Updated 7/21
This is a question only you can answer. There are several factors
to consider. Can you aord to put money down? If so, how much?
Do you drive a lot of miles each year? Some leasing programs
have limits on annual mileage. Are you hard on your car? If you
expect a lot of wear and tear, leasing may not be right for you.
It’s important to understand that a lease only gives you the
right to use a car for a defined period of time, typically 24 or 36
months. After that, you have to return the car. That leaves you
without ownership or assets. On the other hand, if you buy a car,
at the end of the loan it’s yours free and clear.
Most leases, however, allow you to buy the car you’ve been
driving, either in a lump sum payment at the end of the lease or
by refinancing the balance over a certain term. This may or may
not be a worthwhile financial option.
Should I lease or buy?
If you’re thinking about leasing a car
Attracted by low monthly payments, consumers see leasing as an aordable way to drive
the car of their dreams.
But that doesn’t mean you should rush out and lease a new car. It’s just the opposite. Make
your decision an informed and educated one.
Leasing is far more complicated than buying a new car. And as the popularity of auto
leasing increases, so do the number of problems consumers are having with lease
programs.
That’s why the state Assembly revised and enhanced a measure protecting consumers
against many common complaints associated with leasing. The Motor Vehicle Retail
Leasing Act gives consumers more freedom to shop around for the best deal when leasing
a car. The law sets limits on early termination charges and gives the state attorney general’s
oice the authority to mediate “excess wear and tear” charges through a special arbitration
program.
Consumer Guide to
Auto Leasing
Carl E. Heastie
Speaker of the Assembly
District Office:
250 Broadway, Suite 2301
New York, NY 10007
212-312-1400
Albany Office:
Room 932 LOB
Albany, NY 12248
518-455-3791
speaker@nyassembly.gov
www.nyassembly.gov
Courtesy of
Speaker of the Assembly
Carl E. Heastie
Beware of low
monthly payments
You’ve probably seen car commercials
advertising low monthly payments for auto
leases, and that’s the number lessors will try to
push on you. But it’s misleading. You should use
the actual value of the car or the total amount
of money financed to lease it — also known as
capitalized cost — to negotiate, not the monthly
payment.
The capitalized cost is equivalent to the invoice
or sticker price of a new car. So by comparing the
capitalized cost first, you can get a clear picture
of how the interest and other charges vary with
dierent lease programs.
There are other important numbers to consider
as well: the total amount of mileage you are
allowed during the lease, how excess wear and
tear is assessed, the early termination charge and
other penalties or charges.
Compare leases
Lessors have ways to add to the cost of a lease.
For a starting point, always use the capitalized
cost of the car. You also must consider what
options the car has — this can significantly
increase its value. Some other factors you should
consider, besides the monthly payment, include
the acquisition fee, down payment, optional
insurance and warranties, the amount to be
financed, early termination fees and any excess
charges.
Another important factor is the residual value
of the car at the end of the lease. This is the
amount of money you would have to pay to buy
your leased car outright. Some lessors inflate the
value of the car at the end of the lease. Therefore,
check the value of the car from an outside,
unbiased source.
A lessor must disclose all the terms of a lease
contract and provide a sample lease contract
before you decide to lease.
Consumer protections
Lessors must disclose the full selling price or
capitalized cost of the car. By requiring lessors to
disclose this information, the law gives you the
advantage to shop around for the best deal.
Many car lessors will include a hefty early
termination charge if the car is returned before
the lease expires. The law limits the amount a car
lessor can charge.
Remember, you have
the right to compare
leases, negotiate the
cost of the lease and
know exactly what
excess wear and tear
you will be liable for
at the end of a lease.
The law also provides you with the right to
terminate the lease at any time after 50% of the
term, or earlier, if provided for by the lease.
Another area to watch out for is excess wear
and tear. This refers to any damage to a vehicle
beyond what can be considered normal use.
Some car lessors have been known to charge
several hundred dollars for excess wear and tear
on a leased car.
The law protects consumers by limiting excess
wear and tear charges. The law does this by
requiring car lessors to charge either the actual
cost of repairs to a car or the cost of the repairs
based on an itemized estimate. You have a right
to a second inspection at your expense by a
licensed appraiser agreed to by the lessor.
In addition, the law requires the lease contract
to explain exactly what excess wear and tear the
consumer will be liable for.
Negotiate your lease
You actually have more ability to negotiate the
price in a lease agreement than a car purchase.
This is because you can negotiate virtually all
aspects of a lease, including the capitalized cost,
down payment and termination charges.
Remember, while car lessors focus on your
monthly payment, your priority should be the
actual cost of the car at the time of the lease and
its worth at the end of the lease.
Auto leasing at a glance
Capitalized cost
The agreed-upon value of the vehicle,
which may be negotiated, plus any items
you agree to pay for over the lease term
(amortized amount). These include taxes,
fees, service contracts, insurance and
any prior credit or lease balance.
Gap insuance
This covers you for the dierence
between the amount an insurance
company will pay if your car is stolen or
wrecked and what you still owe on your
lease.
Excess wear and tear
The damage to a car beyond what is
considered normal use. Car lessors
may try to charge consumers hundreds
of dollars for excess wear and tear.
However, they can only charge either the
actual cost of repair or the cost of the
repairs based on an itemized estimate.
Termination charges
Most car lessors will charge a hefty
penalty if you break your lease; some
even try to charge a termination (also
called disposition or disposal) fee at the
end of your lease. It pays to ask upfront.
Questions or Complaints?
Fedeal Tade Commission
Consumer Response Center
www.consumer.ftc.gov
877-FTC-HELP (382-4357)
New York State Attorney Geneal
www.ag.ny.gov
800-771-7755
