To lease or to buy? That's the choice you face when
mulling over makes and models and deciding which car deal best meets your needs.
Leasing a car is not the same as buying one. When you buy, you own the car. When
you lease, you pay to drive someone else's vehicle. Leasing can involve lower
monthly payments than a loan. However, at lease end, you will have no ownership
or equity in the car. Many dealers and other lessors offer vehicle leases.
Before you decide whether to lease or buy, the Federal Trade Commission (FTC)
reminds you: don't be dazzled by so-called deals. Ask questions, nail down the
details, read the fine print, and shop around.
If you're thinking of
leasing, the FTC offers these shopping tips:
1. Shop as if you're buying
a car. Negotiate all the lease terms, including the price of the vehicle.
Lowering the lease price will help reduce your monthly payments. Get all the
terms in writing.
2. Learn the language of leasing:
* In a closed-end
lease, you return the car at the end of the lease and "walk away," but you're
still usually responsible for certain end-of-lease charges, such as excess
mileage, wear and tear, and disposition.
* In an open-end lease, you pay the
difference between the value stated in your contract and the lessor's appraised
value at the end of the lease.
* Lease inception fees are payments you must
make when the lease starts, and may include a down payment, security deposit,
acquisition fee, first month's payment, taxes and title fees. Ask for a list of
all charges due at lease inception. You may be able to negotiate some or all of
the terms.
* The capitalized cost is the price of the car for leasing
purposes plus taxes and extra charges like service contracts and registration
fees.
* The capitalized cost reduction is similar to a down payment. If
you're trading in a car, make sure the dealer applies the trade-in value to the
price your lease is based on. The trade-in credit may reduce your down payment
or monthly payments.
3. Ask whether extra charges will be assessed for excessive
mileage, wear and tear, disposition and early termination, and find out the
amount of these charges. Most leases allow you to drive 12,000 to 15,000 a year;
if you put on more miles, expect a charge of 10 to 25 cents for each additional
mile. You may think the ding in the door or coffee stains on the upholstery are
normal wear and tear; to the lessor, it may be significant damage. Check out
penalties for an early return; expect to pay a substantial charge if you give
the car up before the end of your lease.
4. Make sure the manufacturer's
warranty covers the entire lease term and the number of miles you're likely to
drive.
5. Consider "gap insurance" to cover the difference - sometimes
thousands of dollars - between what you owe on the lease and what the car is
worth if it's stolen or totaled in an accident.
6. Before you sign the
deal, take a copy of the contract home and review it carefully away from any
dealer pressure. Be alert for any charges that were not disclosed at the
dealership, like conveyance, disposition, and preparation fees.
7.
Federal law requires lessors to provide lease cost information before you sign
the lease. Take a copy of the attached form to the dealer and ask them to
complete it. Some dealers may be willing to provide the information during your
shopping process. If the dealer declines, consider shopping
elsewhere.
For more information about buying or leasing a car, visit the
FTC's Web site at www.ftc.gov/autos.
The FTC works for
the consumer to prevent fraudulent, deceptive and unfair business practices in
the marketplace and to provide information to help consumers spot, stop and
avoid them. To file a complaint or to get free information on consumer issues,
visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY:
1-866-653-4261. The FTC enters Internet, telemarketing, identity theft and other
fraud-related complaints into Consumer Sentinel, a secure, online database
available to hundreds of civil and criminal law enforcement agencies in the U.S.
and abroad.