When evaluating Car Buying vs. Leasing…

BE IN THE DRIVERS

SEAT!

To Buy or Lease? That is the question…

• Car commercials for shiny, new vehicles today are as likely to tempt you into the showroom with an offer of a low monthly lease rate as to appeal to you as a car buyer.

• Leasing a car is not the same as leasing a home or an apartment and there are many more things to consider when deciding which is the best choice for you.

Shop the Same Way…

• Whether buying or leasing, stick to the basic principles of shopping around for the best deals, negotiating purchase price or lease terms, getting everything in writing and gaining a full understanding of your responsibilities before signing the contract.

Look Down the Road…

• Think about where you'll end up before you begin.

• With leasing, after you satisfy the lease and any end-of-lease costs, you can walk away and either buy or lease another vehicle.

• As a buyer, you own the car after making the final payment and can keep driving it or you can make money selling it and using it for its trade-in value.

Cost of Changing Your Mind…

•If you want out of a car lease early you will typically have to pay an early termination fee.

•If you change your mind after buying a new car, you are still responsible for paying off the loan.

Open, Closed and Upside Down…

• In a closed-end lease, the most common kind, you owe only any end-of-lease charges such as excess mileage at the end of the contract period.

• An open-end lease requires you to pay the difference between the car's value stated in your contract and the price your lessor puts on your car at the lease's end.

• After taking out a car loan to buy a car, you may owe more than the car is worth, or be upside down in the loan, for the beginning of the load period due to interest, finance charges and depreciation.

The Low Down on Up-front Costs…

• When leasing, you may be asked to put down the first month's payment, a refundable security deposit, taxes, registration and other charges.

• You may also pay a capitalized cost reduction, which is another name for a down payment. That may be cash, a trade-in value or a rebate.

• Car buyers will need to pay the cash price or a down payment as well as taxes, registrations and other fees or charges.

Monthly Bills…

• Monthly lease payments are usually lower than auto loan payments because you are not paying for the entire purchase price of the car, only the depreciation during the time you have it.

Insurance…

• Leasing a car may cost you more since many lease agreements may require higher levels of liability insurance than minimum state requirements.

• Other requirements may include collision coverage and comprehensive insurance to pay for theft, vandalism and other losses.

•Car buyers must only follow state laws and any restrictions by the loan provider when deciding what level and types of insurance to purchase.

Miles Per Dollar…

• You need to think about more than miles per gallon when evaluating a lease.

• The Federal Trade Commission estimates that the average lease allows 12,000 to 15,000 miles a year and then drivers can expect to pay a charge of 10 to 25 cents for each additional mile over the amount stated in the contract.

• Car buyers are only concerned with the wear and tear of the miles driven.

Warranties…

• The manufacturer's warranty covers cars purchased or leased.

• When leasing, make sure the warranty covers the full term of the contract and the number of miles you expect to drive.

Wear and Tear…

• The party giving you the lease wants the most value possible for the car when you return it and leases typically make you responsible for excess wear and tear.

• Lease terms vary in who is responsible for maintenance although generally you will be responsible for oil changes and basic maintenance.

• Car buyers can spill coffee all over the seats and lose nothing but the car's good looks and resale value.

Repairs and Accidents…

• You and your insurance company are responsible for repairs and accidents whether you lease or buy.

• However, car leases may require repairs to be made only with original equipment manufacturer parts that may cost more.

• The car will be inspected at the end of the lease and you may need to pay extra if additional repairs are deemed necessary.

• Car buyers and lessees are responsible for the payoff value in case the car is totaled in an accident, so consider "gap insurance," to cover the amount still owed in case the insurance payment is not enough.

Buyer AND Lessee Beware…

• Don’t fall prey to high pressure tactics.

• The federal Consumer Leasing Act gives you the right to have all the terms before signing a lease contract.

• The federal reserve has a form that you can use to comparison shop and clearly spell out specific offers at http://www.federalreserve.gov/pubs/leasing/formce/forms.pdf.

•Car buyers should also read the fine print before committing to loan requirements.

American Debt Counseling, Inc.

A 501(c )(3)non-profit

Credit Counseling Organization

14051 NW 4th Street

Sunrise, FL 33323

www.americandebtcounseling.org

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