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