Car Leasing Tips

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What's the best least term for me?

Length of Lease Term

Sure it sounds good, but is it? The lease term on your new or used car is the length of the lease expressed in months. Typical lease terms range from 24 months to 48 months. While a longer lease will generally result in a lower monthly payment, you end up paying more overall due to the extended term.

*Never agree to a lease term that exceeds the car's general warranty.

   
Should I take a loan or lease?

Loan vs. Lease Comparison

Can't decide whether to buy or lease that new Ford F-150? Check out the auto pages provided by some sites (like Bankrate.com). On it, you'll find a ton of valuable things to help you with your car buying, like:

• Links to articles
• Interactive tools
• Calculators (for loan payments and car leases, comparing monthly payments and total costs)

There are also interactive questionnaires you can complete that will, based on your answers, make a recommendation on whether it is better for you to buy or lease (some a summary report of how the tool arrived at that recommendation).

   
Are all leases the same?

Comparing Lease Terms

Wondering where you can get the best car lease terms and rates? Check out Leasecompare.com. This online service will compare lease payments and terms from multiple lenders on all makes and models of cars, including Hyundai, Nissan, Pontiac, and Dodge. You can actually complete the lease application online and save yourself time as well as money. The site offers three service levels:

• Express- for those who've already found a car and dealer
• Step-by-step- for those who have yet to find a car and need help negotiating the best terms
• By-payment- for those who want to see what's available within a certain payment range

*Express can be used for both new and used cars. Step-by-step and by-payment apply only to new cars.

   
What is the money factor?

The Money Factor

How does that factor in?! The money factor on a new car lease is the percentage used by lenders to calculate the rental fee portion of your monthly payment. It is not the same as your lease rate. A lease payment includes a variety of components, including:

• Depreciation
• A rental fee (and possibly other fees)
• Taxes

You can convert the money factor, which is normally expressed as a decimal (for example, 0.00249) to APR by multiplying by 2400. A good rule of thumb is that the money factor, when converted to APR, should be lower than or equal to new-car loan rates.

*For more information on lease terms and concepts, visit Leaseguide.com or the Federal Reserve Board's online consumer lease term glossary.

   
Where can I find information on dealer incentives and rebates?

Dealer Incentives & Rebates

A while back, when the auto industry and the U.S. economy in general were in the dumper, auto manufacturers from Chevrolet to Volkswagen were offering dealer incentives such a zero-percent financing, no money down leases, and rebates galore. Consumers became spoiled, and now many won't even consider a purchase unless they get a bon-bon from the dealer.

Let's say you are considering leasing a Ford Mustang. The dealer has given you the choice between a discounted interest rate on your new car lease or a cash back rebate. How do you know which is the better incentive? Try a specialized website (like Edmunds.com) that offers a decision calculator on its Web site to help you crunch the numbers. Plug in a few pieces of data and you'll know within seconds which is the better deal for you.

   
Where can I find basic information on auto leasing?

Car Lease Facts

Car leasing continues to grow in popularity. According to statistics published by the Bureau of Transportation Statistics, from 1990 to 2004, new car vehicle sales increased 2.3%. During that same time, new car leases increased 82%.

Despite the growing popularity of leasing, many people continue to be wary of leases having heard stories of huge payoffs at the end of the lease. Consumers are entitled by law to receive certain information about the costs and terms of a vehicle lease under the Consumer Leasing Act.

*For more information on the differences between leasing and buying, visit the Federal Reserve Board's online consumer guide to leasing.

   
What is a closed-end lease?

Closed-end Lease

There are many different shades of gray when it comes to new car leasing, however, there are really only two main types of leases: open-end and closed-end.

A closed-end lease (also known as walk-away lease) is one in which the consumer is not responsible for the difference between the leased car's actual value and its residual value.
Closed-end leases are really the best lease for consumers.

   
Can I lease a used car?

Used Car Leasing

The used car lease is becoming more and more of a staple in the car financing industry. A used car lease can provide excellent value (assuming you lease a car that is known to hold its value, such as a Honda Accord or a BMW-3-series).

A lease payment is mainly for depreciation. A car depreciates most rapidly in its first year. This means that a used car lease should be less expensive than a new car lease. When considering a used car lease, look for cars that are no more than two years old (one year is better) and have low mileage. Also, keep the lease term to 36 months or less.

   
Is leasing right for my budget?

Leasing: More Car for your Money?

If you don't have a huge budget in which to fit a car payment, you may want to consider new car leasing. A lease is basically a long-term rental. Virtually all manufacturers, including Honda, Chrysler, Ford, and Toyota to name a few, offer lease options in their standard finance product lineup. Your monthly payment includes the depreciation on the car during the term of the lease, a rental fee, and any taxes. This can be a double-edge sword, though.

While the monthly payments on a lease are usually lower—sometimes significantly so—than payments on a purchase loan, you have nothing to show for it at the end of the lease. You return the car to the dealer having nothing to show for your investment. The upside to leasing, however, is that, assuming you negotiate terms that fit your lifestyle, you are in new, reliable car every few years.

*If you're tired of maintaining older cars that seem to break down at every turn, but can't afford a new car loan payment, a lease may be the way to go.

   
What is an open-end lease?

Open-end Lease

An open-end lease is one in which the amount you owe at lease termination (assuming you are not terminating early) is based on the difference between the residual value of the leased car and its realized value. While this might sound like a great deal, the reality is that this lease type is geared more to business leasing and should be avoided by consumers.

If you end up with an open-end lease and the realized value is higher than expected, the consumer may receive a refund of any excess if the realized value is greater than the residual value (FYI, the residual value is considered unreasonable if it exceeds the realized value by more than three times the base monthly payment). This rule assumes that you have met the mileage and wear stipulations of the lease.

*If you believe the residual value is unreasonable at the end of the lease, you can refuse to pay, but you may have to deal with the dealership in court should it decide to pursue the matter further.

   
Is there a penalty if I terminate my lease early?

Early Termination Penalties

Before you sign on the dotted line, make sure you understand the penalties clause in your car lease for early termination. Many consumers are so excited to get a new car that they gloss over the penalty section. Unfortunately, circumstances change and for whatever reason you may need to terminate your lease early.

If you are considering a new car lease, visit Leaseguide.com. It contains a wealth of resources to help educate consumers and prevent lease headaches down the line. There is specific information on how to terminate a lease early (hopefully without losing your shirt).

   
Do I have to lease from a car dealer?

Direct Leasing

Did you know you can lease a car directly from the leasing company? Auto Leasing Direct supplies many dealers in the auto industry with a software product called Expert Lease Pro. The dealers use this software to calculate your lease figures and terms. Well, turns out that Auto Leasing Direct decided to try to beat the dealers at their own game.

You can lease a car directly from Auto Leasing Direct and save yourself thousands of dollars by avoiding dealer markup. The company's leasing partners have agreed to provide competitive leasing with full disclosure of all terms direct to consumers without having to go through a dealer.

   
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