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.
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.
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.
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.
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.
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
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.
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.
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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