Reviews-at-a-Glance
The 2010 Audi automobiles are the realization of the quintessential driving machine. Abundant safety features, rugged, dependable construction, and classic styling have been Audi trademarks for decades.
Take a look at our Audi A4 review, featuring the most innovative automobile on the road.
Lease Glossary | Types of Leases | Buy or Lease? | Free Lease Analysis | Dealer Buy Rate Scams | Amortization Calculator
When you lease a car, you are basically renting the car on a long term, month to month basis and at the end of the lease you either turn the car in or buy it at a pre-determined cost otherwise termed a residual value. Print it!
There are two types of leases:
1. There is a closed end lease which means that at the end of the lease you turn the car in. Otherwise known as a "walk away" lease.
2. There is an open end lease which gives you the option of either buying the car at a pre-determined value or turning the car in if the car is not worth the residual value, however you are liable for the difference up to 3 monthly payments.
The biggest advantage of leasing for most people is that you pay less in the beginning than if you purchase. This can entice many consumers into a lease.
If you do lease, make sure you know the sale price or the "capitalized cost" of the vehicle.
This is important because most of the time the leased amount is not disclosed and can be "capped" at a price far above the MSRP (sticker price). And remember all leases have a mileage limit, if you drive beyond the mileage limit there are substantial penalties as high as 30 cents per mile.
Check the following before you sign on the dotted line: EVERY lease has limits, below are a few you should be aware of.
What is the cost of early termination? What are the late payment penalties? What are the standards on measuring wear and tear of the car?
What is the yearly mileage limit or cap and what is the cost per mile if you go over? Although contracts differ the standard mileage allowance is 12,000 to 15,00 miles yearly.
Remember that these figures include the termination fee but do not include any charges for excess wear and tear on the vehicle. Many leasing companies will closely scrutinize your leased vehicle at the end of the lease term. (Another rip-off game)
And finally, remember a dealer can make more money leasing that on selling because the total selling price of the vehicle is usually not disclosed in a lease, the terminology and use of legalese can give the seller other ways to make a huge profit.
This checklist was developed by state attorneys general, consumer groups and lawyers to help you understand a vehicle lease. The Reality Checklist is the copyright and trademark of the Consumer Task Force For Automotive Issues, Inc. We thank them for allowing WheelsDirect2U.com to republish their checklist here.
TIPS ON USING THE REALITY CHECKLIST
Lease or Buy? What's best for YOU?
Only you know the answer to this question. Leasing is only a financing tool. But if you're the type of person who always has car payments, is on steady financial footing and is not a high mileage driver, leasing could be a good alternative if you are informed.
Here's a rather obvious reason why you should be careful when considering a lease: Leasing companies present leasing as a "final solution" - they present the lease payment as it it's set in stone and discourage negotiating. But leasing more than buying should bring out your best negotiating skills.
How badly can the uninformed consumer be hurt? Try $2,000 to $4,000 on a single lease. Some dealerships consistently try to switch customers from buying to leasing and make that much extra profit on the very same car in a heartbeat. Other leasing companies simply build in that much profit and forget to tell you. (And how long does it take you to earn $2,000-$4,000?) See Lease or Buy above.
Areas where lack of Information can hinder you
Leases generally don't tell you what the leasing company is paying for the vehicle you plan to lease. You're familiar with "Sticker Price," the factory sticker on the window of new cars? It's also called "MSRP" (Manufacturer's Suggested Retail Price). Most of us know to try to negotiate a price lower than MSRP when we buy a vehicle. But on most leases, you're never clearly told what is being paid for the car. Since you don't know, it's very easy for a leasing company to charge you 110%-120% of the MSRP. On a $20,000 vehicle, that takes $2,000-$4,000 right out of your pocket.
Leases generally don't tell you what money costs. Finance a car and you know to look for a cheap interest rate. But lease a car and there is no interest rate. At least, according to the leasing companies. They say since you're "renting" rather than financing there is no interest.
NO WAY! Every lease has a "cost of money" attached to it. Leasing companies refer to that cost of money as a "monthly lease charge," "service fee," or "service charge." Since you have to pay the cost of money, we think you have a right to have it presented to you in an understandable and comparable way. We call that an "effective interest rate." More later.
Leases generally don't tell you in an understandable way what It costs you to break a lease early. And it can cost you dearly-thousands of dollars. Leases generally downplay the "cost of excess mileage." Every lease gives you some "free" miles as part of your lease. But drive over that limit and the penalties can be breathtaking. Most leases are based on driving 12,000-15,000 miles a year. But let's assume you're a high-mileage addict who drives 40,000 per year. Those extra miles on a three year lease could cost you an extra $3,500-$11,000.
The Vehicle Reality Checklist
The Reality Check list can help you understand these areas and others. It assumes you've done your homework on car safety and reliability, assumes you are a smart budgeter, and assumes you're willing to take a little flack from leasing sources. Why? Clear information means you can bargain more effectively, and bargaining generally lowers the leasing profits. Would you like that if you were in the auto leasing business?
The Reality Checklist was also designed to be filled out by leasing outlets themselves rather than by you. That means some companies honestly won't have all the answers you need. Their computer, for instance, may not have been programmed to provide it. But if you're patient and insistent, some companies will help you fill in the blanks.
Leasing Terminology (in depth lease glossary)
The Lessor: Companies like GMAC, FMCC, and others. They actually hold the paper on the lease. There are an estimated 12,000 - 15,000 leasing companies in the U.S.
Lessee: You.
Originator. The company actually filling out the paperwork with you, many times a car dealership. Originators are also called "sales outlets" and "leasing representatives."
Working with the Checklist Itself, Here are some notes on different checklist items.
Item 1-MSRP: Remember that used cars, many trucks, and some recreational vehicles don't have MSRPs.
Item 2-Capitalized Cost: Many leasing companies may actually give you this figure by itself without telling you how it was derived. Though we think you have a right to know all the pieces of Cap Cost (as it's called), this number can help you by itself. If you are shopping the same vehicle between different leasing companies, the leasing company with the lower cap cost will generally be the leasing company providing you the vehicle for the less money.
Item 3-The Cost Of Money: For this figure to give you an accurate comparison to the interest rate on an installment loan, you need to have the leasing company convert their "cost of funds" to an effective interest rate. This 'cost of funds' should include any items that make the lease of the specific vehicle more expensive than paying cash for the same vehicle.
Item 4-Breaking the lease early: "Early Terminations" are a big area of abuse in the leasing industry, for a very simple reason--the formulas used for determining early termination require more information and technical input that any consumer has. lnsist that your leasing company develop these examples for you.
Item 5-Excess mileage charge: Insist that the leasing company figure your lease on the total miles you realistically will drive during the entire lease term.
Tip
Don't expect great enthusiasm when you walk up with this checklist. While some sales outlets will happily fill this out since their terms are very competitive, many will not. If you find no cooperation, find another outlet.
Consumer Task Force "Reality Checklist for Vehicle Leasing"
This checklist highlights some of the important parts of your vehicle lease. It is not a legal document or agreement. This is not a lease contract. Read it carefully and read your lease just as carefully.
A lease is similar to a long-term rental agreement. You are paying for the right to drive a vehicle purchased and owned by someone else. In most instances, you will be responsible for all maintenance on the vehicle, including the maintenance required to maintain warranty coverage.
Many of the amounts shown may be negotiated by you and the leasing company.
1a. MSRP (Manufacturer's Suggested Retail Price)
Also called "Factory Sticker."
MSRP for this vehicle is............................................................... .........................$_________
1b. The lower the price your leasing company pays for the vehicle,
the lower your payments should be.
The leasing company has agreed to pay this price...................................................$__________
which is _______ percent of the MSRP of this vehicle.
2. In addition to the price paid for the vehicle itself, the following optional equipment costs are added to the price of the vehicle:
Item _______________Cost $___________
Item _______________Cost $___________
Item _______________Cost $___________
Item _______________Cost $___________
Total Cost of Optional Items $___________
3. Total Cost of the Vehicle (the sum of items lb & 2) .................................$_____________
4. Taxes, Title and License ...................................................................Cost $__________
5. Fee for Acquiring This Lease (Acquisition Fee): ..................................Cost $__________
6. Refundable Security Deposit .............................................................Cost $__________
7. Optional Insurance/Warranty Items
Please note that the following items can be added to your lease contract at your option. You are under no obligation to include these items in your lease contract. Your lessor should be able to provide you with a detailed explanation of what these items are and their stated benefits to you. These extra products/services will increase your monthly lease payments unless the lessor provides them free of charge (e.g. GAP Coverage). It is wise to consider the need for each item carefully and then decide if you can afford to include this extra cost in your lease contract.
Credit Life Insurance and Disability.....................Cost $ __________
Extended Warranty...........................................Cost $ __________
Vehicle Maintenance Agreement........................Cost $ __________
GAP Coverage included/not included..................Cost $ __________
..........................................Total cost of these items $ __________
8. Total (The Capitalized Cost) of Your Lease is
(the total of items 3, 4. 5 & 7) ................................................................. ........ $ __________
9. Initial Payment
You may make an initial payment in cash or by trading in a vehicle. You may make that payment before or at the time you accept delivery of the vehicle. If all or part of this amount is used to reduce the capitalized cost, it would lower your monthly payments. All or part of this amount may also be used to pay for costs which are not included in the total capitalized cost.
a. Cash Payment ..........................................................................................$ __________
b. Trade-In
You are being paid $ __________ for your trade-in. You owe $ __________ on the trade-in. The difference is the amount available for you to use as part of your initial payment.
That amount is: ............................................................................................$ __________
c. Total Initial Payment (the sum of a & b) ..................................................... $ __________
(i) Of this total, $ __________is the amount which is being used to reduce the capitalized cost.
(ii) Of this total, $ __________ is being used to pay the following amounts which are not included in the capitalized cost.
Item ______________________________ Cost $__________
Item ______________________________ Cost $__________
Item ______________________________ Cost $__________
Note: The sum of (i) plus (ii) should add up to the Total in C.
10. Amount You Are Financing Is: (the total of item 8 minus item 9c) .................. $________
11. The Cost Of Borrowing Money
Leasing is simply one way to finance the use of a vehicle.
Cost of funds affects your lease payment.
For this leased vehicle you have agreed to pay an effective interest rate of :______________ %
12. Residual Value
A higher residual value will reduce your monthly payments. The residual value is the forecasted value of your vehicle at the end of your lease term.
Your residual value: .......................................................................................... $ __________
13. MONTHLY PAYMENTS
Based on items 1-12, you have agreed to make a total of __________ payments
at $ __________ each. And one payment of ........................................................$ __________
ADDITIONAL COSTS AT LEASE TERMINATION
14. Breaking the Lease Early
If vou decide to break your lease early before the lease ends, you must return the vehicle to the leasing company, and you will be responsible for some or all of the remaining lease payments and the termination fee, if any. Provided below is anexample of what you would owe should you decide to terminate your lease early. These amounts would be reduced by any amounts received when the lessor sells the vehicle. Bear in mind that these figures include the termination fee but do not include any charges for excess wear and tear or for excess mileage for which you would be responsible under the lease. Based on breaking your lease:
At 12 Payments....approximately ................................................................. ..... $ __________
At 24 payments....approximately ................................................................. ..... $ __________
At 36 payments....approximately ................................................................. ..... $ __________
At 48 payments....approximately ................................................................. ..... $ __________
15. Excess Mileage Charge This lease assumes you will drive no more than __________ miles per year during your lease. If at the end of the lease term you have driven more than __________ miles, you agree to pay a penalty of $ __________ per extra mile.
16. You will be charged extra for whatever wear and tear the lease company determines is above and beyond "normal' wear and tear for the vehicle you are leasing. Make sure the leasing company provides you with documentation in the lease agreement of what constitutes excess wear and tear.
17. Buying The Leased Vehicle If you decide to purchase the leased vehicle, you may do so by exercising the purchase option in your lease contract. A purchase option fee will generally be applied to the total buy-out cost as well. Provided below is an example of what you would pay for your leased vehicle should you decide to purchase it. Buying your vehicle:
At 12 Payments....approximately .....................................................................$ __________
At 24 payments....approximately ......................................................................$ __________
At 36 payments....approximately ......................................................................$ __________
At 48 payments....approximately ......................................................................$ __________