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Before signing a lease,
you are entitled by law to know the charges that will be assessed
"up front" at the initiation of the lease agreement. These
usually include the following:
Security Deposit
Not unlike the kind required
when renting an apartment, this is to make money available to the
lessor should you owe money at the end of the lease or fail to make
payments as agreed during its term. It can also be used to cover
past-due charges or payments, excess wear and tear or damage to the
vehicle, excess mileage charges, or an end-of-lease payment. If you
fulfill all the terms of your lease, the lessor must return it in its
entirety. A no-deposit lease is available through Auto Leasing Specialist
Leasing.
First Lease Payment and Deposit In Advance
Sometimes the first payment is
required at the beginning of the lease term in addition to a security
deposit. If you have a good credit rating, the lessor may not require
the deposit. Unlike a loan, lease payments are always made in advance,
not in arrears.
Capitalized Cost Reduction
Basically, you may have the
opportunity to lower your monthly lease payment by making a one-time
payment to reduce the car's "initial capitalized cost." The
capitalized cost is the total cost of the vehicle, including any fees,
insurance, maintenance contracts, or options you request.
As in the case of the loan amount, the
more you put down initially, the lower the monthly payments. However,
by putting down a large amount in an attempt to reduce your monthly
outlay, you also negate one of the primary reasons for leasing -
little or no initial cash outlay. An alternative might be able to
trade in your current vehicle to defray the capitalized cost reduction
amount.
Sales Taxes, Title and License Fees
In most states, when buying a
car with a loan or cash, sales tax must be paid in full on the entire
value of the vehicle at the time of purchase.
With leasing, most states permit taxes to be
fixed on each monthly payment rather than on the entire value of the
vehicle. The rationale behind this is to tax you only as you consume
the vehicle's value.
Tags, title and license fees are the
responsibility of the lessee just as they are with a loan. These fees
can be paid up front, or included and amortized over the life of the
lease.
Insurance
You must be provided all
insurance requirements and information by the lessor when entering
into a lessor contract. Either the lessor can provide the insurance
(he must disclose any cost to you) or you can provide your own
insurance through your existing insurance carrier. Since leasing may
require higher limits for insurance coverage than what you presently
carry, you must be informed in the lease agreement of the type and
amount of insurance required.
GAP insurance is included with all Auto Leasing Specialist
leases! Should you have an accident and the car is declared a total
loss, or the vehicle is stolen and not recovered, GAP Insurance
will cover the difference (the gap) between what is owed on the lease
contract and the amount that the primary insurer will cover. This is
most important in the early years of a lease, when the difference
between the two amounts is greatest.
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