22nd June 2007

Car Leasing

Numerous cars in different styles and features are introduced into the market each day. It is quite expensive to acquire or change them frequently. To avoid this, an economic and expedient financing option, known as car leasing, is available.

Car leasing offers many advantages over purchasing a new vehicle. In the case of purchasing, the owners are stuck with the same old car until it is disposed off. On the contrary, leasing provides an opportunity to drive a brand new vehicle for a low monthly payment. In leasing, the main advantage is that the user is only paying for the portion of the car’s value, and not for the car itself. Leasing also provides tax benefits. For instance, if a car has been leased for business needs, provisions are there to deduct a part of the lease payment.

However, certain points are to be considered in car leasing, and some of them are length of contract, residual value of the car, penalties concerning early termination of lease, mileage charges, wear and tear, and depreciation. Vehicles with the lowest depreciation provide the best lease deals. Safety features and carriage capacity must also be checked. Above all, the users and dealers must be familiar with laws that regulate vehicle leasing and financing.

There are two types of car leasing ‘closed-end’ leases and ‘open-end’ leases. In closed end lease, the residual value of the vehicle is pre-determined prior to the lease is signed, and users are given options to purchase the car for this value when the lease expires. Open-end lease is quite different from closed end lease, and in this case, the residual value of the car is estimated when the lease is signed. At the end of the lease period, the value is compared with the market value of the car, and the users are required to pay the difference.

Car leasing is generally provided by banks, credit unions, and financial divisions of major car manufacturers. Nowadays, many of the leasing providers provide internet premium calculators, which enables easy comparison of different lease options.

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22nd June 2007

Car Buying VS Car Leasing

When it is time to shop for a new car there are many things to take into consideration. One of the biggest decisions is whether you should choose car leasing or car buying. There are many fundamental differences between the two.

To help make your decision easier the following is a list of those differences:

- At the end of the car loan term you will own a car if you opted to buy. At the end of the car lease term you return the car to the dealer and are left with nothing.

- A car loan term is usually four to six years. A car lease term is typically two to four years.

- Monthly car loan payments are generally higher than car leasing payments. This is because you are only really only paying for the car’s depreciation during the car lease term plus interest, taxes and service fees.

- Most car leases limit the amount of mileage you can put on the vehicle. If you plan on traveling a great deal you will have to consider negotiating a higher mileage limit. This will mean slightly higher monthly payments. If you exceed the limit you will be required to pay a charge of between 10 to 15 cents per mile. If you choose to buy the vehicle this is not an issue.

- When leasing a car there are limits to the amount of wear you can cause to the vehicle. Excessive wear will result in extra charges. If you buy you can do what ever you want to your car.

- If you terminate a car lease before the term is over there usually is a charge. In the case of car buying if you buy out the remainder before the car loan term is up you are usually charged a fee as well.

- The up front costs of car leasing include first month’s auto lease payments, a refundable deposit, a capitalized cost reduction( similar to a down payment), taxes and service fees. The up front costs of car buying include a down payment, taxes, registration and other service fees.

- At the end of the car lease term you have to pay any charges for excess wear and mileage then you can either walk away or buy out the car. When you reach the end of the car loan term you have no further payments and you walk away with your car.

Consider all these differences before coming to a decision on whether to buy or lease your next vehicle. Your choice will effect quite a lot over the loan or lease term including your monthly auto loan payments as well as what you can do to your vehicle to a certain extent. If you know what your long term goals are it will allow you to select the right option for your next car.

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22nd June 2007

Auto Leasing Article : How to lease a new car?

Auto Leasing Article :
How to lease a new car?

Whether you lease a car to get into the latest models or have better purchasing flexibility, getting a good deal is always bound to give you a lift. Use these guidelines to help you spot one: Continue below.

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Check incentives: be on the look-out for factory –subsidized lease deals. Car manufacturers realise that consumers who lease vehicles from them are more likely to be repeat customers than those who simply purchase vehicles. Through their leasing companies, they adjust the residual value and offer low financing charge. Other auto-manufacturers are also starting to give incentives on leasing, called leasing subventions. They offer these subsidies to put slow-selling models on the street, saving you even more money.

Set up a competitive: bidding environment to get the lowest price. If you already have an idea in mind of the make, model and trim level of your desired car, attempt to calculate your own lease payment before you go shopping to avoid paying through the roof. Check online comparison tools or use a lease calculator to check your lease payment based on purchase price. This gives you greater negotiation leverage as you solicit quotes from various leasing companies.

Make sure you know all the fees involved at the beginning of your lease: you may have to pay fees for licenses, registration and title. Other fees include acquisition fees, freight fees and local or state taxes. At lease-end, you may have to pay a disposition fee and charges for extra mileage and any excess wear. Be aware that some of these fees – like acquisition and disposition fees – are negotiable.

Know your mileage needs: almost all leases limit the number of miles per year by imposing typically 10 to 20 cents per excess mile over 15,000 miles a year. If you are the kind of high-commuter who puts 40,000 miles a year on his car, then you might end up running thousands of dollars in hefty penalties at the end of your lease. Be smart and negotiate a higher-mileage limit or pad you excess miles at the beginning of your lease to avoid robber tax rates for excess miles.

Almost all leases limit the number of miles per year by imposing fees typically 10 to 20 cents per mile over 15,000 miles per year. If you are the kind of high-commuter who puts a lot miles on his car, then these costs can add up quickly. Negotiate

Include GAP coverage: make sure your lease includes GAP coverage. This covers you in the event of the vehicle getting wrecked, stolen or totalled. Without GAP insurance, you leave yourself wide open to thousands of dollars in leased obligations. Check if the GAP coverage is included so you don’t pay it twice.

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22nd June 2007

Car Lease Termination

Ever heard the saying, “before you get in, know how to get out?” If you’re thinking about leasing a car make sure you fully understand the leasing contract before signing; especially your contractual obligations for termination. While getting into a lease is easy, terminating a lease is not. Many people commit themselves to a leasing contract without fully understanding the ramifications of early termination.

Early lease termination is the number one reason people lose money when leasing. You can terminate your car lease early, but it’s usually very expensive. Only consider leasing instead of buying if you are very sure you will be able to complete your lease contract. There are many advantages to leasing a car but those advantages come with a very specific contract that is hard to terminate affordably. Many leasing contracts don’t even allow early termination until the lease has been in place for a minimum of 12 months.

Do You Need to Terminate Your Lease?

You decided to lease a car and now you want out. You had another kid and the Camry isn’t big enough anymore. You thought you could make the payments for your Mercedes but now think they are too high. Did you really take on more than you can afford or make a bad decision? Take a hard look at your reasons for wanting to terminate your lease. If you do not absolutely have to terminate, then don’t do it. A car lease is a contract with stiff penalties for early termination. You could easily end up paying the remainder of the payments plus fees and penalties. Additionally, terminating a lease early can ruin your credit can make it very hard to get another car.

Surrendering Your Car Does Not Terminate Your Lease

Some people have the mistaken belief that they can terminate their lease if they give the car back. Nothing could be farther from the truth. Even if you return to the dealership and work out a “deal” to get a different car, you are most likely still paying the early termination fees and penalties stipulated in your contract. Many car dealers use misleading advertising to get you to trade in your leased car for one from their dealership. The dealer takes the fees and penalties, rolls them into your new loan and spreads it out over so many months that you don’t notice their inclusion. All you do by trading in a leased car before the lease is up is fall farther in debt since now you’ll have to pay off 2 cars.

Car Lease Trading: An Alternative to Termination

Instead of committing financial suicide by early car lease termination, consider trading your lease. You will find many companies online who can help you explore this option. Car lease trading takes your lease and reassigns it to another person. You will pay some fees when you list your car in their online lease trading classifieds.

While you are looking to get out of a lease, other buyers would like to pick up your lease. It is a good deal for you because you don’t pay for the remainder of your lease and it’s a good deal for them because you have already paid the down payment, monthly payments and for much of the car’s depreciation.

Lease trading is not inexpensive but the charges are nothing compared to what you would pay in termination penalties. When you trade a lease a new buyer takes over your car lease, puts their name on the lease and removes yours. Your credit will stay clean and you won’t have to pay early termination fees. By trading your lease you can assume a shorter term lease with no money down and avoid the complicated repayment plans dealerships will try and push on you.

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22nd June 2007

Two types of car leases - open and closed

Automobile leases come in two varieties: closed-end and open-end. There’s a big difference between the two types and you should understand that difference before you sign your lease contract. Federal regulations require that the type of lease be clearly indicated on all lease contracts.Dealer salespeople typcially don’t have this level of understanding of leases. So, don’t ask. You’ll only get the answer he/she thinks you want to hear. Read the contract form for yourself.