Car Leasing Basics

When Leasing a Car there is terminology that you need to know. If you go in there asking, "What's that mean?", you're bound to get taken for a ride.

In order to get a good leasing deal, you need to understand leasing jargon.
Read through this leasing glossary to get an overview of the basics:

Acquisition fee: A fee charged by a leasing company to begin a lease. Not
all leasing companies charge an acquisition fee but if charge it starts at
about $300 and is seldom negotiable.

Capitalised cost: The total selling price of the leased vehicle This also
accounts for taxes, title, license fees, acquisition fee and any optional
insurance and warranty items you elect to fold into the lease and pay
overtime rather than upfront.

Depreciation fee:
Forms part of the monthly lease payment charge and accounts for the loss
in the value of the car at the end of the lease. The vehicle's list price
minus the expected residual value at lease end is divided by the number of
months in the lease to give the depreciation fee. Suppose you decide to
lease a vehicle with a retail price of $23,500. The leasing company
estimates that after a three year lease, the vehicle will be worth 35% of
its original retail value, or $8,225. The difference, $15,275, divided by
the number of months in the lease, 36 months, gives us the depreciation fee
($424)

GAP insurance Pays off the lease balanced if the vehicle is wrecked, stolen
or totalled.

Inception fees any fees that are due at the beginning of a lease. These
typically include a security deposit, acquisition fee, first monthly
payment, taxes and title fees.

Mileage allowance The maximum number of miles a leased vehicle can be
driven a year without incurring an excess mileage penalty. A typical
mileage allowance is 12,000 to 15,000 miles a year, although this is
negotiable with your leasing company.

Mileage charges a penalty that you incur if you exceed your mileage
allowance on a leased vehicle. Typical mileage charges are 10 to 20 cents
per excess mile.

Money-factor A fractional number, such as 0.00043, used in calculating your
monthly lease payments. You can get a rough estimate of the annual
percentage rate on your lease by multiplying the money factor by 2,400. If
a dealer quotes a money factor such as 3.4 than you can get the equivalent
APR, 8.16, if you multiply by 2.4.

Residual value Residual value is the amount of money the leasing company
says your leased vehicle will be worth when your lease ends. Higher
residual values lead to lower monthly payments but higher lease-end
purchase cost if you decide to keep the vehicle.

Security deposits an up-front amount that your leasing company required at
the beginning of a lease to safeguard against non-payment. This is
generally refundable at the end of your lease.

Termination or Disposition fee The amount you have to pay the leasing
company at the end of your lease if you decide not to purchase the vehicle.

Wear-and-tear charges Extra charges you have to pay at the end of your
lease for any wear and use the leasing company considers above normal.

Car Leasing Help

Lease Assistance Program

Buy or Lease? Lease or Buy? Damn! What should I do?

And here starts the dilemma that ensues for every would-be car owner: Pay
cash upfront or nix the ownership and pay monthly payments instead?
Buy or lease for a new set of wheels?

As is the case with every other common dilemma, there is no great no answer. No TouchDown , No Slamdunk, No Homerun answer. Each option has its own benefits and drawbacks, and it all depends on a set of financial and personal considerations.

Ultimately, your wallet. Affordability is seriously key, and you need to
question, how stable is your job and how healthy is your general
financial situation. The short-term monthly-cost of leasing is
significantly lower than the monthly payments when buying: you only pay for
"the portion" of the vehicle's cost that you use up during the time you
drive it.

If you have a lot of cash upfront, then you can opt to pay the down
payment, sales taxes - in cash or rolled into a loan - and the interest
rate determined by your loan company. Buying effectively gives you
ownership of the car and that feeling of "free driving" that goes on
providing transportation.

If, say, you want to get into luxury models but can't afford the upfront
cash of purchasing the vehicle than you're a good candidate for leasing.
Unlike buying, it gives you the option of not having to fork out the down
payment upfront, leaving you to pay a lower money factor that is generally
similar to the interest rate on a financing loan. However, these benefits
have a price: terminating a lease early or defaulting on your monthly lease
payments will result in stiff financial penalties and can ruin your credit.
You need to make sure you carve out the monthly lease payment in your
budget for the foreseeable future, at least for the duration of the lease.

Remember, your credit score is vital in getting approved for the amount of car you want to lease. If you are shooting to lease a luxury car, please check your credit first. You don't want to go in there expecting to get a BMW and leaving with a Gremlin.
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Besides the financial aspect, making a buy or lease decision depends on
your own particular lifestyle choices and preferences. Think about what the
car means to you: are you the sort of person to bond with the car or would
you rather have the excitement of something new? If you want to drive a
car for more than fives years, negotiate carefully and buy the car you
like. If, on the other hand, you don't like the idea of ownership and
prefer to drive a new car every two to three years then you should lease.
Next, factor your transportation needs: How many miles do you drive a year?
How properly do you maintain your cars? If you answer is: "I drive 40,000
miles a year and I don't really care much about my cars as I don't mind
dealing with repair bills", then you're probably better off buying. Leasing
is based on the assumption of limited-mileage, usually no more than 12,000
to 15,000 miles a year, and wear-and-tear considerations. Unless you can
keep within the prescribed mileage limits and keep the car in a good
condition at the end of your lease, you might incur hefty end-of-lease
costs.

Lease Assistance Program

If Car Leasing is not right for you, there are alternatives. Of course you want to get into something nice, don't want a huge down payment, and something that is priced reasonably. Government auctions can be the answer. There are severl different tyoes of government auctions that can get you into that Benz or that Beemer. There are local, state, and federal auctions, which sometimes includes police auctions. Don't get me wrong, some of the auctions are crap. But there are some gems to be found. So, a legit option is to check out government auctions.

How to opt out of your car lease before your contract expires.

When your lease is up, you can simply turn in the keys and lease another
car or buy a new one. But how about getting out before the lease ends?
Maybe you can't afford the sky-high payments on that silky Jaguar JX V6
model anymore or you've just had a baby and you need a larger and more
spacious vehicle?
Unfortunately getting out of a lease is not as easy as getting in! A
leasing contract is difficult and expensive to terminate early. Simply
turning in the keys and walking away from a lease can result in stiff
penalties. You credit could be ruined and you could even get sued for
breach of contract.

It's not all doom and gloom though. Actually, there is a number of
options available to you.
You can sell the car yourself and pay off the bank. This can be cost
effective if the market value of the car is close to the buy-out number.
Do not hesitate to exercise this option even at a loss if it happens to be
lower than the termination fee.
Your best option, though, is to transfer your lease for someone who would
"assume it" and take it off your hands. There is a whole set of potential
buyers looking for short-term leases without all the hassle and extra
costs. Check with family and friends or use the services of lease-
assumption websites, like swapalease.com, to list your car. Make sure you
check the credit worthiness of the new lessee and provide the car in good
condition.