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Auto-Leasing Articles


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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Benefits Of Leasing

(category: Auto-Leasing, Word count: 468)
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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.

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Single Payment Lease

(category: Auto-Leasing, Word count: 218)
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A prepaid lease is a new type of lease which has made its foray into the

market in recent times. In this lease, consumers forego the cycle of lease

payments if they make a large payment at the beginning of the lease.

There are two amounts in a conventional lease that incur charges and

determine your monthly lease payments. First, there is a depreciation

charge which accounts for the value the car loses during the lease term.

Second is a residual amount which is the projected value of the vehicle at

the end of the lease. The sum of these two charges gives the monthly

payments on your lease.The idea behind a pre-paid lease is to eliminate the

finance charges for depreciation and only account for residual value

charges in a single, pre-paid payment at the beginning of the lease.

Single-payment leases are devised with spendthrifts in mind: no cycle of

monthly payments, a new car every two to three years and no interest in

purchasing the vehicle at the end of the lease. You should only consider

this type of lease if you are concerned about not being able to make monthly

payments and have a lot of cash upfront.

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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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The Residual Value Of Leasing

(category: Auto-Leasing, Word count: 488)
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If you are in the market to lease a vehicle, you will hear the term

"residual value" recur like a leitmotif. A residual value does not only

affect your monthly payments, but is equally used by leasing companies

to determine any penalties should you break your lease early and how

much to pay if you decided to buy the vehicle at the end of your lease.

Let us first start by looking at the meaning of residual value. The

term "residual value", refers to the value of something after it has

been used for some time. In leasing lingo, it refers to the

depreciation of the vehicle's value over the life of its lease.

So how does it exactly affect your monthly payments? When you lease a

car, you pay for the car's value that you use over the lease length.

Suppose you leased an $18,000 car for 2 years: the leasing company

needs to estimate the value of this car in two years time in order to know

how much of the car you will be using during your lease term. That's where

the "residual value" comes into the equation. If the residual value is

estimated to be $13,000 at the end of your lease, then your monthly

payments will be calculated on the $5,000 you will use over 24 months,

giving an average monthly payment of $208.3 (plus interest, tax and fees).

How about if the car is expected to lose half its value over the same

period? In this scenario, you will be using $9,000 over the same period,

leaving you with a higher monthly payment of $375 (plus interest, tax and

fees).

As you can see, residual values are a key factor in determining how much

money to pay on your lease and the higher the residual value, the lower

your monthly fees. This works in reverse if you build a bond with your car

and decide to purchase it at the end of your lease. If we stick with the

same example above, the lower monthly payments in the second scenario come

at the cost of paying substantially more to buy your car at the end of the

lease.

So, since the residual value is so important, how do I know which one is

best for me? Well, it all depends whether you want to purchase the car at

the end of your lease. If you don't want to make a large down payment and

you want low monthly payments, then a car that holds with a higher residual

value is a good deal. If you are thinking of purchasing the car at

lease-end, then you need to balance low-monthly payments with a moderate

residual value.

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Leasing Glossary

(category: Auto-Leasing, Word count: 544)
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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

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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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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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Auto Insurance And Leasing

(category: Auto-Leasing, Word count: 233)
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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.

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