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Buy Or Lease

(category: Auto-Leasing, Word count: 539)
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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.

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Using Lease Calculators

(category: Auto-Leasing, Word count: 242)
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Want to calculate your monthly lease payment? Consider using a lease

calculator

If you are considering a car lease, then you might want to know some key

figures involved in the deal: the monthly lease payments, the overall cost

of the lease and how much savings can be made compared to purchasing the

vehicle.

A lease calculator relieves you from the stress of having to know the

complex underlying lease formulae used in calculations. You simply plug a

number of figures into the calculator and hey presto! You get a detailed

rundown of detailed payments, taxes and total lease costs.

Figures you need to get from your dealer about a specific lease you're

interested in include: capitalized cost, estimated residual value at the

end of the lease, the number of months in your lease and the money factor.

Make assumptions and change some of the figures to see how it affects your

lease payments. For instance, residual value is an "estimated" value of what

the vehicle will be worth at the end of the lease. You can input different

estimates to cover different scenarios and assumptions.

As a final note of caution, bear in mind that lease calculators only do

calculations and check the accuracy of abstract mathematical formulae. They

do not tell you whether a lease is good or bad.

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Leasing Used Cars Explained

(category: Auto-Leasing, Word count: 455)
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Leasing a used vehicle can be an attractive deal in many ways, no least

getting you into that luxury model or SUV, for lower monthly payments than

a brand new one. Be prepared, however, to do some more homework to dissect

a good deal.

As with new car-leasing, your price research should focus on the key

figures that are the initial market value and the estimated residual value

of the used car. This is harder to predict since there is no factory-set

sticker price on used cars, and the residual percentage is very much pegged

to a subjective current retail value. Use different sources to get a rough

idea of the value of the used car: your local dealerships, internet

car-evaluating tools, such as Edmunds.com and Cars.com, to name but a few.

Another way to pin down a good estimate is to compare the lease on your

given car to a lease on a new-car with the same make and model. This should

give you a better picture of the difference between leasing new and going

for used. Just like leasing a new car, used vehicle leasing is more

attractive when residual values depreciate the least. You stand a better

chance of finding a bargain in the high-end, luxury vehicles that keep

their values better as used cars.

Next, you need to check the initial mileage and the overall vehicle

condition. The maximum mileage on a used car should be no more than 12,000

miles a year. A 3-years old car with 50,000 miles on the clock is very

unlikely to make a good used-vehicle lease. Check for signs of excessive

use, like worn seat fabric, worn pedal pads and dirty engine, which might

indicate that the odometer has been rolled back. If the car is not

certified, you need to get it thoroughly inspected. Ask your dealer for a

manufacturer-sponsored certification program or have your car certified by

a qualified mechanic or inspection service.

Most used-car deals don't come with gap coverage. This is a special type

of coverage, normally offered on a new auto-lease, to cover the consumer if

the leased vehicle is lost, stolen or damaged. Typically, auto-insurance

policies cover only what your car is worth at the time of loss, not what

you still owe on the lease. The difference could run into thousands of

dollars. For peace of mind, do not enter into any used-car lease without

gap-coverage. Arrange it separately with either the lease dealer or your

auto-insurance company.

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Leasing With Bad Credit

(category: Auto-Leasing, Word count: 250)
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Have you been refused a car lease? Chances are you have less flawed credit

history. Know what's involved and what you can do to build good credit

history.

Credit score is a measure of your credit worthiness used by leasing agents

to determine whether you are eligible for a lease. You credit score is

based on your past and present credit history, and can range anywhere from

350 to 850. A measure above 720 is considered a "prime score" and will

land you the best rates. If you are below 640, then you are "sub-prime"

and will be considered bad rating by the bulk of leasing agents. This is

where all the trouble in getting that lease comes from.

Ask for your FICO Credit Score from the Fair Isaac Corporation (FICO)

which details your credit score held by all three leading credit score

agencies in the country. Compare the three credit scores and determine if

any agency is holding erroneous credit data about you. Contact the

reporting agency and getting corrected.

If there are no mistakes in your credit report, then you can take some

steps to maximise your score to go above the threshold of 640. Pay your

bills on time and pay down any credit card debts you have. Do not take any

new accounts as this might increase the likelihood of you getting into bad

credit thus worsening your credit score.

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Lease Financing

(category: Auto-Leasing, Word count: 274)
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For auto-consumers, crunching the numbers is one of the most difficult and

confusing aspects of leasing.

Take the finance charge on a lease for instance. Most people just don't

understand how this is calculated on capitalised cost AND residual value

instead of just the capitalised cost. For most, it seems plainly obvious,

just as is the case when purchasing, that a charge should be levied on the

capitalised cost of the vehicle.

Well, no quite! When you lease a car, you're only using the car over a

specified period of time with the option of buying the car. The residual

value represents the "loan balance" at the end of the lease. If you add it

to the capitalized cost and divide by two, you'll get the average

capitalized cost outstanding over the lease term. Let us suppose you're

leasing a car with a capitalized cost of $25,000 and a residual value of

$15,000. You average balance over the lease term, irrespective of how long

it is, is $20,000 - the sum of the two divided by two -.

Using this sum works because the money factor is the annual interest rate

devided by 24, rather than 12. Continuing with our example and assuming an

interest rate of 6% APR:

$30,000 X (6 per cent / 24) = $75

(Capitalized cost + residual value) X (interest rate / 24) = Monthly

finance charge

This finance charge is added to the depreciation charge to calculate the

monthly payments on your lease.

(Word count: 248)

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Independent Car Lease Companies

(category: Auto-Leasing, Word count: 215)
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To lease, you have two possible choices: either lease through a dealer's

finance source or through an independent lease company.

A conventional dealer has a captive finance source, which can be the car

manufacturer's financial company, such as BMW Financial Services, Honda

Motor Credit or General Motors Acceptance Corporation (GMAC), or a major

national bank such as Chase Manhattan.

Independent lease companies are no financial obligation to any single

one manufacturer financing source, but work with dealers anywhere in the

country.

So which one is better?

Conventional dealers provide better lease-deals on limited-time promotions.

Factory-subsidized cars that have subvented money factors and residuals are

very attractive lease deals and can be very hard to beat anywhere else.

Independent lease companies can offer you unbiased and professional advice

on vehicle selection regardless of make and model. This is because they are

not tied to a single manufacturer or financing source, unlike conventional

dealers who have to sell specific models. They can also be more flexible

regarding negotiating lease terms like residual value and mileage.

Ultimately, if you prefer a more personal and customer-oriented

relationship with your leasing agent, then you will do well with an

independent leasing company.

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How To Calculate Your Lease Payment

(category: Auto-Leasing, Word count: 483)
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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.

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Lease Trading

(category: Auto-Leasing, Word count: 214)
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Ever wanted to terminate your lease early, comfortable with the thought you

weren't going to be hit with hefty fees? You can if you transfer your lease

to someone else.

Trading a lease is the best option for people who want to terminate a lease

early and don't want to pay the large termination imposed by most lease

agents. It can also be an alternative to get out of a lease for far less

than you would otherwise pay your original lease company for extra mileage

and wear-and-tear charges that can run into the thousands of dollars.

For a small fee, you can advertise your car lease for assumption to a large

number of potential buyers on the look-out for leases on the Internet. Such

services include LeaseTrader.com, the originator of online lease-trading

and the biggest online marketplace where most lease transfers take place,

and smaller marketplaces such as BreakAlead.com and TradeAlease.com

Before swapping your lease, make sure your leasing company approves lease

transfer transactions. Caution must be exercised in choosing a lease

swapping service: make sure they facilitate the whole lease transfer

process, offer online or telephone customer-service help and registered

buyers undergo stringent credit checks.

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Luxury Cars And Resale Values

(category: Auto-Leasing, Word count: 202)
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When it comes to ultra-luxury, high-end vehicle leasing, there is no doubt

that the best deals are those cars that hold their value. With this in

mind, we single out a few truths about residual values that consistently

apply to high-end leasing.

The most determining factor when it comes to resale values is public

perception of the brand, not its reliability ratings in quality surveys.

Take the Jaguar for example: it is consistently rated as a quality car, but

because of questionable reliability perception among the public, it takes a

sharp dip in value at the end of its lease-term

Higher-tech options and other cutting-edge features do not necessarily mean

the car will fare better. By the time your car is two years old, better

and cheaper systems will render the laser-guided cruise control, navigation

systems and built-in cell phone obsolete. Look for functional features,

such as automatic transmissions, power windows and wheel-drive to enhance

the vehicle's value in the used-car market.

Used-car buyers view less favorably luxury vehicles that come with big

incentives. These are perceived as questionable in quality and

reliability.

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