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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
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
The capitalized cost is the price of
the car for leasing purposes plus taxes and extra
charges like service contracts and registration
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
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.