Initial Lease Costs
Before the time of signature, you are entitled by law to be
informed of what you will be charged up front. These
charges could include:
Security Deposit. Much like a deposit that you would make when you rent an
apartment, you will pay a deposit on your auto lease. If
you should fail to make payments or owe money at the end
of the lease, the deposit makes this money available to
the lessor. The deposit could be used to cover late fees,
excess wear and tear or damage, additional mileage above
the allotted amount, or the end-of-lease payment. If all
terms of the lease are met, and no additional charges
incurred, the lessor must return the full amount of the
deposit to you at lease end. If you have a good credit
rating, you may not be required to pay a deposit.
First Lease Payment and Deposit. Your first monthly payment may be required along with the
deposit in advance. A lease, unlike a loan, requires
monthly payments in advance, not in
arrears.
Capitalized Cost Reduction.
One option you have, to lower your monthly payments, is
to make a larger down payment to reduce the car's
"initial capitalized cost". The capitalized cost is the
total cost of the car including fees, insurance,
maintenance contracts, or options. Just like a loan, the
more money you put down to start, the lower your monthly
payments will be. However, this neutralizes the advantage
of a lease - little or no down payment. If you desire
this capital cost reduction, you may be able to trade in
your current vehicle to defray the amount.
Sales Taxes, Title, and License.
In most states, whether you pay in cash or take out a
loan to purchase a car, you are required to pay all of
the sales tax up front at the time of purchase. In a
lease, most states allow you to spread the taxes out over
each of the payments. The tax is applied to the payment
rather than the total value of the car. You are taxed
only for the amount of the car's value that you use.
As with a loan, tax, title and license fees are your responsibility. You
may have the option to pay these fees up front or
included and spread out over the length of the
lease.
Insurance When you enter into a lease agreement, the lessor must
provide you with all of the insurance requirements and
information. You have a couple options with your
insurance. The lessor may offer insurance. All costs of
this insurance must be made available to you prior to
signing. You may also choose to use your own insurance
carrier. The lessor may require higher limits of insurance
- this will be detailed in the lease.
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