Confused About Vehicle Leasing? AAA To The Rescue!
29 December 1997Confused About Vehicle Leasing? AAA To The Rescue!
ORLANDO, Fla., Dec. 29 -- Thinking of leasing your next vehicle, but you are confused by the unfamiliar terminology or fear there may be hidden costs involved? Not to worry, says AAA, as leasing companies are required to more clearly explain all terminology and costs involved under the Federal Consumer Leasing Act, effective Jan. 1. In addition to the consumer-friendly rules, the Federal Reserve Board has developed a comprehensive leasing education program which is being launched to reach as many potential vehicle lessees as possible. AAA offers its members competitively priced auto loans and leases through its expanded Financial Services Program. If you are considering leasing, AAA recommends considering the number of miles you drive each year in the decision. Most lease terms include a maximum mileage. If you exceed the limit -- usually about 12,000 each year -- you'll probably have to pay a mileage charge at the end of the lease. AAA offers this additional information to help you determine if leasing -- or buying -- is right for you: * In leasing, you do not own the car, but must return it at the end of the lease, unless you choose to buy it. In buying, you own the vehicle and keep it at the end of the financing term. * When you lease a vehicle, the company leasing the car generally assumes the risk of the vehicle's future value. In buying outright or financing, you assume the risk of the future value of the vehicle. * Your upfront leasing costs may include a down payment, refundable security deposit, first month's payment, taxes and other charges at lease signing or delivery. In financing, you may have to make a down payment and pay taxes, registration fees and other charges before taking possession of the car. * Your monthly lease payments are generally lower than if you finance the purchase because you are paying only for the use and depreciation of the vehicle during the lease term, plus interest, taxes and fees. If you finance the vehicle, your monthly loan payments are generally higher than lease payments because you are paying for the entire purchase price of the vehicle. * You may return the vehicle to the dealer at lease end, pay any end-of- lease costs and "walk away." You do not have to trade in or resell the vehicle at lease end. If you buy the vehicle, you have to sell or trade it when you decide it's time to get a different vehicle. * In leasing, you are responsible for any early termination charges if you end the contract early. In financing, you may be responsible for a prepayment penalty if you pay off your loan early. * Most leases limit the wear and tear to the vehicle during the lease. You likely will have to pay charges for exceeding those limits when you return the vehicle. In financing, you can maintain it as you desire. The vehicle's condition, including excessive mileage, will likely affect the trade-in or resale value. * At the end of the lease, you will have a option either to finance the existing vehicle or obtain a new lease. At the end of the finance term, you have no further payments. To learn more about AAA's auto leasing and financing program, call 800-680-AAA4. SOURCE American Automobile Association