Keys to Vehicle Leasing

A primer on leasing: before, during, and after.

The Federal Reserve Board

Leasing a car, rather than purchasing a vehicle, has become a popular way to acquire a new vehicle. However, it's more involved than just figuring how much it will cost per month, according to The Federal Reserve Board.

Leasing a vehicle is much more involved than just being concerned about the monthly payment. You will need to ask many questions. Under the federal Consumer Leasing Act, you have a right to information about the costs and terms of the vehicle lease.

A closed-end lease, the most common type of vehicle lease, allows you to choose the vehicle, return the vehicle at the end of the term, pay any end-of-lease costs, and walk away.

The Federal Reserve Board offers some key points to consider before leasing your next vehicle:

Comparing Different Lease Offers

When deciding on a vehicle and terms of the lease, examine these issues:

• The agreed-upon value of the vehicle — a lower value can reduce your monthly payment
• Up-front payment, including the capitalization cost reduction
• The length of the lease
• Any end-of-lease fees and charges
• The mileage allowed and per-mile charge for excess miles
• The option to purchase either at lease-end or earlier
• Whether the lease includes “gap” coverage, which protects you if the vehicle is stolen or totaled in an accident

Here are additional things to know about the beginning, middle, and end of the lease:

At the Beginning of the Lease

You may be required to pay your first monthly payment; a refundable security deposit or your last monthly payment; other fees for licenses, registration, and title; a capitalization cost reduction (like a down payment); an acquisition fee; freight or destination charges; and state or local taxes.

During the Lease

You will have to pay your monthly payment; any additional taxes not included in the first payment; insurance payments; ongoing maintenance costs; and any fees for late payment.

You will also have to pay for safety and emissions inspections that are required by the local or state government.

If you end your lease early, you may have to pay substantial early termination charges.

At the End of the Lease

If you do not buy the vehicle, you may have to pay a disposition fee and charges for excessive miles and excessive wear.

This article, and hundreds more, can be found on the NEA Member Benefits Web Site in the “Member Library” section: www.neamb.com/consumer_articles.jsp