We applaud Consumer Reports for its continuing in-depth coverage of vehicle leasing. However, we want to clarify and expand on some reported items that may have confused consumers in their report. ACVL comments and additional information have been inserted into the Consumer Reports article as “ACVL Comments” in bold italics.
Feature Report, January 2001
(taken from Consumer Reports, Dec. 14, 2000)
It’s the Lease You Can Do
7 Keys to Unlocking Thousands of dollars in Savings on your Next Auto Lease
One out of every three new cars, minivans, sport-utility vehicles, and light trucks consumers drive off dealer lots these days is financed by a lease. That’s up from fewer than one in ten a decade ago. Clearly, the emergence of leasing marks the biggest change in the way Americans put themselves behind the wheel since the advent of the installment car loan.
It’s easy to see why consumers find leasing so seductive. After all, with little or no money down and for a “low” monthly payment, you can drive an automobile you never imagined you could afford to own. Then after enjoying the most trouble-free two or three years of the vehicle’s life, you simply bring it back to the dealer and lease another new one. No worries about paying for the upkeep of an older car or haggling over trade-in values. With a lease, the scent of fresh leather upholstery need never leave your nostrils.
But the hassle-free image of leasing that auto manufacturers and dealers are eager to project can be a mirage. We evaluated scores of lease ads appearing in ten metropolitan newspapers across the U.S. and turned up dozens of offers that could mislead or even deceive an inattentive shopper.
Lease advertising must follow federal requirements and therefore includes the same basic information. Most national advertisements contain additional information. We have reviewed dozens of lease advertisements and have created an exhaustive list of all of the different terms you’re likely to see in advertising – plus an explanation of what they mean. Lease Ad Terms
Our analysis of terms quoted by the behind-the-scenes finance companies that actually write the contracts for 30 of the most commonly leased cars, SUV’s, and light trucks revealed that the cost of leasing identical vehicles can vary by thousands of dollars over the life of the lease. (See Lease deals.)
It is very unusual to have lease terms differing by thousands of dollars on the same vehicle unless there is a large manufacturer subsidy of the lease terms. But it is often difficult to determine that you are comparing vehicles with EXACTLY the same equipment unless you are comparing lease terms from different lessors on the vehicle you have selected at one dealership. Like all other businesses, in order to gain sales, leasing companies have to maintain competitiveness. Aside from credit differences, most lease terms are very similar among the nation’s major lessors. Manufacturer subsidies – termed subvention – can, however, result in special savings.
And a special survey we commissioned of a nationally representative sample of 305 recent lease customers showed that a majority had done a poor job of shopping for the vehicle, negotiating the most favorable terms, or steering clear of costly end-of-lease charges
Lease customers have consistently been found by independent surveys to be more satisfied with their vehicles and their financing choice than cash customers or loan/credit customers. Shopping for a lease is no different than shopping for any other consumer purchase. A consumer shops for the best product value and comparison shops retailers offering the same product. The consumer should: investigate the transaction cost; compare payments, vehicles, mileage requirements, and end-of-lease options; ask questions and become comfortable with a transaction before signing a contract obligating themselves to a lease or purchase.
This is not to say that leasing can’t be a satisfying and cost-effective way to acquire a new vehicle, but it’s a mistake to think that leasing is easier or less expensive than purchasing.
Indeed, for all its superficial simplicity, a lease transaction is a tangle of arcane language and buried details that can ensnare even an experienced customer.
There are important differences between leasing and buying both in terminology and how the transactions work. We’ve created a point-by-point comparison, which includes a glossary of words that might be unfamiliar to consumers. Glossary
If you’re considering leasing your next vehicle, here are seven key steps that will improve your odds of landing a good deal.
Be sure leasing makes sense for you
A lease comes with lots of limitations on how you can use your new vehicle.
Not really. Leasing has standards of maintenance, mileage and insurance. Failure to stay within the agreed upon standards may subject the lessee to additional charges. If a lessee agrees to average no more than 15,000 miles per year, the lease payment is determined based on the projected value of a vehicle with that mileage at lease end. There is no restriction on the number of miles that a lessee can drive. However, the end value of a vehicle will decline if the mileage is more than agreed upon. The leasing company must then be compensated for the reduced value of the vehicle. The only other typical lease restrictions are for avoiding commercial use or use in commission of crimes.
Do you drive a lot? Do you load your trunk or roof rack with paint-gouging flea-market treasures? Is your car a magnet for parking-lot dents and dings? Are your kids apt to turn its interior into a finger-painting studio? If so, you face a potentially costly problem trying to live within the tight strictures of a lease. That’s because you’ll be assessed for what the leasing company determines to be excessive wear and tear to the vehicle when you return it at lease-end.
There is no mystery here, the value of a vehicle declines with damage and wear. The end value of a vehicle is established based on the lessee returning a well-maintained vehicle with no more than the agreed-upon mileage. If the lessee knows that he will drive more miles than outlined in the lease or generally abuses the vehicle, the lessee must be prepared to compensate the lessor for the decline in value based on excess miles and damage. Excess wear and tear standards are fully defined and disclosed in lease agreements. They are usually well within the boundaries of reasonableness.
You’ll also be charged anywhere from 10 to 20 cents for every mile you drive beyond what your lease allows. Leasing novices are particularly at risk of running up these costs. Nearly one-third of the first-time lessees in our survey were hit either with excess mileage or wear-and-tear charges.
Lessees select their annual mileage at lease inception. The guaranteed end value (residual value) is based on this mileage. Consumers are advised to select a mileage level that corresponds to their true expected mileage. Some consumers declare lower mileage usage than they really expect to have, in order to obtain a lower payment. It is the old adage, pay now (i.e., as you go) or pay later. If the mileage is set accurately by the lessee, the monthly payment will increase but mileage charges will not be charged at lease end. Lessees should remember that the purchase of mileage over the term is generally less than the cost of excess mileage at the end.
Some consumers have a good reason to understate their mileage to increase their monthly payment savings: (1) they want to pay down more of their credit card debt that’s costing 21% (in effect borrowing at 8% or 9%); or (2) they want to increase their retirement plan contribution that is being matched at 20% to 50% by their employer. However, this choice will subject them to an excess mileage charge at lease end, if they return the vehicle. There is no excess mileage (or excess wear) charge if you trade or purchase the vehicle.
Of course, the value of any car–whether leased or purchased–will be reduced if it is abused or driven hard. But if your driving patterns expose you to these risks, it’s better to discover them before you even entertain the possibility of leasing.
Lessors agree. Consumers who are likely to abuse their car or fail to maintain their vehicles should avoid leasing or should be prepared to compensate the lessor for the decline in the vehicle value due to abuse, inadequate maintenance, damage or excess mileage.
To determine whether the leasing lifestyle is for you, look ahead to the full term of your lease. How likely are you to change jobs or move to a new home that requires you to rely on your leased vehicle for a long daily commute?
Many lessors allow you to change your mileage allowance during the lease if you find that you are driving more than you expected. You can then avoid a large bill for excess mileage charges at lease end
Will one of your children begin driving over the coming few years? If so, leasing may not be the right choice.
This is a misconception. There are no restrictions among major lessors for children driving leased vehicles.
Drivers who are hard on their vehicles aren’t the only poor lease candidates. Driving too little can also saddle you with unnecessary costs. Among our survey respondents, for example, 20 percent of the drivers over age 55 returned their leased vehicles to the dealer having driven at least 10,000 fewer miles than their lease allowed. Since they got no credit for that unused value, they gave the leasing company what amounted to a windfall when it resold the vehicle.
Consumers should choose low-mileage leases if they drive less than the standard 15,000 miles per year. As pointed out by Consumer Reports, 12,000 mile per year leases are readily available and 10,000 mile per year leases are also available in most areas. However, if the vehicle is worth more than its trade-in value, almost all leases give you the right to trade it or buy it and recoup the equity.
Valuing those unused miles at 10 cents apiece, that subsidy to the dealer can add up to $1,000 or more.
First, it’s the leasing company, not the dealer, who owns the returned vehicle. The dealer has no financial interest in the vehicle. Just because the lessee drove less than the full number of miles does NOT mean there is equity in the vehicle. As Consumer Reports asserts, the average leased vehicle was worth $1,920 LESS than the residual value. ACVL members reported that returned vehicles in 1999 sold for $2,592 LESS than the residual value. So if you drove 10,000 miles less than the contract amount (thereby increasing the value of the vehicle $1,000), you saved only $920 according to Consumer Reports rather than $1,920 in excess depreciation that you didn’t pay for. According to ACVL information, the average consumer saved $1,592 rather than $2,592.
Know what’s in the ads – and what’s missing
It takes a sharp-eyed skeptic to deconstruct a lease advertisement. Most of the ads we examined were revealing less for what they said than for what they omitted or obscured. Typically, the most prominent piece of information they feature is how much you can expect to pay per month. But you have to scrutinize the fine print to discover that the monthly payment is most commonly computed on the basis of the manufacturer’s suggested retail price (MSRP), in effect making you pay top dollar for the vehicle.
That’s not true of the lease ads we’ve reviewed. We’ve invited Consumer Reports to share the ads they reviewed with us. Except for the 3 specific ads discussed below, they declined to do so and informed us that it is “Consumer’s Union policy to provide details of unpublished materials and test data beyond what is published in Consumer Reports only to the named manufacturers or providers of the products and services involved.” The best payments will come when the lease capitalized cost is less than the MSRP and that is usually what is advertised.
Here are other common ad twists and tricks you should watch out for:
- Act fast. A careful shopper needs time to visit dealers and weigh competing offers – time that many lease ads don’t let you have. For example, an ad run by the finance subsidiary of Volvo of North America in the July 30 edition of the Chicago Tribune promoted an attractive-sounding 36-month lease on a new S80 sedan at $499 per month. But to qualify for those terms, the customer who first comes across the ad that day would have just one day to sign the lease and take delivery of the vehicle just three days after that.
Most special advertised terms have an expiration date. In fact they have to since that’s the legal definition of a “sale.” Ads typically run throughout the sale period. At the point at which the sale is expiring, a published ad can appear to be for a very short time to a first-time reader.
- Minimal mileage allowances. Most of the lease ads we reviewed based their offers on an allowance of 12,000 miles–pretty skimpy for anyone who depends on a car to make a long daily commute. And even lower mileage limits are becoming more common. An ad run last fall by White Plains Honda in suburban New York, for example, promoted a 36-month lease on a 2001 Accord that came with just 10,000 miles a year. Exceed that low limit and you’ll pay a hefty 18 cents for each additional mile.
More than 60% of lessees choose 12,000 miles a year or less, so naturally that’s what lessors advertise. Consumers should match the annual mileage allowance to their realistic expected usage. If an advertised special is based on mileage below your intended use, ask for a higher mileage allowance.
- Leases that outlast the vehicle’s warranty. An ad from Miami Lakes Mitsubishi appearing in The Miami Herald last summer offered what at first seemed to be an unbeatable $169-per-month lease on a 2000 Galant. But a closer look revealed that the low monthly payment applied only to cars leased for a minimum of 60 months–longer than the 3-year or 36,000-mile warranty standard for most components of that make and model. That puts the lease customer at risk of having to pay hefty out-of-warranty repair bills on a vehicle he or she doesn’t own. We saw ads for lease terms as long as 51/2 years.
For consumers intending to keep a vehicle for an extended period, such as 60 months, the fact that a vehicle will be out of warranty by the time the lease is over is no different than buying a vehicle for cash and keeping it beyond the warranty period or financing it for 60 or 66 months. Leasing just allows you to do so with a lower monthly payment, and the right to return the vehicle at lease end no matter how it has depreciated in the used car market. If you buy or if you lease, you can purchase an extended warranty when the manufacturer’s warranty runs out.
Unless you can claim tax deductions for the business use of an automobile, leasing offers no inherent financial advantages over buying.
That’s not the case. The total costs of leasing a vehicle for a fixed period are generally LESS than for financing because of: (1) savings on depreciation if you trade the vehicle; (2) gap coverage included in most leases; (3) reduced sales/use tax in most states; and (4) the higher investment or debt reduction rate for which your monthly payment savings can be used. Depending on a consumer’s circumstances and the terms of the lease offer, the lease may represent significant financial advantages over buying. See Leasing vs. Buying, Differences
But our survey findings suggest that substantial numbers of consumers fail to focus on the economics of their lease deal. In fact, more than one-quarter of our survey respondents never considered any alternative to leasing.
Some consumers prefer leasing and don’t look at the financing. It doesn’t follow that they don’t understand the financial and other benefits of leasing. More consumers prefer financing and don’t look at leasing and its cost savings. Virtually EVERY customer who financed a vehicle and traded it in 1999 or 2000 could have saved thousands of dollars in depreciation ($2,592 on average in 1999) if they had leased it instead. Most consumers who don’t consider alternatives to leasing feel that the advantages of leasing are compelling for them. Attractions to lower monthly payments, protection from excess depreciation, gap coverage, the ease of vehicle return and termination, etc. are economically paramount for them. This is perfectly valid.
Take these steps before you commit:
- Educate yourself about the vehicles you want to consider. What you end up paying in a lease comes down to the same variables that influence how much it would cost to buy the same vehicle: its price when purchased new, how well it holds its value over time, and prevailing financing costs.Before you set foot in a dealer’s showroom, take time to investigate the vehicles that interest you. Be sure to compare them on an equal basis, gathering prices for identical models and trim lines and understanding what’s included in the basic option packages. The Internet is a good place to begin your research. For a list of helpful web sites, see Lease links online.
- Check your credit history. Lease-finance companies routinely size up customers to determine whether they are good credit risks before closing the deal, and they save their best terms for customers whose profiles show unblemished records.
Just as in financing, your credit rating will affect the lease rate. However, the residual value isn’t affected and no other terms of the lease will change. Lessors don’t “save” their best terms, they offer the rate that corresponds to your credit risk.
That’s why it makes sense to get up-to-date copies of your credit record from the three major credit-reporting agencies–Equifax, Experian, and TransUnion. Do that at least 60 days before you negotiate to finance or lease a vehicle, to allow enough time to spot errors in your report and begin to correct them before you close a deal.
- Investigate bank auto-loan rates.You won’t be able to make an accurate comparison between leasing and buying unless you arm yourself with information about the most competitive financing terms for which you qualify. Check rates at your local bank or credit union, or shop for rates online at www.bankrate.com, the web site of Bankrate.com, a research firm that updates terms from some 4,000 lenders on a daily basis. To keep your financing options wide open, gather details for loans with terms of 36, 48, and 60 months.
Although there is no APR in leasing, leasing rates are generally comparable to loan rates. The reason lease rates are so low despite the residual protection and gap coverage they provide is that the lessor receives tax benefits from the IRS. Thus, although consumers don’t get any tax breaks when purchasing a vehicle for personal use, they can indirectly get tax benefits (in the form of lower lease rates) through leasing.
- Look for “subvented” lease deals. As you gather vehicle prices and loan-rate information, keep an eye on the automotive section of your local paper for so-called subvented lease offers. These special deals are typically offered by auto manufacturers through their subsidiary finance arm (and labeled as such in the fine print). Unlike the standard terms independent leasing companies offer, the subvented deals usually provide attractive incentives, such as lower financing charges and manufacturer rebates. They can be useful in identifying the most-competitive lease terms for the vehicles that interest you.
Such subsidized leases can be highly attractive to consumers. Also, manufacturer cash rebates can usually be applied universally to any leasing source, as well as any financing source.
- Visit several dealers. None of the information you gather will help much if you fail to visit at least three dealer showrooms. Yet curiously, lease-oriented customers are far less likely than buyers to compare competing offers. Just 38 percent of the lessees in our survey talked to more than one dealership in search of the best terms (compared with 63 percent of the buyers).
Many lessees respond to attractive “loyalty” offers at the end of their leases that give them very attractive terms for renewing their leases with the same dealer and lessor. Convenience also remains a principal attraction of leasing. If there is an advertised special, such as from an auto manufacturer, it is less likely that you will be able to improve upon the terms by shopping. Also, lessees of luxury vehicles often have fewer sources in their geographic market for the vehicle they have chosen. If they believe the price is fair and they’ve been treated well in the past, they may feel less need to do comparison shopping.
Negotiate the Purchase Price
When you contact a dealer and declare yourself interested in leasing, the sales rep will want you to focus on just one number – the monthly payment. Indeed, the entire process of leasing appears designed to throw up intimidating barriers, making it hard for you to consider anything else.
The very language of leasing is so opaque that it obscures the simplest elements of the transaction. Ordinary words, like “purchase price,” “down payment,” “finance charge,” and “trade-in value” have morphed in leasing parlance to “gross capitalized cost,” “capitalized cost reduction,” “money factor,” and “residual value,” respectively.
Leasing isn’t financing so the federal government requires different terms to be used. The new federal Regulation M includes a mathematical progression (which ACVL proposed) of how the monthly payment is calculated from the capitalized cost and the residual value. Thus, it’s now easy to understand the terms and how they determine your monthly payment.
Perhaps put off by this verbal smoke screen, 22 percent of our survey respondents told us they didn’t bother to negotiate lease-payment terms at all.
Consumers are invited to look up definitions of leasing in our glossary and visit the rest of this site to learn more about how to compare leases and terms. Many consumers don’t negotiate cash or finance prices either if they believe they got a good price. Additionally, many consumers take subsidized leases where the capitalized cost has already been substantially reduced by the manufacturer so there isn’t room for any negotiation.
Approach the negotiation as if you intend to purchase the auto. And when you bargain, ignore the vehicle’s sticker price, and begin from the invoice price (what the dealer actually paid for the vehicle) or better yet from the Consumer Reports Wholesale Price (the invoice price minus customer and dealer incentives and holdbacks). You can get both of those prices from the Consumer Reports New Car Price Service. (See the Lease links online for other sources of price information.)
By bargaining up from the vehicle’s wholesale price, you can potentially shave thousands of dollars from your total lease cost. For example, leasing a Ford Expedition based on a price that’s just a few percentage points above the Consumer Reports Wholesale Price could drop the monthly cost to as much as $140 below what you’d pay for a lease based on MSRP for the same vehicle – a saving of some $5,000 over the life of a 36-month lease. You may not realize such big savings on vehicles that are in short supply, where you may end up paying closer to full retail price, but it’s always in your interest to negotiate. (Lease deals provides estimates of maximum potential savings over a 36-month lease for 30 of the most commonly leased models.)
Knowing the MSRP and the invoice cost is useful for any consumer doing comparative shopping. Depending on supply and demand conditions, discounts on vehicle pricing and leases may be possible.
Compare Alternative Lease-finance Companies
Most auto dealerships work with at least four leasing companies, and terms can vary significantly among them. The savings from choosing the right leasing company can be big. On a 36-month lease for a 2001 Chevrolet Blazer, for example, GMAC sets the residual value at $14,219, or nearly $1,300 more than an equivalent lease offered by Wells Fargo Bank. At the same time, the effective annual percentage interest rate a top-tier credit customer would pay under a GMAC lease based on MSRP is just 5.06 percent.
The lease payment may be lower either because of a lower lease rate (generally because the lessor has a lower cost of funds and/or expenses and credit losses) or a higher residual value (generally because the lessor believes the vehicle will be worth more at the end of the lease). Additionally, manufacturers often utilize their marketing money to increase the residual value of a vehicle to lower the price and/or buy down the rate (“subvention”). This makes their product more attractive to the consumer and has the same impact as rebates on retail financing. It is incentive spending. This is a good example of manufacturer subvention. This is good for the consumer. While this example shows the GMAC lease to be less expensive, on many vehicles financial institutions often have lower lease payments because of lower lease rates and/or higher residual values.
The same creditworthy lease customer would pay 9.73 percent with a Wells Fargo lease.
Wells Fargo reports that its lease factor was about 8.76% in this period. Nevertheless, the point is true that the subvented GMAC rate was much lower.
Together, those better GMAC terms reduce the monthly payment for the Blazer to $454 from a monthly $568 with Wells Fargo. That adds up to a total saving of $4,104 over the life of the lease. Generally, the finance subsidiary of the manufacturer whose vehicles the dealer represents – General Motors Acceptance Corp. (GMAC), for example, or Ford Motor Credit – will provide the most-attractive terms. This option is worth asking about first.
It is NOT generally true that the manufacturer’s finance subsidiaries have the most attractive lease terms. That’s true only if the manufacturer has subvented (subsidized) the lease, which is the case in the example cited. Without such incentives, bank leasing payments are often more competitive than the lease payments offered through the finance subsidiary of the manufacturer.
Plot your End-of-lease Strategy Before you Sign
The lease contract will spell out conditions you’ll be expected to meet when it comes time to return your vehicle, so the time to decide whether you can live with those terms is before you sign. Here’s where to look for lease-endgame advantages:
Choose the right mileage allowance. If you exceed the mileage limitation stipulated in the lease, you could end up paying as much as 20 cents for each additional mile you drive. You may be better off purchasing additional miles at a discount before you take possession of the vehicle, as 32 percent of our survey respondents chose to do when they leased. The saving can be significant, since most lease-financing companies will let you boost your mileage limits at the lease inception for anywhere from 8 to 16 cents a mile.
We agree, but remember that “purchasing miles up-front” doesn’t require an up-front payment; it just reduces the residual value so you pay more depreciation (but less rent charge) over the term. Conform the lease mileage to your driving needs. If you choose the mileage lower than you know you will drive, you will have a lower monthly payment and will have a bill for excess mileage at the end. Pay as you go or pay at the end if you return the vehicle.
But remember, the more miles you buy and use, the more likely you are to incur charges for excessive wear and tear. So make sure you understand what the dealer deems excessive before you sign the lease.
The excess wear and tear charges are directly related to the condition of the vehicle, not the contracted mileage allowance. Note that the dealer doesn’t set the wear and tear standard, the leasing company does. Also, most lessors now use third party expert appraisers rather than their dealer affiliates, to do the end- of -term vehicle inspection.
Consider your end-of-lease purchase option. You may end up liking the performance and reliability of the vehicle you lease and ultimately decide you want to buy it when your lease is up. That’s why it makes sense to pay close attention to what the lease sets as the residual value, or what the auto would be expected to sell for used. The lower the residual value, the less you would have to pay to buy. But because a lower residual value will result in a higher monthly lease payment, you should weigh your potential interest in purchasing at lease-end before you sign the deal.
This advice assumes that all leases have residual purchase options, which is not the case. Instead of comparing the residual values, you should compare the stated “purchase option price” in the lease agreements that you are considering.
However the residual value is determined, you’re better off insisting that your lease name a specific purchase-option price so you’ll have a clear idea of what you can expect to pay if you ultimately choose to buy the vehicle. Some leases are deliberately vague about that price, and instead designate a formula to determine the vehicle’s ultimate cost when the lease expires.
Don’t Get Taken for a Ride at Lease-end
A satisfactory leasing experience can unravel expensively at lease-end if you let your guard down. Because you’ll be giving up your leased wheels, the dealer knows that you have little choice other than to buy or lease another vehicle. Indeed, some dealers will try to strengthen their bargaining hand by telling you that you will be charged for excess wear and tear on the vehicle, then offer to forgive those charges if you agree to lease a new vehicle.
Since the dealer doesn’t own the vehicle, the dealer can’t “forgive” the excess wear and tear charges if you lease another vehicle. However, the dealer can agree to pay those charges for you or purchase your vehicle as part of offering you an attractive deal. If you have any doubt about the wear and tear charge, most lessors will inspect the vehicle for you before lease end and give you a chance to repair it; or they will inspect it at lease end and allow you to extend the lease while you’re getting it repaired.
But if, on the other hand, you drove many fewer miles than your lease allowed, you may want to investigate whether it makes sense to buy the vehicle at the purchase-option price the lease stipulates and then resell it on your own if its market value is higher.
Clearly, consumers know far in advance when their lease will terminate. Shopping early for a new replacement vehicle is a sound idea if you do not wish to purchase your leased vehicle. Most lessors provide a pre-return inspection, typically 30 days prior to lease end. This will give you a good idea of what excess wear and tear you have and give you the time to correct it before you relinquish the vehicle at lease end. Avoiding excess mileage by selecting annual mileage requirements that conform to your driving needs is most desirable.
Here are other ways to minimize end-of-lease expenses:
Have an independent garage repair your vehicle. You’re under no obligation to have the dealer who originally leased you the car do the end-of-lease repairs. At least one month before your lease is due to expire, have the vehicle pre-inspected. (Many leasing companies provide this service free.) Then, collect bids from mechanics or body shops you trust to determine the least expensive way to make the necessary repairs. And when you return the vehicle, insist on getting a signed vehicle-inspection worksheet documenting its condition before you turn over the keys. That way, you can’t be held responsible for damage that may occur later.
If you’ve driven your full allotment of miles, you may also need to replace the tires – something you can do less expensively with a bit of shopping than simply by allowing the auto dealership to charge you top dollar for its treads.
No, dealers don’t have authority to charge you for replacing tires at lease end. Only the leasing company can require replacement tires if yours don’t meet the standard specified in your lease. While leasing companies normally charge competitive prices for needed replacement tires, it is always best to repair damage before you return a leased vehicle.
But if you do replace tires, expect to pay for all four. Most leases specify that tires must match.
Yes, but if only two tires need to be replaced, you can just get two that match the existing ones.
Be careful of “loyalty” leases. Dealers like nothing better than to persuade existing lease customers simply to roll over into a new lease when their contract expires. Indeed, 60 percent of our survey respondents told us they went back to their old dealer for another lease. Fewer than half bothered to shop around first. You owe it to yourself to shop as carefully for your new lease as you did for your original one. If after testing the market you decide to lease anew from your original dealer, make sure that any forgiven end-of-lease charges aren’t simply rolled over into the next lease you sign. (For more on the perils and opportunities of repeat leasing – and how to break out of the serial leasing cycle – see Get off the lease treadmill.)
Like most businesses, many leasing companies and dealers offer special terms to repeat customers. These are highly advantageous and provide extra value, however, lessees must shop to suit their needs.
Remember to get your security deposit back. Many leasing companies require customers to ante up the equivalent of a month’s payment when the initial lease is signed. If you have a good credit history, you may be able to persuade the dealer to waive that fee.
Again, the dealer doesn’t determine the lessor’s policies. The only thing the dealer sets is the capitalized cost in the lease. However, some lessors don’t charge a security deposit for top-line credit customers and most others will waive the security deposit if you agree to pay a slightly higher lease rate.
But if you do have to pay it, don’t rely on the dealer to remind you to ask for your refund. As with every aspect of leasing, you have to look out for yourself.
This simply is not true. The dealer is not involved here in any way. The refund comes directly from the leasing company and is automatic in all cases where it is due.