Archive for March, 2009
Below are the top three scams most frequently used by auto dealers. Any one of these could cost you a lot of money so before signing that car lease, always read the print.
Car Lease Scam 1: The dealer offers to take your current car as a trade in, pay off your loan balance on that vehicle (no matter how much it is) and lease you a better car than the one you have for lower payments.
Although the dealer will pay off your old loan as agreed, he will then credit the value of the trade-in against the price of the new car then add on the rest of the loan balance you owed to the price of the new car you’re about to lease. The payments won’t change for the reason that you’re leasing and not buying, so the amount will look lower than what you’d have expected, nevertheless the deal is far worse.
Car Lease Scam 2: The dealer offers to pay your remaining lease payments on your existing car lease in exchange for a new lease from them.
Don’t ever assume that the car dealer is taking over the responsibility of car lease payments. What they’re really doing is just taking over the rest of the payments and when completed, will return the car to the company that originally leased it to you. Depending on the terms of your lease, if there’s any problem with the car, such as excess mileage, scratches and among others, the leasing company won’t send the bill to the dealer; they’ll send it to you. Additionally, if the dealer doesn’t pay the remaining payments, or doesn’t return the car, the leasing company will come after you, not the dealer. Lastly, the dealer won’t really be making those payments anyway, since they have found a way of adding the price of the remaining payments back into the total price of your new car.
Car Lease Scam 3: The dealer will try to convince you that all leased cars must have extended warranties, maintenance contracts, paint protection, rust proofing and window etching.This is a sham. If the dealer press that you should have these extra warranties ans such, don’t give-in. Car leasing companies don’t insist on any of these things. All the items listed above give dealers higher profits and are unnecessary.
As appealing as car lease takeover sounds, there are still some risks that a lessee should take note of. One, is the chance of service problems. A study said that a 3-year old car has more than twice the problems as a one-year-old car has. Any repairs that’s not covered by the warranty, comes out of one’s own pocket, even if the car has been in your hands for three months or so. It’s probably a good idea to purchase a comprehensive, bumper-to-bumper warranty to cover the full car lease term.
Another risk associated with car leasing is that it’s difficult to predict what that car (the leased vehicle you’re about to take over) will be worth when it’s, let’s say, five years old. The retained value of the car after 5 years is an important factor in determining your monthly payments. If the retained value is set too low, your monthly payments will be higher however if it is set too high, it gives the dealer the latitude to push up the car’s initial price while offering what seem to be an acceptable monthly payment.
The best vehicles to lease, therefore, are those that hold their value supremely well – such luxury cars, sports cars, and some high-end SUVs. As a result, used-car leasing has become largely the district of a handful of luxury makes such as BMW, Lexus, and Mercedes-Benz.
Just like car loans, car lease requires a lessee to have a better credit rating since the lease provider is exposed to a much higher risk as opposed to car loans. People with a bad credit history will frequently have frustrating experiences when closing the car lease deal, especially when times of credit is tight and the economy is stressed. Although some companies are desperate enough for business that they don’t mind the extra risk, generally, people with sub prime credit should expect to pay higher interest rates, be required to make higher down payments or make a security deposit.
If you expect to use the car for a relatively short period of time, let’s say for 12 months, you can opt to try Car Lease Takeover instead. Although the car lease company has to approve and check your credit history, the requirements are not as strict if you compare it to a new lease. Typically car lease takeovers offer a cash incentive with no down payment to make the deal attractive.Should you get disapproved, here are a few of your options:
- Get a co-signor for your car lease, someone who will be responsible if you make a default on your payments
- Borrow money or a car from family and friends
- Save cash for your “starter car” and trade it in once you have the money or credit rating to grant you that car lease
So you have decided to lease your car or may already have a leased car. You made sure you purchased the correct car lease insurance and your leasing insurance covers everything right? Unfortunately not.What is Gap Insurance?
Gap insurance covers the gap between what you owe on a car and what it’s worth if you happened to total your car in a covered losses such as accident or theft. The types of losses covered and the extent of the coverage may vary according to the insurance company, so make sure that you clarify what’s covered before availing the gap insurance.Gap Insurance Needed for a Leased Car
For car leasing, gap insurance is a must, especially for the no-down payment leased cars. As much as the car lease insurance is important this, however, does not cover a major gap that is in every leased vehicle. The necessity of the gap can occur is you totaled your leased car in an accident. How it works? Read further below.How Gap Insurance Works for a Leased Car
Your leasing insurance will cover the depreciated market value at the time of the collision. Usually, the car lease payments are lower when compared to buying one. Since all new cars depreciate the most in first few years, the market value of the leased vehicle is lower between what is still owed on the car lease contract. But, you are still responsible for that difference in what the insurance company will pay and what is still owed on the lease… that amount or “gap” is what gap insurance covers.Some things to take note of:
- Carry your car lease insurance company’s comprehensive and collision coverage in order for the gap insurance to pay out.
- Check to see if your car lease down payment is covered in the gap insurance.
- Be aware of what your deductibles are on your car lease insurance, since gap insurance does not cover your car lease insurance deductible.
- Even if you car lease has already begun, you can still get a gap insurance
- Remember that gap insurance is only applicable if you have religiously conformed to the terms stated in car lease contract.
- Take note that until the gap insurance pays for you for the loss, you may have to continue making car lease payments.
- Gap insurance and wear and tear insurance are two different things
It shouldn’t be any surprise that car leasing is growing in popularity, given the current economic downturn. It would be impractical for anyone to spend a bulky amount to drive a brand new vehicle when in fact car leasing makes it possible for anyone to purchase a new car minus the depreciation.
Brand new cars depreciate at an alarming rate, some more than others, but nonetheless every single car that is purchased from a showroom will depreciate as soon as the owner turns the key and hit the road.
With a down payment you can have your very own brand new MINI Cooper S for as little as 167 US dollars per month. Here’s a detailed example: If you were to buy a brand new Alfa Romeo MiTo it would set you back around 8,000 US Dollars and after a year’s ownership and average mileage the car would depreciate by between 15-20 per cent. You can lease the same brand new car for as low as 150 US dollars per month with no hassles of worrying about depreciation, plus you will receive all of the perks that come with car leasing.
When you choose car leasing you will receive servicing as part of the deal so you won’t have to worry about expensive garage fees if your car encounters difficulties. You’re also not tied to a long term contract since car leasing terms are good for 24 to 36 months. No large deposit, no financing worries, no servicing worries, no depreciation worries – these are some of the undeniable car leasing perks.
You wouldn’t invest in anything else that would depreciate so quickly would you, and you don’t have to ever again by indulging in a little bit of car leasing. It’s the quick, easy way to get behind the wheel of a brand new vehicle that you could not afford to buy outright and is the perfect way to turn heads down the High Street, to impress the ladies or simply to drive to work each morning with a bit of comfort and style.
Car leasing companies offer all different types of vehicle, ranging from economical commuter cars, to luxury saloons, to the latest sports coupes, to comfortable and practical family SUVs. You name it, they can source it – and to your requirements to. You choose the colour, the size of the engine, the transmission, the interior, everything as you would when purchasing a brand new car only you don’t throw your investment down the drain.