Keys to Vehicle Leasing: A Consumer Guide
Under the federal Consumer Leasing Act, you, the consumer, have a right to information about the
costs and terms of a vehicle lease. This information will help you compare lease offers and
negotiate a lease that best fits your needs, budget, and driving patterns.
This quick consumer guide is for a closed-end lease, the most common
type of vehicle lease. With a closed-end lease, you may return the vehicle
at the end of the lease term, pay any end-of-lease costs, and walk away.
Leasing is different from buying.
Here's how . . .
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LEASING:
You do not own the vehicle. You get to use it but must return it
at the end of the lease unless you choose to buy it. |
BUYING:
You own the vehicle and get to keep it at the end of the financing term. |
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LEASING:
Up-front costs may include the first month's payment,
a refundable security deposit, a capitalized cost reduction (like a
down payment), taxes, registration and other fees, and other charges. |
BUYING:
Up-front costs include the cash price or a down payment, taxes,
registration and other fees, and other charges. |
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LEASING:
Monthly lease payments are usually lower than monthly loan payments
because you are paying only for the vehicle's depreciation during
the lease term, plus rent charges (like interest), taxes, and fees. |
BUYING:
Monthly loan payments are usually higher than monthly lease payments
because you are paying for the entire purchase price of the vehicle,
plus interest and other finance charges, taxes, and fees. |
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LEASING:
You are responsible for any early termination charges if you end the
lease early. |
BUYING:
You are responsible for any pay-off amount if you end the loan early. |
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| LEASING: You may return
the vehicle at lease-end, pay any end-of-lease costs, and "walk
away." |
BUYING:
You may have to sell or trade the vehicle when you decide you
want a different vehicle. |
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LEASING:
The lessor has the risk of the future market value of the vehicle. |
BUYING:
You have the risk of the vehicle's market value when you trade or
sell it. |
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LEASING:
Most leases limit the number of miles you may drive (often 12,000-15,000
per year). You can negotiate a higher mileage limit and pay a higher monthly
payment. You will likely have to pay charges for exceeding those limits
if you return the vehicle. |
BUYING:
You may drive as many miles as you want, but higher mileage will
lower the vehicle's trade-in or resale value. |
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LEASING:
Most leases limit wear to the vehicle during the lease term. You will
likely have to pay extra charges for exceeding those limits if you return
the vehicle. |
BUYING:
There are no limits or charges for excessive wear to the vehicle,
but excessive wear will lower the vehicle's trade-in or resale value. |
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LEASING:
At the end of the lease (typically 2-4 years), you may have a new
payment either to finance the purchase of the existing vehicle or to
lease another vehicle. |
BUYING:
At the end of the loan term (typically 4-6 years), you have no further
loan payments.
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Consider beginning, middle, and end-of-lease costs
At the beginning of the lease, you may have to pay your first monthly payment;
a refundable security deposit or your last monthly payment; other fees for licenses,
registration, and title; a capitalized cost reduction (like a down payment); an
acquisition fee (also called a processing or assignment fee); freight or destination
charges; and state or local taxes.
During the lease, you will have to pay your monthly payment; any additional
taxes not included in the payment such as sales, use, and personal property taxes;
insurance premiums; ongoing maintenance costs; and any fees for late payment.
You'll also have to pay for safety and emissions inspections and any traffic tickets.
If you end your lease early, you may have to pay substantial early termination
charges.
At the end of the lease, if you don't buy the vehicle, you may
have to pay a disposition fee and charges for excess miles and excessive
wear.
You can compare different lease offers and negotiate some terms. Consider . . .
- The agreed-upon value of the vehicle--a lower value can reduce your
monthly payment
- Up-front payments, including the capitalized cost reduction
- The length of the lease
- The monthly lease payment
- Any end-of-lease fees and charges
- The mileage allowed and per-mile charges for excess miles
- The option to purchase either at lease-end or earlier
- Whether your lease includes "gap" coverage, which protects
you if the vehicle is stolen or totaled in an accident.
Ask for alternatives to advertised specials and other lease offerings.
Know your rights and responsibilities
When you lease a vehicle, you have the right to
- Use it for an agreed-upon number of months and miles
- Turn it in at lease-end, pay any end-of-lease fees and charges, and
"walk away"
- Buy the vehicle if you have a purchase option
- Take advantage of any warranties, recalls, or other services that
apply to the vehicle.
You may be responsible for
- Excess mileage charges when you return the vehicle. Your lease agreement
will tell you how many miles you can drive before you must pay for extra
miles and how much the per-mile charge will be.
- Excessive wear charges when you return the vehicle. The standards
for excessive wear, such as for body damage or worn tires, are in your
lease agreement.
- Substantial payments if you end the lease early. The earlier you end
the lease, the greater these charges are likely to be.
For more information . . .
Contact your dealer, manufacturer, leasing company, or financial institution for more information.
The federal Consumer Leasing Act and some state laws may provide you
with additional consumer rights not covered in your lease agreement. For
information on these laws, contact your state's consumer protection agency
or attorney general's office. You also can contact
Division of Consumer & Community Affairs
Mail Stop 800
Federal Reserve Board
Washington, DC 20551
or
Consumer Response Center
Federal Trade Commission
6th and Pennsylvania Ave., NW
Washington, DC 20580
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