| Auto finance is now different. It is now populated | | | | low upfront cost and relatively low monthly |
| with all sorts of choices to help you purchase that | | | | payments. The downside is that you never own |
| auto of your dreams. Auto lease deals are one of | | | | the vehicle and may have nothing to show for all |
| the fastest growing areas. | | | | your payments at the end of the agreement. |
| An auto lease is a long-term rental agreement - | | | | Remember that residual value mentioned earlier? |
| terms typically start at 24 months with 36 and | | | | Well that gets interesting at the end of the lease |
| 48 months much more usual. Auto lease | | | | period. Auto lease companies usually set this at |
| agreements do have a few twists to watch out | | | | the low end of expectations. If you stay within |
| for though. | | | | the terms of your lease the chances are that the |
| As the name suggests, you don't actually own | | | | auto will be worth more than the residual value. |
| the auto when you take out an auto lease. The | | | | This means you have 3 choices: 1. Buy the auto |
| leasing company owns the auto and then leases it | | | | for the agreed residual value 2. Part exchange the |
| to you. When the lease expires you return the | | | | auto and use the extra value as the deposit on |
| vehicle. If you are within your agreed mileage | | | | your next lease vehicle. 3. Give the keys back |
| target and the auto has suffered no worse than | | | | and get on with your life |
| normal wear and tear then you can simply work | | | | The most common option taken by auto lease |
| away | | | | customers seems to be to part exchange and |
| As you don't own the vehicle the lease company | | | | use the difference as the deposit on the next |
| can sell it at the end of your contract. Your | | | | auto. |
| payments therefore depend on the difference | | | | There are downsides to auto leasing. In the long |
| between the buying price and the selling price. | | | | run it will always be more expensive than buying |
| Lease companies spend a lot of time and effort | | | | through an auto loan. |
| to ensure they have a good idea of exactly how | | | | Auto leasing deals are not for everyone. To |
| much each vehicle in their fleet will be worth at | | | | manage their risks auto leasing companies put |
| the end of the lease agreement. | | | | tight constraints on the deals they offer. Leases |
| So, suppose you find a auto for $20,000 purchase | | | | are for fixed period and it is practically impossible |
| price. The lease company does some sums and | | | | to exit a lease early. Calculation of residual values |
| tells you that if you take out a 3 year deal with a | | | | is highly mileage dependent so you may find any |
| 12,000 mile per annum mileage limit they will | | | | excess mileage payments are expensive. |
| guarantee a residual value of $8,000. The net | | | | Nevertheless, if you want to drive a new auto, |
| cost to the auto leasing company is $12,000 plus | | | | can guarantee to keep the vehicle for the full |
| administration charges (setting up the deal and | | | | term of the lease, and can stick to the mileage |
| selling the auto at the end) and finance charges. | | | | limits in your agreement, leasing can be a great |
| You pay lease charges on the $12,000 difference. | | | | choice. |
| The result is that you can drive a new auto for | | | | |