Lease End Considerations
Apart from your initial costs and monthly payments, when it comes to
auto leasing, you need to know that there
are certain costs associated with lease end. These charges could be for
excessive mileage, damage to the car beyond "normal wear and tear", the car
resale charge, or an end-of-lease payment.
Charges for Additional Mileage. The majority of close-end
auto leases specify a set
number of annual miles that you may put on the car. If the total miles at lease
end is greater than this pre-specified number, you might be charged for each
mile over the limit, typically 12-18 cents per mile. Know your driving habits
before signing a lease to avoid this charge. You may be able to purchase
additional blocks of mileage up front at a lower rate than lease end.
Excessive Wear and Tear. At lease end, you may be charged for damage to the car
beyond "normal wear and tear", or beyond what is "reasonable". To avoid
misunderstandings about these charges be sure to clearly define "normal" and
"reasonable" wear and tear in your lease agreement and before the time of
signature.
Default Penalties. Like a loan, should you fail to meet your obligations of the
lease, or should you fail to make payments, the lessor may repossess the car
and/or asses the costs or penalties as specified in the lease. These costs and
penalties could include, forfeiture of your deposit, immediate payment of all
remaining obligations, and the cost of the legal fees to reclaim the car.
Auto Leasing Options
You will have several options at the end of your lease. Depending on your
circumstances you can customize your plan at lease end. You must determine some
of these options at the start of your lease agreement.
Walk Away Option. If you have met all obligations of the lease agreement, such
as mileage, condition and payment agreements, you may be able to turn your
vehicle in and simply walk away. Usually there is a disposition fee charge with
this option.
New Car Lease Option. If at lease end, your car is worth the same or less than the
Estimated Residual Value, it makes sense to turn in your vehicle and sign a new
lease on a new car. Even if the car is worth less than the Residual Value, you
can still turn the car in, provided it is in good condition and within the
predetermined amount of mileage, and sign a new lease. This is one of the
advantage to leasing - you could be driving a brand new car every two to three
years.
Purchase Option. If you would like to purchase your car at the end of your
lease, please be sure to negotiate this option before signing. If you do not
negotiate this options up front, the lessor will have no obligation to make this
vehicle available to you at lease end. If you are considering a purchase option
lease, the lessor must disclose to you the purchase price of the car and the
formula for determining the price up front. Alternately, you might be able to
sell the car at lease end and keep any equity that you might have. Consult your
leasing agent.
Third Party Reassignment Option. You cannot assign your lease to a third party.
You do not own the vehicle, and the lease is with you and you alone. A lease is
a legal document and it is binding. Any and all responsibilities resulting from
a third party reassignment are also yours and yours alone. If you think that a
third party reassignment is necessary, work with you lessor so that terms may be
negotiated to avoid any unnecessary financial obligations.
Right to Early Termination Option. A lease agreement is a binding contract, and
like all contracts, two parties negotiate its terms. If you know that you may
need to terminate the lease before lease end, be sure to include this provision
in the contract before signing.
As a general rule, you will be required to honor at least 12 months of your
lease agreement before using the termination option. If you choose to terminate
early, there are usually extra charges and penalties. The lessor must disclose
these penalties and the formula used to calculate them before the time of
signature.
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