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A Hard Look at Auto Leasing


FIGHT BACK! BY DAVID HOROWITZ

A Hard Look at Auto Leasing

Can't afford to buy that dream car you've always wanted? Lease it instead! Car dealers
make it sound so easy -- and affordable. But are you really saving any money leasing a car
instead of buying it? That depends on the terms of the lease. And according to consumer
experts, people who lease cars often have no idea what they're really paying for their vehicles
because they don't understand the fine print in the leasing agreement.
Leasing contracts were originally written for fleet operators and their lawyers. And that
makes it difficult for the rest of us to get a handle on the complexities of auto leasing. Here aresome of the numbers you need to know to compare leasing costs with buying a car:
-- Up front costs may include a security deposit, tax and license, lease acquisition fee, a
optional down payment to reduce your monthly payments.
-- Financing costs, often called a "money factor" or "lease factor," are similar to interes
rates in an outright purchase. A dealer can convert these costs to an interest- rate format for
comparison.
-- Residual value is the vehicle's estimated value at the end of the lease. It's also the pce
you would have to pay to buy the car from the leasing company.
-- Monthly payment is the cost the dealers usually advertise in big, bold numbers. The
amount of your monthly payment will depend on how much you put down on the car and its
residual value at the end of the lease.
-- Penalties may be added to the cost of your lease if you turn in the car early or drive i
more than the total mileage allowed in the lease.
-- Total cost is all of the above. It's the number you're looking for when you compare
leasing and buying.
Most car leases, like purchases, are negotiable. So, when you talk to your dealer about a
lease, take a pocket calculator with you and be prepared to bargain. If you drive more than
15,000 miles a year (the usual mileage limit in car leases), find out what it would cost to
purchase that extra mileage up front. It will probably be cheaper than paying 25 cents a mile for
the overage when you turn in the car.
Besides the money, there are other considerations before deciding on an auto lease. If you ant a new car every few years and don't intend to pay it off, then leasing makes sense. But
don't expect any special tax advantage from leasing. IRS rules are very restrictive about writing
off auto-lease payments.
The Federal Reserve Board, which regulates auto leasing, is proposing new disclosure
rules that would require leasing companies to put all these costs in one part of the contract. The merican Financial Services Association, an auto leasing trade group, is asking its members to
standardize leasing language and abide by the association's voluntary disclosure guidelines.
But if you really want to get the best possible deal on an auto lease, I suggest you get a opy of the 17-point "Reality Checklist," published by the Consumer Task Force, a coalition of
22 state attorneys general and the Ralph Nader organization. Ask your state attorney general's
office or send a check or money order for $1 to Reality Checklist, P.O. Box 7648, Atlanta, Ga.,
30357-0648.
If you have any questions or comments, please write to David Horowitz in the Consumer
Forum+ (go FIGHTBACK). COPYRIGHT 1994 CREATORS SYNDICATE, INC.


 
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