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Look Before You Lease
Read
the fine print carefully before you sign the lease.
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. Although leasing can involve
lower monthly payments than a loan, at lease end, you will have no
ownership or equity in the car.
The number of new car
leases is skyrocketing. Before you decide whether to lease or buy, the
Federal Trade Commission reminds you: don't be dazzled by so-called
deals. Ask questions, nail down the details, read the fine print, and
shop around.
If you're thinking of
leasing, the FTC offers these shopping tips:
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Shop 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
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Learn the language
of leasing:
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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.
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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.
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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.
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The capitalized
cost is the price of the car for leasing purposes plus
taxes and extra charges like service contracts and
registration fees.
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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.
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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 is
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.
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Make sure the
manufacturer's warranty covers the entire lease term and the
number of miles you're likely to drive.
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Consider "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.
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Before 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
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Federal 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.
Although these specific disclosures are not mandatory until
January 1, 1998, dealers may be willing to provide the information
now. If the dealer declines, consider shopping elsewhere
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