Tuesday, February 28, 2006

Car Lease Or Fleece Part II

In the last installment I discussed the pros to leasing a car. In this issue I will discuss the cons. Are you thinking that there can't possibly be a downside to leasing a car? Well I'm about to show you some of them.

1. You pay for excessive wear and tear on the car. What defines excessive wear? Anything for a scratch, to a ding or a big dent in the side door. You pay for the repairs to the car at lease end.
2. The car must come back to the lessor in its original condition. If not you pay to have it restored. This is not the same as #1. Suppose you want a CD player with a detachable face-plate, if you add this to the car you must remove it when you turn the car in and replace it with the original equipment.
3. The lessor owns the car, as the lessee you are just renting it until the end of your contract.
4. The lessee still has to pay for general maintenance (oil changes, etc.), any tickets incurred and insurance.
5. You usually pay a higher amount for insurance for a leased vehicle.
6. You pay any and all excessive mileage fees. An example of this is a 2006 Chevy Cobalt 3-year lease with 36000 miles with .25¢ per extra mile. Drive 40000 miles andthat'ss 4000 miles over. A hefty extra $1000 at lease end.

Bottom line is leasing is right for some people and not for others. Take all the pros and cons, apply them to your individual situation and make the right decision for you.

Some Common Lease Terms:
Closed-end Lease - with this type of lease, at the end of the contract you can walk away from the car and owe nothing more except for wear and tear and excessmileagee.
Disposition Fee - fees accessed at lease end for selling expenses or disposing of the car.
Gap Insurance - The difference between what you owe and what the car is worth in the event that it is stolen or totaled in an accident. This insurance pays the balance after insurance pays off.
Lessee - you, the person leasing the vehicle.
Lessor - the financial institution leasing the vehicle to you. Open-end Lease - at the end of the lease, if the cars appraised value is less than the amount stated in the contract, you the lessee must pay the difference. Generally not to your advantage.
Residual Value - Resale value of the car at lease end, as determined by the lessor.

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