To lease or
to buy? That's the choice you face when mulling over makes and
models and deciding which car deal best meets your needs. Leasing
a car is not the same as buying one.
When you buy,
you own the car. When you lease, you pay to drive someone else's
vehicle. Leasing can involve lower monthly payments than a loan.
However, at lease end, you will have no ownership or equity in
the car. Many dealers and other lessors offer vehicle leases.
Before you decide whether to lease or buy, the Federal Trade Commission
(FTC) reminds you: don't be dazzled by so-called deals. Ask questions,
nail down the details, read the fine print, and shop around.
thinking of leasing, the FTC offers these shopping tips:
as if you're buying a car. Negotiate all the lease terms,
including the price of the vehicle. Lowering the lease price will
help reduce your monthly payments. Get all the terms in writing.
the language of leasing:
In a closed-end
lease, you return the car at the end of the lease and "walk
away," but you're still usually responsible for certain end-of-lease
charges, such as excess mileage, wear and tear, and disposition.
In an open-end
lease, you pay the difference between the value stated in
your contract and the lessor's appraised value at the end of the
Lease inception fees are payments you must make when
the lease starts, and may include a down payment, security deposit,
acquisition fee, first month's payment, taxes and title fees.
Ask for a list of all charges due at lease inception. You may
be able to negotiate some or all of the terms.
The capitalized cost is the price of the car for leasing
purposes plus taxes and extra charges like service contracts and
The capitalized cost reduction is similar to a down payment.
If you're trading in a car, make sure the dealer applies the trade-in
value to the price your lease is based on. The trade-in credit
may reduce your down payment or monthly payments.
3. Ask whether extra charges will be assessed
for excessive mileage, wear and tear, disposition and early termination,
and find out the amount of these charges. Most leases allow you
to drive 12,000 to 15,000 a year; if you put on more miles, expect
a charge of 10 to 25 cents for each additional mile. You may think
the ding in the door or coffee stains on the upholstery are normal
wear and tear; to the lessor, it may be significant damage. Check
out penalties for an early return; expect to pay a substantial
charge if you give the car up before the end of your lease.
sure the manufacturer's warranty covers the entire lease
term and the number of miles you're likely to drive.
"gap insurance" to cover the difference - sometimes
thousands of dollars - between what you owe on the lease and what
the car is worth if it's stolen or totaled in an accident.
you sign the deal, take a copy of the contract home and
review it carefully away from any dealer pressure. Be alert for
any charges that were not disclosed at the dealership, like conveyance,
disposition, and preparation fees.
law requires lessors to provide lease cost information
before you sign the lease. Take a copy of the attached form to
the dealer and ask them to complete it. Some dealers may be willing
to provide the information during your shopping process. If the
dealer declines, consider shopping elsewhere.