Leasing is back as a popular way to drive new wheels. A lower monthly payment may not represent all the real and potential costs of a lease. Other factors can influence just how good a lease deal is.
1. Disposition Fee/Purchase Option Fee:
Dropping off a car at lease end without leasing a new one may require a disposition fee. on the other hand, deciding to buy the car at lease end may require a purchase option fee that also can run into thousands of extra rupees.
2. Down Payment or Open End Balloon Payment:
Leasing is simply paying for the value of a car the leasing company predicts you will consume druing the term of the lease. But to make an advertised lease payment more attractive, lenders often require a down payment. A larger down payment equals a lower monthly payment. Furthermore, if the car is stolen or tataled two months into the lease, that down payment will just be lost.
Stay away of any lease hased on paying the difference between the lender's projection and the car's actual market value at lease end. This is called an open-end lease, and it can stick you with a final balloon payment of thousands or even lakhs of rupees. A low monthly payment doesn't mean much when you have to stroke out a big check when returning the car.
3. Excess Mileage Fee:
Every lease conract includes a mileage limit, over which the lender will charge by the mile.
4. Insurance:
Leasing a car requires more insurance than conventional financing. Higher coverage amounts and deductibles demanded by leasing companies drive up the insurance costs - sometimes by thousands of rupees.
Before signing a lease, establish the coverage required and check with your insurance agent to determine any extra costs. Divide those extra costs by the number of months in your lease.
5. Termination Fee:
Returning a car before the lease expires almost always prompts a penalty. Ensure any lease you sign allows transferring the car to a qualified party.
Leasing always costs more than the advertised monthly payment. How much more depends on the lease. Always check the small print.
