Not a big fan of car shopping? Let’s fix that together!
At The Tiger Auto Group Lease Store, we’re turning auto leasing on its head. With no pressure, no runaround and no hidden fees, we promise you’ve never had more fun shopping for a new car.
The popularity of leasing a car has exploded in recent years, with individual consumers accounting for the bulk of the increase. Leasing has grown more than tenfold in less than a decade, and now accounts for more than 35% of the 17 million-plus vehicles sold in the United States.
Why the dramatic upsurge in auto leasing?
The ever increasing cost of new vehicles combined with a decline in the disposable savings of Americans and changes to the tax laws are the main causes.
In 1987, more than 70% of disposable savings were available for the purchase of consumer goods. By 1993 that figure had declined to less than 40%. This year, the percentage continues its downward slide.
Additionally, the many tax deductions that favored purchasing over leasing were eliminated. Since those tax laws were changed, leasing has enjoyed a steady increase every year for the last ten years.
Know what you're looking for? We will find the car for you, any make or model, new or used!
In a closed-end lease, you make a predetermined number of lease payments for a specified period of time and return the vehicle at the end of the term. Barring physical damage to the vehicle, excess wear and tear, or additional mileage beyond the mileage allocations in the lease, you have no contingent responsibility for the vehicle’s value at the close of the lease. With a closed-end lease, any loss of value through depreciation of the vehicle is the responsibility of the leasing company. The Lease Store (TLS) is a closed-end lease.
In this type of lease, you take the “risk” that, at the end of the lease term, the vehicle will have a market value comparable to the amount specified in the lease contract, sometimes called an “estimated residual value.” If the amount the car is resold for is equal to the estimated residual value, you owe nothing. If it isn’t, you may owe all or a portion of the difference, often called an “end-of-the lease payment.” The Federal Consumer Leasing Act provides a measure of protection for leases in open-end leases by limiting the end-of-term liability to no more than the total of three monthly payments.
Lease vs Purchase
You’ve decided you want a new car. Should you obtain a loan, lease, or pay cash? There are pros and cons for all three methods. You should be able to make an informed choice about what’s best for you based on the operating cost, equity and ownership, and tax and insurance considerations.
Only about 10% of all automobile purchases are in cash. If you pay for the entire cost of your car with cash up front, it’s all yours and you don’t owe anything on it. However, you won’t have that money available for investing, for other uses or in case of an emergency.
Leasing almost always has one very powerful advantage over a loan… lower initial cash outlay. With leasing there is normally little initial cash required in order to put yourself “in the car.” Generally, the better your credit rating, the less cash required at the start of the lease.
Usually you will be asked to provide a refundable security deposit, the first monthly payment, and sometimes, at your discretion, a “capitalized cost reduction,” or down payment. As with most terms in a lease, these can be structured to meet your needs. No down payment and no deposit leases are The Lease Store’s specialty.
When you lease, at the end of the lease, you have no equity or ownership of the vehicle. When you finance your car with a loan, you are gradually building equity as you pay it off. However, you should consider the amount of money that you will have to spend over the total period of the loan in order to build equity. Even though you will “own” the car after making all the loan payments, the value of the car will be worth much less than the amount that was spent in order to obtain it. And even though an asset, it is a continually depreciating one, losing more and more of its value with each passing day.
When you buy a car in most states you have to pay the sales tax up front in a lump sum. With leasing, you can generally amortize or spread out the sales and rental or use tax over the term of the lease.
Leasing can sometimes require higher limits for insurance coverage than what some people carry, for both public liability and property damage (collision and comprehensive). However, no one in this litigious society should ever drive any vehicle with insurance limits lower than the limits required on a lease. These limits are $100,000 / $300,000 and $50,000 collision. Since taxes and insurance obligations do vary by state, know which requirements apply to your situation.
Because of the way leases are structured, the payments can be vastly lower than loan payments. Because of this, you can generally add more options or upgrade to a more expensive model than you could afford with a loan. Also consider how often you want to drive your car. Leases can have shorter terms than loans, so you can usually drive a new car every two or three years instead of the standard four or five year (or longer) length of a traditional car loan.
Initial Lease Costs
Before signing a lease, you are entitled by law to know the charges that will be assessed “up front” at the initiation of the lease agreement. These usually include the following:
Not unlike the kind required when renting an apartment, this is to make money available to the lessor should you owe money at the end of the lease or fail to make payments as agreed during its term. It can also be used to cover past-due charges or payments, excess wear and tear or damage to the vehicle, excess mileage charges, or an end-of-lease payment. If you fulfill all the terms of your lease, the lessor must return it in its entirety. A no-deposit lease is available through The Lease Store (TLS).
Sometimes the first payment is required at the beginning of the lease term in addition to a security deposit. If you have a good credit rating, the lessor may not require the deposit. Unlike a loan, lease payments are always made in advance, not in arrears.
Basically, you may have the opportunity to lower your monthly lease payment by making a one-time payment to reduce the car’s “initial capitalized cost.” The capitalized cost is the total cost of the vehicle, including any fees, insurance, maintenance contracts, or options you request. As in the case of the loan amount, the more you put down initially, the lower the monthly payments. However, by putting down a large amount in an attempt to reduce your monthly outlay, you also negate one of the primary reasons for leasing – little or no initial cash outlay. An alternative might be to trade in your current vehicle and use the equity (if any) to defray the capitalized cost reduction amount.
Your Obligations & Responsibilities
Auto leasing provides great flexibility; however, like a loan or a cash purchase, there are costs and expenses associated with operating, maintaining and repairing vehicles.
The lessor is obligated by law to provide you the following information in the lease agreement, about your periodic payments: the total number of payments, the total amount of the monthly payments, the amount of each payment, the due dates of each payment, any late-payment charge and how it is calculated.
You will be responsible for repairs and maintenance when you lease, just like a loan. Since terms like “normal wear and tear” and “reasonable maintenance” can easily be misunderstood, make sure your repair and maintenance responsibilities are spelled out specifically in the contract and that you understand them before signing.
All warranties must be disclosed to you. While the terms of these warranties vary greatly, you are required to follow the maintenance schedules specified in order to keep the warranty coverage in force. Because warranties differ so much in their terms, the lessor may offer an extended service plan. These are normally described as “extensions” of existing warranties. If you are considering a short term lease on a new vehicle, most major repairs will likely be covered under the manufacturer’s warranty. Whether you choose a short term or a long term lease, you may want to consider the service benefits offered in these types of plans like emergency road side assistance and rental car allowances.
While leases may include restrictions on moving the vehicle out-of-state without permission, they do not normally include limitations on permitting other family members to drive the car. However, you are responsible for any applicable renewal registration fees or property tax obligations required by your state, whether you choose to lease or own the vehicle.
Lease Termination Considerations
Aside from initial and continuing monthly lease costs, there may be final costs associated with leasing you should be aware of. These include charges for excessive mileage, excessive wear and tear, and an end-of-lease payment. Let’s look at them one at a time.
Most closed-end leases stipulate a set number of annual miles you may drive the vehicle. If you exceed this allocation, you may be charged for every mile over the predetermined annual limit. It is important to allow mileage that fits your driving habits before signing a lease. You may be permitted to “purchase” additional miles up front at a lower rate.
With Autoflex you can specify any amount of miles you need and the lease may be adjusted to allow for those miles and the end value of the vehicle reduced accordingly.
If you default on your lease obligations or fail to make your payments as in a loan, the lessor may repossess the vehicle and/or assess the cost or penalties stated in the lease. These may include forfeiture of your security deposit, immediate payment of all remaining obligations and the cost of legal fees to reclaim the vehicle.
All leases contain stipulations making you responsible for “excessive” wear and tear, which is usually defined as any wear and tear greater than “reasonable.” To avoid any misunderstandings, be sure that specific definitions of “excessive” wear and tear and “reasonable” are included in your lease agreement.
You have several options at the end of your lease. What you decide to do largely depends on your particular circumstance.
Your lease agreement may include the option to purchase your vehicle at the end of the lease. If you want this option, be sure to negotiate it before signing. Without it the lessor has no obligation to make the vehicle available to you for purchase at the end of the lease. They must also disclose the purchase price or the formula for determining the price before the lease is signed if they are offering you a purchase option lease.
As long as all of your obligations are met as to the lease agreement, such as mileage, condition and payment agreements, you may be able to simply turn in the vehicle and walk away. There is usually a disposition fee charge with this option.
The lease is your lease and the contract is with you. Since you do not own the vehicle, if you assign your vehicle to a third party you are in violation of the contract. Any and all financial responsibility resulting from such third party reassignments is yours. Work closely with the lessor if you think third party reassignment is necessary. That way the terms can be negotiated so you will not suffer any undue financial obligations.
Whether you decide to lease or not, be sure to keep two things in mind. First, a lease is an important legal document. It entitles you to certain rights but also binds you to certain duties, liabilities and obligations. Know what you are signing before you sign it. Second, most elements in a lease can be structured and adjusted to meet your needs or situation. Make sure you work with the lessor to create the lease that is right for you.
A lease is a binding contract. Like all contracts, the two parties negotiate its terms. If you think getting out of the lease before its completion is something you might have to do, ask that a provision for it is put into the contract.
In many cases, you will be required to keep the vehicle for at least 12 months before exercising any termination option. If you terminate early, you will usually incur extra charges and penalties for doing so. The circumstances under which such penalties and costs are invoked, and the formula used to determine these charges, must be disclosed to you by the lessor before signing any contract.
Have a Question?
Sign Up for Email Updates
Grosse Tete, LA
17505 Sidney RD
Grosse Tete, LA 70740 (225) 376-6470