LEASING USED VEHICLES - TRADE A LEASE

Some automobile dealers and leasing companies are expanding their leasing programs to include as part of their end of lease options the possibility to transfer the lease.  This way the original owner can move onto another car and someone else can take over the car's payments.

How many times a used vehicle can be “re-leased” is determined by the leasing company. You may also find that leasing a one- or two-year-old used vehicle for the remainder of the lease term is more affordable, when compared with buying the same vehicle over a longer period of time, such as 48 or 60 months and all the costs involved in getting into a brand new lease.

When considering whether to lease a used car or truck, be sure to find out if a warranty or service policy is offered to cover maintenance and/or repair costs for the vehicle over the term of the lease.

For more information on leasing a car, or special short-term leasing programs, contact the experts in lease management: TRADE A LEASE

SHORT-TERM LEASING

Having the option of leasing a vehicle for a short term (12-24 months) has become an increasingly popular alternative to long term financing (36 to 42 months).  For many consumers, leasing a car, truck or SUV is attractive because of the lower monthly payments, no money down, no risk of resale, and lower maintenance and repair costs.

Another advantage of short-term leasing when you assume a lease is that you pay only for the portion of car’s worth that you use.  Therefore, monthly payments can be lower than a financed purchase loan for a similar car and term.  In addition, with a lease transfer no down payment is required.  As a result you may view lease take-over as a way to drive more car for the same monthly payment.

If you want to drive a different car every two or three years, the following benefits of assuming a lease will appeal to you:

-         Lower monthly payments

-         No money down

-         No risk of resale, you just return the car when the lease is over

-         Lower maintenance and repair costs than if you owned the car

TYPES OF LEASES

There are two kinds of leases: the closed-end car lease and the open-end car lease.  The majority of leases are closed-end.  At the end of both types of leases, you may return the leased car, truck or SUV.  With a closed-end lease the residual value – or the car’s guaranteed future minimum value – is determined at the beginning of the lease.

For an open-end lease, you assume the risk that at the end of the lease the car will be worth less than the predetermined residual value stated in the leasing contract.  If it is, you must pay the difference.  However, if the car is worth more, you are not obligated to pay.

All car leases in TRADE A LEASE should be close-end leases.

MONTHLY PAYMENT

There are three elements of a lease that are typically used to calculate the monthly payment:

-         Capitalized cost of the vehicle which is the total cost of the leased car, truck or SUV or simply put its price.

-         Residual value which is the guaranteed minimum value the leasing company thinks the car will be worth at the scheduled end of the lease

-         Lease factor, money factor or interest factor which is the cost of money the leasing company charges for overhead and profit.

RESIDUAL VALUE

The residual value or guaranteed minimum value plays a key role in figuring your payments.  The higher the residual value of the car, truck or SUV , the lower the payments will be because you are financing less of the car’s value or worth.

The banks that issue the lease contracts set residual values.  The residual value is their best guess as to what the car will be worth at the end of the lease.  They base their projections on data from past models and a prediction of what consumers tastes will be. 

You can't negotiate residual value.  However, you can and should shop for a lease based on the residual value.  So before you decide what kind of car you want to lease, you should consider which cars hold their value well. 

If you want to check the residual rates of current model cars look in the Black Book which may be available at your local bank in its auto loan department.

Remember that the residual value is different each year.  It might be 70percent after one year, 60 percent after two, 50 percent after three, and so on.

END OF LEASE CHARGES

A disposition fee may be required by some dealers or leasing companies when the car is turned in at lease end.

Be sure to check the leasing contract for all required charges, and remember that you are responsible for taxes, title and license fees and insurance.

MILEAGE ALLOWANCE

In a typical closed-end lease, you may drive 15,000 miles per year without mileage adjustment.  this mileage figure is based on the average driver.  If you need more than 15,000 miles per year, you may want to include an adjustment for the extra miles in your lease payment.

Allowances for miles are usually less expensive if prepaid at the beginning of the lease, more expensive if paid at the end. Also prepaid miles that are not used are typically refunded.

WHEN THE LEASE EXPIRES

If you decide to return the vehicle to the dealer or leasing company at the scheduled end of the term, a turn-in date will be arranged when the vehicle is inspected for excess wear and tear or other damages, and the vehicle's odometer is checked. You should review the vehicle condition report carefully and discuss it with the person doing the inspection.

If you are charged for damages, or if you have excess mileage over the standard miles allowed, these costs may be deducted from the security deposit. You should ask your dealer about the lease-end process at lease inception.

Prepaid additional mileage that you do not use may be reimbursed at the original amount paid.

With an open-end lease, the leasing company appraises and sells the vehicle, and compares this amount to the estimated residual value stated in your leasing contract. If more money is owed to the leasing company over and above the security deposit, you must pay the leasing company. If no charges are assessed, your original security deposit is refunded to you.