multiply by 2,400. Not to mention that dealers sometimes mark up money factor fees just to make sure they make enough on the deal. For example. Leasing a $30,000 for three years results in about $3,900 in fees, about $1,000 higher than a three-year loan, even with matching interest rates of 5.7%.

How not to get ripped off with your lease

Research Check out Leasing Tips and the Federal Reserve's consumer leasing guide

Negotiate Play the game as if you were buying. Save your lease card after you’ve settle a price with the car salesman. Prepare for moaning.

Make up front mileage purchase Since the limitations on mileage are restricting, settle on prepaid fees rather than back-end excess mileage fees which will be more expensive.

Read the fine print Note restrictions, penalties, and end-of-lease procedures, that clauses exactly match your negotiated demands, capitalized cost, or the total negotiated price and fees, minus any trade-in value and down payment.