Leasing Still Misunderstood - Part II
In Part I, I described a typical lease scenario that helps explain how leasing works and how it benefits the lessor (party providing the leased vehicle) and the lessee (part driving the leased vehicle).
However, it was not quite complete in that it's lease companies, finance firms, and banks that provide leases, not individuals. That means there some extra rules and fees.
A car lease is a legal agreement. Lease companies make the rules and set fees. When a lessee signs a contract, he or she agrees to the terms of the lease and the specified fees.
There is nearly always an acquisition fee, or bank fee. This is usually several hundred dollars and is much like "points" in a home mortgage. It's a kind of administration fee or lease initiation fee charged by the lease company, not the dealer. This fee is included in the cost of the vehicle and is paid along with the lease. There may be a security deposit of a few hundred dollars, which is returnable at the end of the lease.
Then there's usually a lease-end disposition fee, usually about the same as a single monthly payment. It's billed after a leased vehicle has been returned and is an administration fee for handling the return and getting the vehicle ready for auction. The lessee may also be billed for unusual damages, excessively worn tires, and extra mileage. The details are always spelled out in the lease contract.
Sales tax is typically (in most states) less for leased cars than those that are purchased. That's because only the monthly payment is taxed, not the entire value of the vehicle.
In Part III, I'll discuss some of the most common problems of leasing.
However, it was not quite complete in that it's lease companies, finance firms, and banks that provide leases, not individuals. That means there some extra rules and fees.
A car lease is a legal agreement. Lease companies make the rules and set fees. When a lessee signs a contract, he or she agrees to the terms of the lease and the specified fees.
There is nearly always an acquisition fee, or bank fee. This is usually several hundred dollars and is much like "points" in a home mortgage. It's a kind of administration fee or lease initiation fee charged by the lease company, not the dealer. This fee is included in the cost of the vehicle and is paid along with the lease. There may be a security deposit of a few hundred dollars, which is returnable at the end of the lease.
Then there's usually a lease-end disposition fee, usually about the same as a single monthly payment. It's billed after a leased vehicle has been returned and is an administration fee for handling the return and getting the vehicle ready for auction. The lessee may also be billed for unusual damages, excessively worn tires, and extra mileage. The details are always spelled out in the lease contract.
Sales tax is typically (in most states) less for leased cars than those that are purchased. That's because only the monthly payment is taxed, not the entire value of the vehicle.
In Part III, I'll discuss some of the most common problems of leasing.
posted by Al Hearn at 9:24 PM
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