Archive for August, 2008
It’s usual that we hear about a car lease and how different it is from car buying, but we don’t hear a lot about novated car leasing.
To start off, let’s define the term. A novated car lease is that financial agreement between an employer, the employee (who is the car user), and the financier. It is some sort of a salary packaging wherein the employer agrees to be responsible for the obligations of the employee under the lease, paying the monthly lease payments thru the employee’s pretax income.
As the employee, you can own the car and have the right to take it when you change jobs. You can even get a great discounts for the package deals with a novated car lease.Here are some of the advantages for you as the employee:
- You have a variety of choices to choose from.
- You can pay the car with pretax dollars.
- You can buy the car at the end of the lease.
- You can lease the car 100% for private use.
- Your employer can allow you more than one car for a novated car lease.
- It is a hassle-free and cost-effective plus factor for an employee’s salary package.
- The responsibility of the car ends upon the termination of the contract.
- You are not liable for the management of the car.
Research is the best armor against car lease scammers, but there is another important facet that needs to be given attention to and that would be reading and understanding the car leasing contract. This will surely equip you against hidden charges and make you knowledgeable that car dealers won’t be able to manipulate you.
The most critical part of the car lease contract that you need to study and focus on is the “Federal Consumer Leasing Act Disclosures” part. This is the part that has all the pertinent information regarding your car lease agreement: how much is your sign-up fee, your monthly payment, the number of payments you need to make, how to calculate you car lease payments, what are the rules for early termination of the contract, and other pertinent facts. Since this is quite a new regulation, there are actual charges that are not regulated in the contract. Examples of which are the amount for trade-in, the actual price of the vehicle and sometimes the monthly payment is not even accurately calculated.
Try to understand the deal about the overall wear and tear of the leased car. You would have to make sure with the car dealer what is under the normal wear and tear for the car on lease. Normally, the mileage for a car would be 12,000 to 15,000 while there is a charge of 10 to 25 cents for every extra mile.
Although early termination is part of the “Federal Consumer Leasing Act Disclosures,” you need to focus more on the rules regarding this aspect of the car lease deal since there are usually high charges to be incurred in this aspect.
Make sure also that gap insurance is part of the car leasing company’s policy or best of all if it’s part of the car leasing contract. This will arm you against penalties or paying the early termination fee if in case you lost your car due to theft or if you had an accident. Try to check also on other insurance coverage and make sure that you get maximum insurance coverage. Most car lease contracts require maintenance of insurance coverage: $100,000 per person for injury or death, $300,000 per occurrence for property damages. On the other hand, $1,000,000 is required for coverage in liability in Canada. Most car lease contracts won’t show you the interest rate and also the acquisition fee. The acquisition fee is usually part of the vehicle’s price.
All these you need to consider since once again, research is the keyword before closing a car lease deal.Sources:
For those who are into impulsive buying, be that for a minor consumable or a major purchase like a family car, it may not be a very helpful attitude. Indeed, it can cause you head-splitting headache. How’s that? Well, when you buy a car, and you for some reason found it horrible right after you bought it, remember that purchasing or leasing a car is not under the 3-day Right to Rescind policy of states. What one must do is contact your State Attorney General’s Office to ask about buyer’s remorse laws in your state. The first step to take is ask the sales dealer handling your account if ever he can find a way on how to return the purchased or leased car. But just to paint you the right picture, these dealers are a rare breed. Whatever the process is, it would take weeks with thousands to spend when the rescind is being processed. If you bought a car from a private owner, you would need to contact a lawyer or submit a request to a claims court. It is even harder and more like next to impossible to have a leased car returned because of the amount of paperwork and fees involved. So what to do about knowing buyer’s remorse laws in your state is, call the State Attorney General’s Office or the Department of Motor Vehicles (DMV) or if worse gets worst, call your attorney.
You need to do this also when your licensed dealer wasn’t able to give you the title to your car after at least 5 to 45 days, depending on your state. You can give the State Attorney General’s office or DMV a ring after 30 days of not receiving a copy of your registration to ask for assistance when your dealer’s inefficiency is getting out of hand.
Also in most states , under the Lemon Law legislation, after several attempts to troubleshoot a defective brand-new car, the buyer has the choice to return the vehicle or ask for a refund. But the catch here is that lemon laws are applicable only to brand-new cars and not to leased cars. You would have to ask your licensed dealer about the matter; and if they remain uncooperative, you can always inquire for help from the State Attorney General’s Office or the DMV.
Now that you know the consequences of what impulsive buying or buying without purchase is, the best you can do to avoid getting into chaos is take time to choose well and read the contract before that purchase.
A lease is a binding contract that won’t be that easy to get out of, like marriage; and it would cost as much as divorce too.
When a car lessee returns a car before the contract ends, high fees pile up. These fees include the early termination fee and other penalties. An alternative path to take to do away with these stifling fees is to transfer the lease to a new lessee.
Of course, there are still fees that you need to pay for this transaction, but you can rest assured that it’s chicken feed compared to the surging ETFs and other penalties.
What You Can Build On
How can a prospective lessee be convinced that the transfer of lease is desirable and more convenient than a new one? Here are some basic points you can focus on to negotiate the matter:
- This lease allows the new prospect to get a late-model car without the large amount to pay for down payment.
- He/she doesn’t have to stay long on the lease; this arrangement is perfect for executives and graduating students.
- Try to bank on the idea of lifestyle change. From having regular passengers to driving alone long range; it might also be from having heavy cargo to just light travel.
- With a lease, he/she can drive a car that suits his taste every year or two.
- The lessee can buy the car at the end of the contract.Another point to remember is that even if you have a slightly higher fee to pay for every month, the car can be an enticing offer with less mileage or a hefty cash incentive.
- Does this prospective lessee has good credit background?
- Does your lease company allow lease transfers?
- Are you responsible for anything after the lease transfer?
- Have you read and understood the lease, both the old and new?
- Is the warranty period of the vehicle longer than the lease period?
- Have you inspected the car you are about to lease? Remember that if not, you might be found liable for any damage done before the transfer.
- Do you know the previous lessee of the car?
- Are you sure you can’t find a newer car with the same price you are to pay for the lease?
- Is there any lease-end charge you need to pay?
- Have you read the history of the car you are about to lease? You might find a lovely made-up car from a horrendous car accident.
There’s nothing much to worry on this aspect though most of the dealerships or financial institutions set a certain fee for each lease transfer; this fee is not that high.
What to Consider
A lot of questions to ponder on before the ink dries in the contract:
For the exiting lessee:
For the new lessee: