Understanding how to calculate your monthly lease payment makes it easier
for you to make an informed decision. Yet, most of us shy away from the
“complicated” math on our lease contract, leaving it up to the dealer to
do the payment formula.
Actually, it’s not that difficult! Once you understand all the figures
involved in calculating your monthly payments, everything else falls into
place. These key figures are:
MSRP (short for Manufacturer’s Suggested Retail Price): This is the list
price of the vehicle or the window sticker price.
Money Factor: This determines the interest rate on your lease. Insist on
your dealer to disclose this rate before entering into a lease.
Lease Term: The number of months the dealer rents the vehicle.
Residual Value: The value of the vehicle at the end of the lease. Again,
you can get this figure from the dealer.
Now, let us calculate a sample lease payment based on a vehicle with an
MSRP (sticker price) value of $25,000 and a money factor of 0.0034 (this is
usually quoted as 3.4%). The scheduled-lease is over 3 years and the
estimated residual percentage is 55%.
The first step is to calculate the residual value of the car. You multiply
the MSRP by the residual percentage:
$20,000 X .55 = $11,000.
The car will be worth $13,750 at the end of the lease, so you'll be using:
$20,000 – $11,000 = $9,000
This amount of $9,000 will be used over a 36 month lease period giving us a
monthly payment of:
$9,000 / 36 = $250.
This is the first part of the monthly payment, called the monthly
depreciation charge.
The second part of the monthly payment, called the money factor payment,
factors the interest charge. It is calculated by adding the MSRP figure to
the residual value and multiplying this by the money factor:
($20,000 + $11,000) * 0.0034 = $105.4
Finally, we get the approximate monthly payment by adding the two figures
together:
$250 + $105.4 = $355.4
To recapitulate, the sample formula looks like this:
1- Monthly Depreciation Charge:
MSRP X Depreciation Percentage = Residual Value
MSRP – Residual Value = Depreciation over lease term
Depreciation over lease term / lease term (number of months in the lease) =
monthly depreciation charge
2- Monthly factor money charge
(MSRP + Residual value) X Money factor = money factor payment
3- Sample Monthly Payment:
depreciation charge + money factor payment = monthly payment
Keep in mind that this is a simplified calculation that does not take into
account taxes, fees, rebates or any other incentives. The calculation gives
you a ballpark figure or a rough idea of what your lease payments for the
vehicle in question should be.
Minggu, 10 Agustus 2008
Buy a car at the end of your lease
You’ve come to the end of your lease and you like you car enough you want
to keep it in the driveway. Just like buying a used car, there is some
research to be done to nail a good deal.
First, you need to know the cost of buying out your lease. Read the fine
print of your contract and look for the “purchase option price”. This
price is set by the leasing company and usually comprises the residual
value of the car at the end of the lease plus a purchase-option fee
ranging from $300 to $500. When you signed on the dotted line, your
monthly payments were calculated as the difference between the vehicle’s
sticker price and its estimated value at the end of the lease, plus a
monthly financing fee. This estimated price of the car value at the end
of the lease is what is termed in leasing jargon “residual value”. It is
the expected depreciation – or loss in value – of the vehicle over the
scheduled-lease period. For example, a car with a sticker price of
$40,000 and a 50% residual percentage will have an estimated $20,000
value at lease end.
Now that you know the cost of buying out your lease, you need to determine
the actual value, also termed “market value”, of your vehicle. So, how
much does your car retail for in the market? To pin down a good, solid
estimate you need to do some pricing research. Check the price of the
vehicle, with similar mileage and condition, with different dealers. Use
online pricing websites, such as Cars.com, Edmunds.com and Kelly Blue Book
for detailed pricing information. Gleaning pricing information from various
sources should give you a fair estimate of your vehicle’s retail value.
All you have to do now is compare the two amounts. If the residual value is
lower than the actual retail value, than you’re into a winner.
Unfortunately, there is a good chance a car coming off a lease is a little
on the high side.
Don’t despair though. Leasing companies know as much that residual values
on their vehicles are greater than their market value and as such are
always on the look out for offers. You can knock down on the price of your
leased vehicle with some smooth negotiating tactics. Put forward a price
that is below your actual target and negotiate hard until you wind up near
that figure.
to keep it in the driveway. Just like buying a used car, there is some
research to be done to nail a good deal.
First, you need to know the cost of buying out your lease. Read the fine
print of your contract and look for the “purchase option price”. This
price is set by the leasing company and usually comprises the residual
value of the car at the end of the lease plus a purchase-option fee
ranging from $300 to $500. When you signed on the dotted line, your
monthly payments were calculated as the difference between the vehicle’s
sticker price and its estimated value at the end of the lease, plus a
monthly financing fee. This estimated price of the car value at the end
of the lease is what is termed in leasing jargon “residual value”. It is
the expected depreciation – or loss in value – of the vehicle over the
scheduled-lease period. For example, a car with a sticker price of
$40,000 and a 50% residual percentage will have an estimated $20,000
value at lease end.
Now that you know the cost of buying out your lease, you need to determine
the actual value, also termed “market value”, of your vehicle. So, how
much does your car retail for in the market? To pin down a good, solid
estimate you need to do some pricing research. Check the price of the
vehicle, with similar mileage and condition, with different dealers. Use
online pricing websites, such as Cars.com, Edmunds.com and Kelly Blue Book
for detailed pricing information. Gleaning pricing information from various
sources should give you a fair estimate of your vehicle’s retail value.
All you have to do now is compare the two amounts. If the residual value is
lower than the actual retail value, than you’re into a winner.
Unfortunately, there is a good chance a car coming off a lease is a little
on the high side.
Don’t despair though. Leasing companies know as much that residual values
on their vehicles are greater than their market value and as such are
always on the look out for offers. You can knock down on the price of your
leased vehicle with some smooth negotiating tactics. Put forward a price
that is below your actual target and negotiate hard until you wind up near
that figure.
Selasa, 05 Agustus 2008
Go green and save on your lease
Hybrid vehicles’ popularity has sharply grown from a couple of thousands
in early 2000 to close to 300, 000 by the end of 2005. The trend is
rapidly catching with the auto-leasing industry with generous tax credits
and incentives on offer if you go green.
Beginning in 2006, businesses and taxpayers who lease, or purchase, an
environmentally-friendly and fuel-efficient vehicle will be eligible to
claim federal income tax credits worth thousands of dollars. Individual
states also offer generous incentives, including hybrid state tax credits,
new High-Occupancy Vehicle (HOV) lanes access and discounted thruway tolls
for alternative-fuelled vehicles.
And that’s not all you can save from going green! You can now save on your
parking fees at a number of universities and some auto-insurance companies
are offering insurance discounts for hybrid-vehicle owners nationwide.
If you want to take advantage of these incentives and contribute to energy
conservation then visit HybridCenter.org and complete a personal profile
about your driving needs and habits. You will get in-depth advice on hybrid
models that would make economic sense to you and local, state and federal
incentives available where you live.
in early 2000 to close to 300, 000 by the end of 2005. The trend is
rapidly catching with the auto-leasing industry with generous tax credits
and incentives on offer if you go green.
Beginning in 2006, businesses and taxpayers who lease, or purchase, an
environmentally-friendly and fuel-efficient vehicle will be eligible to
claim federal income tax credits worth thousands of dollars. Individual
states also offer generous incentives, including hybrid state tax credits,
new High-Occupancy Vehicle (HOV) lanes access and discounted thruway tolls
for alternative-fuelled vehicles.
And that’s not all you can save from going green! You can now save on your
parking fees at a number of universities and some auto-insurance companies
are offering insurance discounts for hybrid-vehicle owners nationwide.
If you want to take advantage of these incentives and contribute to energy
conservation then visit HybridCenter.org and complete a personal profile
about your driving needs and habits. You will get in-depth advice on hybrid
models that would make economic sense to you and local, state and federal
incentives available where you live.
Selasa, 22 Juli 2008
How to avoid extra costs at the end of your lease
$250 to dispose of your vehicle, $1000 for extra miles you put on the clock
and $200 to replace the light bulb and the worn tyres—lease agents
constantly nickel-and-dime consumers when their lease runs out.
Here’s a rundown of what can trigger those fees, and some steps to take in
self-defense.
Disposition fee: leasing companies charge you if you choose not to buy the
vehicle at the end of your lease. This fee is set as compensation for the
expenses of selling, or otherwise disposing of the vehicle. It typically
includes administrative charges; the dealer’s cost to prepare the car for
resale and any other penalties. Make sure this fee is stated clearly in the
contract and is agreeable by you before signing on the dotted line. At
lease-end, you are left in no position to negotiate as the dealer can apply
your refundable security deposit towards this fee.
Excess mileage charges: Almost all leasing companies will charge a premium
for each mile over the agreed upon mileage stated in your contract. This
penalty can be as high as 25 cents per mile and can add up quickly. To
avoid the risk of running thousands of dollars in excess mileage penalties
at the end of your lease, always check the “per mile” charges in your
contract and be realistic about your mileage before you sign any contract.
If you think the limit is unrealistic given your commutation needs, then
negotiate with the dealer to get a higher mileage or contract for
additional miles.
Excess tear-and-wear charges: Another potential cost at the end of the
lease is any incidental damage done to the car during the lease. This is
deemed any excessive damage done to the normal tear and wear of the vehicle.
Notice the use of the terms “deemed”, “excessive” and “normal”. There is no
standard formula to define what’s “excessive” and “normal” and it’s up to
the leasing company to assess – or deem – the damage and determine what
they are going to charge. This leaves you at the mercy of unscrupulous
leasing agents who set stringent tear-and-wear standards. Make sure you
read the description of these standards, understand them and agree to them.
If your leased vehicle is damaged prior to the end of the lease, you may
find it cheaper to repair the damage yourself than pay the excessive charges
of the leasing agent. In the event of a dispute over the charges at the end
of your lease, get an independent third party to do a professional appraisal
detailing the amount required to repair any damaged parts or the amount by
which tear-and-wear reduces the value of the vehicle.
and $200 to replace the light bulb and the worn tyres—lease agents
constantly nickel-and-dime consumers when their lease runs out.
Here’s a rundown of what can trigger those fees, and some steps to take in
self-defense.
Disposition fee: leasing companies charge you if you choose not to buy the
vehicle at the end of your lease. This fee is set as compensation for the
expenses of selling, or otherwise disposing of the vehicle. It typically
includes administrative charges; the dealer’s cost to prepare the car for
resale and any other penalties. Make sure this fee is stated clearly in the
contract and is agreeable by you before signing on the dotted line. At
lease-end, you are left in no position to negotiate as the dealer can apply
your refundable security deposit towards this fee.
Excess mileage charges: Almost all leasing companies will charge a premium
for each mile over the agreed upon mileage stated in your contract. This
penalty can be as high as 25 cents per mile and can add up quickly. To
avoid the risk of running thousands of dollars in excess mileage penalties
at the end of your lease, always check the “per mile” charges in your
contract and be realistic about your mileage before you sign any contract.
If you think the limit is unrealistic given your commutation needs, then
negotiate with the dealer to get a higher mileage or contract for
additional miles.
Excess tear-and-wear charges: Another potential cost at the end of the
lease is any incidental damage done to the car during the lease. This is
deemed any excessive damage done to the normal tear and wear of the vehicle.
Notice the use of the terms “deemed”, “excessive” and “normal”. There is no
standard formula to define what’s “excessive” and “normal” and it’s up to
the leasing company to assess – or deem – the damage and determine what
they are going to charge. This leaves you at the mercy of unscrupulous
leasing agents who set stringent tear-and-wear standards. Make sure you
read the description of these standards, understand them and agree to them.
If your leased vehicle is damaged prior to the end of the lease, you may
find it cheaper to repair the damage yourself than pay the excessive charges
of the leasing agent. In the event of a dispute over the charges at the end
of your lease, get an independent third party to do a professional appraisal
detailing the amount required to repair any damaged parts or the amount by
which tear-and-wear reduces the value of the vehicle.
Selasa, 15 Juli 2008
Fees involved in leasing
Mention auto-leasing and most people will automatically assume a low-
monthly payment. There is actually more than what meets the eye, and a
number of fees are involved at various stages of the lease process.
At the beginning of the lease, you have to pay a refundable security
deposit, typically equivalent to one monthly payment, to safeguard against
non-payment and any incidental damage done to the car at the end of the
lease. You are also required to pay an administrative charge, called
acquisition fee. Other fees include licenses, registration, title and any
state or local taxes.
During your lease, and you expected to honour your monthly payment
obligations. Any failure to do so will result in late-payment charges.
You have to pay any traffic tickets, emission and safety inspections and
ongoing maintenance costs. Ending your lease early will result in
substantial early termination charges.
At the end of the lease, expect to pay any excess mileage costs, charged
at 10 to 20 p a mile. Any incidental damage done to the car, and deemed to
be above normal, will result in excess tear-and-wear charges. Finally, if
you choose not to purchase the vehicle, then you have to pay a disposition
fee.
monthly payment. There is actually more than what meets the eye, and a
number of fees are involved at various stages of the lease process.
At the beginning of the lease, you have to pay a refundable security
deposit, typically equivalent to one monthly payment, to safeguard against
non-payment and any incidental damage done to the car at the end of the
lease. You are also required to pay an administrative charge, called
acquisition fee. Other fees include licenses, registration, title and any
state or local taxes.
During your lease, and you expected to honour your monthly payment
obligations. Any failure to do so will result in late-payment charges.
You have to pay any traffic tickets, emission and safety inspections and
ongoing maintenance costs. Ending your lease early will result in
substantial early termination charges.
At the end of the lease, expect to pay any excess mileage costs, charged
at 10 to 20 p a mile. Any incidental damage done to the car, and deemed to
be above normal, will result in excess tear-and-wear charges. Finally, if
you choose not to purchase the vehicle, then you have to pay a disposition
fee.
Sabtu, 10 Mei 2008
Dealer Leasing Tricks
Too often when it comes to auto-leasing, people get so dazzled by the
myriad terms and the jargon thrown their way that they end-up paying
through the nose, relying on a dealer’s “help” than their own informed
decision.
Here is a look at some of the tricks dealers use to pad their profits and
leave the customers shelling hundreds of dollars more than the deal should
be worth.
Trick 1: Leasing always a better deal than buying
Dealers use the lure of lower-monthly payments to entice customers to sign
for long-term loans, with terms stretching for five years or more, making
the payments even lower. There are two catches with such lengthy contracts:
higher mileage, exceeding the prescribed limit, and hefty repair costs.
With
leases charging on average 10 to 20 cents a mile for any extra mile over
the agreed amount in the contract, and warranties only covering three
years, you leave yourself wide open for hefty charges for excessive
mileage and wear and tear.
Trick 2: Cheap 2-3% APR rate on your lease
The dealer is not quoting the interest rate you would be paying on your
lease; he’s rather giving you the lease money factor. Whilst similar to an
interest rate and important in determining your monthly payment, a more
accurate rate is calculated by multiplying the money factor by 24. For
example a “cheap” 3% money factor is 24 X 0.003 = 7.2%. This gives you a
better sense of what your annual interest rate on your lease contract is.
Trick 3: Stress-free early lease termination
Dealers know consumer driving needs change and they would like to have the
option of getting out of a lease commitment sometime down the road, before
their lease ends. Truth of the matter is, when you sign for a lease, you
are effectively saddled with monthly payments for the remainder of the
lease term and there is little-choice of getting out early. Lease contracts
carry hefty financial penalties for either defaulting on monthly payments
or terminating the lease earlier than the scheduled term.
To avoid being on the receiving end of such tried-and-true tricks, educate
yourself about leasing. Get down to the nitty-gritty and understand what
the leasing terms used by dealers mean. Crunch the numbers along with him
and understand how they arrived at the monthly payment figure. Don’t sign
anything until you’ve understood all the terms and your numbers much those
of the dealer. Do not let the dealer pressure you into signing; you are the
one to determine whether the agreement is right for you.
myriad terms and the jargon thrown their way that they end-up paying
through the nose, relying on a dealer’s “help” than their own informed
decision.
Here is a look at some of the tricks dealers use to pad their profits and
leave the customers shelling hundreds of dollars more than the deal should
be worth.
Trick 1: Leasing always a better deal than buying
Dealers use the lure of lower-monthly payments to entice customers to sign
for long-term loans, with terms stretching for five years or more, making
the payments even lower. There are two catches with such lengthy contracts:
higher mileage, exceeding the prescribed limit, and hefty repair costs.
With
leases charging on average 10 to 20 cents a mile for any extra mile over
the agreed amount in the contract, and warranties only covering three
years, you leave yourself wide open for hefty charges for excessive
mileage and wear and tear.
Trick 2: Cheap 2-3% APR rate on your lease
The dealer is not quoting the interest rate you would be paying on your
lease; he’s rather giving you the lease money factor. Whilst similar to an
interest rate and important in determining your monthly payment, a more
accurate rate is calculated by multiplying the money factor by 24. For
example a “cheap” 3% money factor is 24 X 0.003 = 7.2%. This gives you a
better sense of what your annual interest rate on your lease contract is.
Trick 3: Stress-free early lease termination
Dealers know consumer driving needs change and they would like to have the
option of getting out of a lease commitment sometime down the road, before
their lease ends. Truth of the matter is, when you sign for a lease, you
are effectively saddled with monthly payments for the remainder of the
lease term and there is little-choice of getting out early. Lease contracts
carry hefty financial penalties for either defaulting on monthly payments
or terminating the lease earlier than the scheduled term.
To avoid being on the receiving end of such tried-and-true tricks, educate
yourself about leasing. Get down to the nitty-gritty and understand what
the leasing terms used by dealers mean. Crunch the numbers along with him
and understand how they arrived at the monthly payment figure. Don’t sign
anything until you’ve understood all the terms and your numbers much those
of the dealer. Do not let the dealer pressure you into signing; you are the
one to determine whether the agreement is right for you.
Sabtu, 12 April 2008
Buy or Lease?
It’s the classic dilemma that faces every auto-consumer out there: Pay
cash upfront or forego the ownership and pay monthly settlements instead?
Buy or lease for a new set of wheels?
As is the case with every other common dilemma, there is no slam-dunk
answer. Each option has its own benefits and drawbacks, and it all depends
on a set of financial and personal considerations.
First, your finances. Affordability is clearly key, and you need to ask the
question of 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.
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.
cash upfront or forego the ownership and pay monthly settlements instead?
Buy or lease for a new set of wheels?
As is the case with every other common dilemma, there is no slam-dunk
answer. Each option has its own benefits and drawbacks, and it all depends
on a set of financial and personal considerations.
First, your finances. Affordability is clearly key, and you need to ask the
question of 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.
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.
Senin, 10 Maret 2008
Benefits of leasing
Despite aggressive low-interest financing, cash-back offers and other
purchasing incentives offered by leading auto-makers to buyers, leasing
numbers keep increasing steadily over the years. Leasing is not only an
attractive financial proposition to most auto-consumers, but also a
lifestyle and preference choice.
Benefit Number 1: Keeping up with the latest trends
Leasing is sometimes more of a personal and lifestyle choice than a
financial one. Many people are not comfortable with the idea of owning a
vehicle over a long period of time. They’d rather keep up with the latest
trends of the industry and drive the latest models every two to three
years.
Leasing a car gives you the convenience of having the latest technology
and safety innovation, such as an electronic stability system, DVD
entertainment systems and advanced stereo equipment. If you are willing to
forego ownership for the latest set of wheels, than leasing is your best
option.
Benefit Number 2: Purchasing Flexibility
Leasing also offers purchasing flexibility: it allows you to defer the
purchasing decision while using the car. You don’t have to haggle with your
mechanic over repair expenses, deal with hefty maintenance bills or worry
about a depreciating asset. Provided you can keep the vehicle in good
condition and stay within the contracted mileage allowance, you’re
effectively getting a test drive for the length of your lease.
At the end of your lease, you can purchase the vehicle or simply turn in
the keys and walk away. No questions asked.
Benefit Number 3: Cash Flow
Leasing offers many short-term benefits. It reduces your initial cash
outlay as you do not have to pay the large down payment required for car
ownership. You only pay for the depreciation on the car - only the part you
will use during your lease, not the entire vehicle. This results in lower
monthly payments and frees even more cash. This cash can be put to use more
intelligently elsewhere than the questionable investment of owning a
depreciating asset. If you are self-employed or use your car for your job,
then you can write off your leasing payment as a business expense.
Benefit Number 4: Negotiating Leverage
Although it may seem a little unorthodox in this industry, almost
everything about leasing is negotiable. If you know all the fees involved,
you can lower your monthly payments, negotiate the purchase price of the
vehicle at the end of the lease and contract additional miles on top of
your mileage limit. You can also do some shopping around and compare deals
from different auto-insurers to get the cheapest GAP insurance for your
lease.
purchasing incentives offered by leading auto-makers to buyers, leasing
numbers keep increasing steadily over the years. Leasing is not only an
attractive financial proposition to most auto-consumers, but also a
lifestyle and preference choice.
Benefit Number 1: Keeping up with the latest trends
Leasing is sometimes more of a personal and lifestyle choice than a
financial one. Many people are not comfortable with the idea of owning a
vehicle over a long period of time. They’d rather keep up with the latest
trends of the industry and drive the latest models every two to three
years.
Leasing a car gives you the convenience of having the latest technology
and safety innovation, such as an electronic stability system, DVD
entertainment systems and advanced stereo equipment. If you are willing to
forego ownership for the latest set of wheels, than leasing is your best
option.
Benefit Number 2: Purchasing Flexibility
Leasing also offers purchasing flexibility: it allows you to defer the
purchasing decision while using the car. You don’t have to haggle with your
mechanic over repair expenses, deal with hefty maintenance bills or worry
about a depreciating asset. Provided you can keep the vehicle in good
condition and stay within the contracted mileage allowance, you’re
effectively getting a test drive for the length of your lease.
At the end of your lease, you can purchase the vehicle or simply turn in
the keys and walk away. No questions asked.
Benefit Number 3: Cash Flow
Leasing offers many short-term benefits. It reduces your initial cash
outlay as you do not have to pay the large down payment required for car
ownership. You only pay for the depreciation on the car - only the part you
will use during your lease, not the entire vehicle. This results in lower
monthly payments and frees even more cash. This cash can be put to use more
intelligently elsewhere than the questionable investment of owning a
depreciating asset. If you are self-employed or use your car for your job,
then you can write off your leasing payment as a business expense.
Benefit Number 4: Negotiating Leverage
Although it may seem a little unorthodox in this industry, almost
everything about leasing is negotiable. If you know all the fees involved,
you can lower your monthly payments, negotiate the purchase price of the
vehicle at the end of the lease and contract additional miles on top of
your mileage limit. You can also do some shopping around and compare deals
from different auto-insurers to get the cheapest GAP insurance for your
lease.
Minggu, 10 Februari 2008
Auto Leasing Scams
Car-leasing has been lauded as a more attractive alternative to buying,
offering in the process the flexibility to drive a new car for less. The
reality, however, is that leasing is an option that is fraught with many
pitfalls for the average customer. Leasing regulation does not require as
much disclosure as buying a vehicle. This has given rise to many leasing
scams that trick the customer into believing they are into a good deal
when, in effect, all he is getting is a rough deal on the dealer’s terms.
Here we look at some of these common scams and how to avoid them
Artificially low interest rates:
Some dealers quote a lower interest rate when in reality it’s much
higher. They do this by either purposefully quoting the money factor as
the interest rate or calculating the loan without amortizing some closing
fees, like the security deposit, into the loan lease. Take the money
factor for example: this is typically expressed as a four decimal digit,
something like 0.004. Some dealers quote this as a 4% interest rate when
in fact you need to multiply it by 24 to get a rough idea of the interest
rate on your loan. In this example, the interest rate is a much higher 9.6%
than the “quoted” rate of 4%.
Make sure you crunch the numbers and understand the formula they use to
calculate their interest rate. Look out for any fees not factored into the
calculation. If you are not satisfied, do not enter into the lease
agreement.
Terminate your lease early for a low penalty
This is an all-time leasing scam. You ask your dealer how much you will pay
if you want to terminate your lease and he tells you: “You want to get out
early? Sure thing, you only pay an early termination fee of $300”. What he
is quoting is only the small administrative penalty of early termination,
there is a much stiffer penalty called early termination fee and this runs
into thousands of dollars.
Do not confuse the early termination administrative penalty with the
termination fee. Read the small print carefully and know exactly how much
you will get charged should you terminate your lease before its scheduled
end.
Pay for an extended warranty you don’t need
This is another shell game to inflate the dealer’s profit at your expense.
The dealer slides an extended-warranty into the deal whilst it’s already
factored into the monthly payments, or he tricks you into buying a 36-month
warranty on a 24-month lease.
You do not have to pay extra money for a warranty already built into your
payments or for one that goes well beyond your lease term.
They might slip an extended warranty in. Don’t be fooled, the warranty is
already factored in.
No security deposit
Any dealer who advertises a $0 security deposit is not telling you the
whole story. A security deposit is always factored in the lease under the
provision for disposition fees.
offering in the process the flexibility to drive a new car for less. The
reality, however, is that leasing is an option that is fraught with many
pitfalls for the average customer. Leasing regulation does not require as
much disclosure as buying a vehicle. This has given rise to many leasing
scams that trick the customer into believing they are into a good deal
when, in effect, all he is getting is a rough deal on the dealer’s terms.
Here we look at some of these common scams and how to avoid them
Artificially low interest rates:
Some dealers quote a lower interest rate when in reality it’s much
higher. They do this by either purposefully quoting the money factor as
the interest rate or calculating the loan without amortizing some closing
fees, like the security deposit, into the loan lease. Take the money
factor for example: this is typically expressed as a four decimal digit,
something like 0.004. Some dealers quote this as a 4% interest rate when
in fact you need to multiply it by 24 to get a rough idea of the interest
rate on your loan. In this example, the interest rate is a much higher 9.6%
than the “quoted” rate of 4%.
Make sure you crunch the numbers and understand the formula they use to
calculate their interest rate. Look out for any fees not factored into the
calculation. If you are not satisfied, do not enter into the lease
agreement.
Terminate your lease early for a low penalty
This is an all-time leasing scam. You ask your dealer how much you will pay
if you want to terminate your lease and he tells you: “You want to get out
early? Sure thing, you only pay an early termination fee of $300”. What he
is quoting is only the small administrative penalty of early termination,
there is a much stiffer penalty called early termination fee and this runs
into thousands of dollars.
Do not confuse the early termination administrative penalty with the
termination fee. Read the small print carefully and know exactly how much
you will get charged should you terminate your lease before its scheduled
end.
Pay for an extended warranty you don’t need
This is another shell game to inflate the dealer’s profit at your expense.
The dealer slides an extended-warranty into the deal whilst it’s already
factored into the monthly payments, or he tricks you into buying a 36-month
warranty on a 24-month lease.
You do not have to pay extra money for a warranty already built into your
payments or for one that goes well beyond your lease term.
They might slip an extended warranty in. Don’t be fooled, the warranty is
already factored in.
No security deposit
Any dealer who advertises a $0 security deposit is not telling you the
whole story. A security deposit is always factored in the lease under the
provision for disposition fees.
Kamis, 10 Januari 2008
Auto Insurance and Leasing
When leasing a car, it’s easier to stick with the same company for your
auto insurance. What you don’t know, however, is that you may end up
paying too much for your coverage and it’s better to look elsewhere for
lower rates.
When you lease, the vehicle that you will drive belongs to the leasing
company. They want to make sure that their investment is covered in the
event the vehicle gets damaged, totalled or stolen. They typically want
to get covered for the difference between what your auto-insurer pays and
your outstanding leasing obligations at the time of the accident or
damage. This is called GAP, short for Guaranteed Auto Protection, and is
usually included in the leasing contract.
If your leasing company is called BMW Financial Services, Chrysler
Financial or any other finance division of an automaker, then chances are
your GAP insurance will be offered by the same lease company.
You are under no obligation to accept GAP insurance included as part of
your lease agreement. Why pay an insurance premium if you could get the
same coverage for a lower price?
Invest some time shopping by comparing quotes from other insurance
companies, including your existing one. Ask for discounts that you already
qualify for and adjust your coverage accordingly.
auto insurance. What you don’t know, however, is that you may end up
paying too much for your coverage and it’s better to look elsewhere for
lower rates.
When you lease, the vehicle that you will drive belongs to the leasing
company. They want to make sure that their investment is covered in the
event the vehicle gets damaged, totalled or stolen. They typically want
to get covered for the difference between what your auto-insurer pays and
your outstanding leasing obligations at the time of the accident or
damage. This is called GAP, short for Guaranteed Auto Protection, and is
usually included in the leasing contract.
If your leasing company is called BMW Financial Services, Chrysler
Financial or any other finance division of an automaker, then chances are
your GAP insurance will be offered by the same lease company.
You are under no obligation to accept GAP insurance included as part of
your lease agreement. Why pay an insurance premium if you could get the
same coverage for a lower price?
Invest some time shopping by comparing quotes from other insurance
companies, including your existing one. Ask for discounts that you already
qualify for and adjust your coverage accordingly.
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