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    This section is designed to help you understand all the terms and terminology of leasing a new or used car. Leasing a car is a great way to drive a new model car and be able to switch to a newer one every couple of years without the hassle of trying to sell your old car or trade it in. Leasing has become more popular lately and seems to continue growing in popularity. The lack of commitment to one car entices many people. Leasing also has the benefits of lower monthly payments than buying a car, a low up front cost, and a solid warranty that will cover you for the entire term of your lease. This will cut back on your maintenance costs. Even though leasing may have its benefits, it may not be for everyone.

    If you are one of those people that like to buy a car and stick with it for a while, leasing will not be for you. Another drawback for some people is, the more miles you drive, the higher the lease payments. Leased cars have a mileage allowance, which limits the number of miles you can put on the car in a year. If you pass this limit, you will be charged more at the end of the lease.

    If you are considering leasing a car, here are some helpful hints.

    Leasing terms:
    (Gross) Capitalized cost: This is the final price of the vehicle, which is negotiated by you and the dealer. It will include all fees, taxes, and other premiums.

    Capitalized-cost reduction: This would be any discount you can bring to the deal like a trade in, rebate, or cash down.

    Adjusted Capitalization cost: This would be the final cost after cost and cost reduction are figured.

    Closed-end lease: This is a lease in which the leased car can be returned at the end of the lease with no further obligations.

    Open-end lease: At the end of this lease, the person who leased the car is responsible for the difference between the residual value and the realized value.

    Residual Value: This is the value of the car when it is first being leased. This value is used to decide the depreciation value and will help decide your monthly payments.

    Realized Value: This is the term used for the value at the end of the lease.

    Early termination charge: An additional fee given if the lease is ended before the contract date.

    Early termination payoff: The amount of money left on the contract that will be charged to the leaser if they end the contract early.

    Purchase option: This is part of the contract, which are the terms that would apply if you choose to buy the car at the end of the lease.

    Subvented lease: This is a lease by the manufacturer or other leasing agent, which normally comes with lower monthly payments by using a higher residual value than others.

    Gap coverage: Insurance that covers the difference between the payoff of the lease and the original lease insurance.

    Mileage limit: The amount of miles you lease allows you per year.

    Term depreciation: The capitalized cost minus the residual value.

    Security deposit: An unspecified amount, which will be paid at the beginning of the lease and retuned at the end.

    Acquisition fee: Fees included in the capitalized cost to cover dealer administration costs.

    Destination charge: An amount added to the capitalized costs by the dealer to cover delivery and handling of the car.

    Monthly depreciation: The term depreciation divided by the length of the lease term.

    A. Know when you walk into a dealership whether you want to lease or buy. This will make negotiations easier and less confusing. It also gives the dealer less of an opportunity to haggle with you.

    B. Negotiate the price of the car before you tell the dealer you want to lease a car.

    C. Don't get a lease for longer than three years.

    D. Ask about subvented leases. These discounted leases from the factory will insure you lower payments.

    E. When discussing mileage, give yourself a good allowance. This may make your monthly payments a little higher but you will run less of a risk going over the allowance and paying more in the end.

    F. Closed end leases are normally the smarter choice. A closed end lease has the residual price set and cannot be negotiated at the end.

    G. Negotiate the price with dealer as if you were buying the car. A dealer might try to up the price for a lease to get more in monthly payments. Make sure the price is the same whether you were buying or leasing.

    H. Make sure the dealer gives you all the information they are required to give you when you lease a car. It is by law that they give you this information so you are more aware of what this all means. He needs to give a contract/lease form that you understand, list all expenses that will be going into the final price, list fees for unseen things at the end such as early termination and wear and tear, and he needs to show you exactly how all of these fees add up.


    1. You can drive a newer model car every couple of years without dealing with trade-ins and/or selling of the old used car.

    2. At the end of the lease you can buy the car or just give it back, you decide.

    3. Low monthly payments.

    4. Might help you to drive that car you wanted but didn't think you could afford to buy it.

    5. Less maintenance worries.

    6. No long time commitment worries.

    7. Warranties are for the span of time you have the care normally.

    8. Low up front costs.


    1. Leases are hard to get out of without paying high fees if you find that you don't like the car.

    2. At the end of the lease, you don't own the car so you have to get another one.

    3. Leases can turn out to be more expensive than buying in the end.

    4. Mileage allowances are almost always to low and when you break them you have to pay for the extra miles.

    5. Even thought the car is warranted, wear and tear is a separate part of the contract and if you don't take excellent care of the car you will be paying wear and tear fees in the end.

    6. You cannot alter the car. It cannot be modified or changed.

    7. Depreciating values of the car can end up costing you money.

    As you can see, leasing definitely has its benefits as well as its downfalls. It is up to you, the customer, to decide if leasing is for you. If you decide to lease a car, hopefully this guide will provide you with some information to help you get the best deal on what you really want.