Guide on what you must know about auto car leasing before taking up any service.

2. CONTENTS
1. Auto Insurance And Leasing 1
2. Auto Leasing Scams Exposed 3
3. Real Benefits Of Leasing 6
4. Buy A Car At The End Of The Lease 8
5. Buy Or Lease? 10
6. Dealer Leasing Tricks 13
7. Leasing Fees Involved 15
8. Why You Should Go Green And Save On Your Leasing 17
9. How To Avoid Extra Costs At The End Of Your Lease 19
10. How To Calculate Your Lease Payment 21
11. How To Get Out Of Lease Before Your Contract Expires 24
12. How To Lease A New Car? 26

3. 1
AUTO INSURANCE AND LEASING
WHEN LEASING A CAR, IT IS EASIER TO STICK WITH THE SAME COMPANY FOR
your auto insurance.
Though this is common knowledge to you and most car owners out there, what you don’t
know, however, is that you may end up paying too much for your coverage.
Hence it is better to look elsewhere for lower rates.
When you lease, the vehicle that you will drive belongs to the leasing company.
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4. 2 AUTO LEASING GUIDE
They want to make sure that their investment is covered in the event the vehicle gets
damaged, totaled or stolen.
They typically want to get covered for the difference between what your auto-insurer pays
and your outstanding leasing obligations at the time of the accident or damage.
This is called GAP, short for Guaranteed Auto Protection, and is usually included in the
leasing contract.
If your leasing company is called BMW Financial Services, Chrysler Financial or any other
finance division of an automaker, then chances are your GAP insurance will be offered by
the same lease company.
You are under no obligation to accept GAP insurance included as part of your lease
agreement.
Why pay an insurance premium if you could get the same coverage for a lower price?
Invest some time shopping by comparing quotes from other insurance companies, including
your existing one.
Ask for discounts that you already qualify for and adjust your coverage accordingly.

5. 2
AUTO LEASING SCAMS EXPOSED
CAR-LEASING HAS BEEN LAUDED AS A MORE ATTRACTIVE ALTERNATIVE TO
buying, offering in the process the flexibility to drive a new car for less.
However, the reality is that leasing is an option that is fraught with many pitfalls for the
average customer.
Leasing regulation does not require as much disclosure as buying a vehicle.
This has given rise to many leasing scams that trick the customer into believing they are into
a good deal when, in effect, all he is getting is a rough deal on the dealer’s terms.
Here we look at some of these common scams and how to avoid them.
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6. 4 AUTO LEASING GUIDE
1. Artificially Low Interest Rates
Some dealers quote a lower interest rate when in reality it is much higher.
They do this by either purposefully quoting the money factor as the interest rate or
calculating the loan without amortizing some closing fees, like the security deposit, into the
loan lease.
Take the money factor for example.
This is typically expressed as a four decimal digit.
Like 0.004.
Some dealers quote this as a 4% interest rate when in fact you need to multiply it by 24 to get
a rough idea of the interest rate on your loan.
In this example, the interest rate is a much higher 9.6% than the quoted rate of 4%.
Make sure you crunch the numbers and understand the formula they use to calculate their
interest rate.
Look out for any fees not factored into the calculation.
If you are not satisfied, do not enter into the lease agreement.
2. Terminate Your Lease Early For A Low Penalty
This is an all-time leasing scam.
You ask your dealer how much you will pay if you want to terminate your lease.
And he tells you: “You want to get out early? Sure, you only pay an early termination fee of
$300”.
What he is quoting is only the small administrative penalty of early termination,
For there is a much stiffer penalty called early termination fee and this runs into thousands
of dollars.
Do not confuse the early termination administrative penalty with the termination fee.
Read the small print carefully and know exactly how much you will get charged should you
terminate your lease before its scheduled end.
Pay for an extended warranty you don’t need
This is another shell game to inflate the dealer’s profit at your expense.

7. Auto Leasing Scams Exposed 5
The dealer slides an extended-warranty into the deal whilst it’s already factored into the
monthly payments, or he tricks you into buying a 36-month warranty on a 24-month lease.
You do not have to pay extra money for a warranty already built into your payments or for
one that goes well beyond your lease term.
They might slip an extended warranty in.
Don’t be fooled, the warranty is already factored in.
3. No Security Deposit
Any dealer who advertises a $0 security deposit is not telling you the whole story.
For a security deposit is always factored in the lease under the provision for disposition fees.

8. 3
REAL BENEFITS OF LEASING
LEASING IS NOT ONLY AN ATTRACTIVE FINANCIAL PROPOSITION TO MOST AUTO-
consumers but also a lifestyle and preference choice.
With that said, here are the benefits of leasing.
1. Keeping Up With The Latest Trends
Leasing is sometimes more of a personal and lifestyle choice than a financial one.
Many people are not comfortable with the idea of owning a vehicle over a long period of time.
They rather keep up with the latest trends of the industry and drive the latest models every
2 to 3 years.
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9. Real Benefits Of Leasing 7
Leasing a car gives you the convenience of having the latest technology and safety
innovation.
Such as an electronic stability system, DVD entertainment systems and advanced stereo
equipment. If you are willing to forego ownership for the latest set of wheels, than leasing is
your best option.
2. Purchasing Flexibility
Leasing also offers purchasing flexibility.
It allows you to defer the purchasing decision while using the car.
You don’t have to haggle with your mechanic over repair expenses, deal with hefty
maintenance bills or worry about a depreciating asset.
Provided you can keep the vehicle in good condition and stay within the contracted mileage
allowance, you are effectively getting a test drive for the length of your lease.
At the end of your lease, you can purchase the vehicle or simply turn in the keys and walk
away.
No questions asked.
3. Cash Flow
Leasing offers many short-term benefits. It reduces your initial cash outlay as you do not
have to pay the large down payment required for car ownership.
You only pay for the depreciation on the car - only the part you will use during your lease,
not the entire vehicle.
This results in lower monthly payments and frees even more cash.
This cash can be put to use more intelligently elsewhere than the questionable investment of
owning a depreciating asset.
If you are self-employed or use your car for your job, then you can write off your leasing
payment as a business expense.
4. Negotiating Leverage
Although it may seem a little unorthodox in this industry, almost everything about leasing is
negotiable.
If you know all the fees involved, you can lower your monthly payments, negotiate the
purchase price of the vehicle at the end of the lease and contract additional miles on top of
your mileage limit.

10. 4
BUY A CAR AT THE END OF THE LEASE
YOU HAVE COME TO THE END OF YOUR LEASE AND YOU LIKE YOU CAR ENOUGH
you want to keep it in the driveway.
Just like buying a used car, there is some research to be done to nail a good deal.
First, you need to know the cost of buying out your lease.
Read the fine print of your contract and look for the purchase option price.
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11. Buy A Car At The End Of The Lease 9
This price is set by the leasing company and usually comprises the residual value of the car
at the end of the lease plus a purchase-option fee ranging from $300 to $500.
When you signed on the dotted line, your monthly payments were calculated as the
difference between the vehicle’s sticker price and its estimated value at the end of the lease,
plus a monthly financing fee.
This estimated price of the car value at the end of the lease is what is termed in leasing
jargon residual value.
It is the expected depreciation or loss in value of the vehicle over the scheduled-lease period.
For example, a car with a sticker price of $40,000 and a 50% residual percentage will have
an estimated $20,000 value at lease end.
Now that you know the cost of buying out your lease, you need to determine the actual value,
also termed market value of your vehicle.
So, how much does your car retail for in the market?
To pin down a good, solid estimate you need to do some pricing research.
Check the price of the vehicle, with similar mileage and condition, with different dealers.
Use online pricing websites, such as Cars.com, Edmunds.com and Kelly Blue Book for
detailed pricing information.
Gleaning pricing information from various sources should give you a fair estimate of your
vehicle’s retail value.
All you have to do now is compare the 2 amounts.
If the residual value is lower than the actual retail value, than you’re into a winner.
Unfortunately, there is a good chance a car coming off a lease is a little on the high side.
Don’t despair though.
Leasing companies know as much that residual values on their vehicles are greater than
their market value and as such are always on the look out for offers.
You can knock down on the price of your leased vehicle with some smooth negotiating
tactics.
Put forward a price that is below your actual target and negotiate hard until you wind up
near that figure.

12. 5
BUY OR LEASE?
This is a dilemma that every auto-consumer faces.
Should I pay cash upfront?
Or should I forego the ownership and pay monthly settlements instead?
Should I buy?
Or should I lease for a new set of wheels?
As is the case with every other common dilemma, there is no sure-fire guaranteed answer.
For each option has its own benefits and drawbacks and depends on a set of financial and
personal considerations.
First, your finances. Affordability is clearly key, and you need to ask the question of how
stable is your job and how healthy is your general financial situation.
10

13. Buy Or Lease? 11
The short-term monthly-cost of leasing is significantly lower than the monthly payments
when buying: you only pay fo the portion of the vehicle’s cost that you use up during the
time you drive it.
If you have a lot of cash up front, then you can opt to pay the down payment, sales taxes - in
cash or rolled into a loan - and the interest rate determined by your loan company.
Buying effectively gives you ownership of the car and that feeling of free driving that goes
on providing transportation.
If, say, you want to get into luxury models but can’t afford the upfront cash of purchasing
the vehicle than you are a good candidate for leasing.
Unlike buying, it gives you the option of not having to fork out the down payment upfront,
leaving you to pay a lower money factor that is generally similar to the interest rate on a
financing loan.
However, these benefits have a price: terminating a lease early or defaulting on your monthly
lease payments will result in stiff financial penalties and can ruin your credit.
You need to make sure you carve out the monthly lease payment in your budget for the
foreseeable future, at least for the duration of the lease.
Besides the financial aspect, making a buy or lease decision depends on your own particular
lifestyle choices and preferences.
Think about what the car means to you.
Are you one to bond with the car?
Or you rather have the excitement of something new?
If you want to drive a car for more than fives years, negotiate carefully and buy the car you
like.
If, on the other hand, you don’t like the idea of ownership and prefer to drive a new car
every 2 to 3 years then you should lease.
Next, factor your transportation needs.
How many miles do you drive a year?
How properly do you maintain your cars?
If you answer is: I drive 40,000 miles a year and I don’t really care much about my cars as I
don’t mind dealing with repair bills, then you are probably better off buying.

14. 12 AUTO LEASING GUIDE
Leasing is based on the assumption of limited-mileage, usually no more than 12,000 to 15,000
miles a year, and wear-and-tear considerations.
Unless you can keep within the prescribed mileage limits and keep the car in a good
condition at the end of your lease, you might incur hefty end-of-lease costs.
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15. 6
DEALER LEASING TRICKS
TOO OFTEN WHEN IT COMES TO AUTO-LEASING, PEOPLE GET SO DAZZLED BY THE
myriad terms and the jargon thrown their way that they end-up paying through the nose.
They relied on a dealers' advice than doing their own research and evaluation.
Here is a look at their common tactics to pad their profits and leave the customers shelling
hundreds of dollars more than the deal should be worth.
1. Leasing Is Better Than Buying
Dealers use the lure of lower-monthly payments to entice customers to sign for long-term
loans, with terms stretching for five years or more, making the payments even lower.
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16. 14 AUTO LEASING GUIDE
There are 2 catches with such lengthy contracts: higher mileage, exceeding the prescribed
limit, and hefty repair costs.
With leases charging on average 10 to 20 cents a mile for any extra mile over the agreed
amount in the contract and warranties only covering 3 years, you leave yourself wide open to
hefty charges for excessive mileage and wear and tear.
2. Cheap 2-3% APR Rate On Your Lease
The dealer is not quoting the interest rate you would be paying on your lease.
Rather he is giving you the lease money factor.
While similar to an interest rate and important in determining your monthly payment, a more
accurate rate is calculated by multiplying the money factor by 24.
For example a cheap 3% money factor is 24 X 0.003 = 7.2%.
This provides you a better understanding of what your annual interest rate on your lease
contract is.
3. Stress-Free Early Lease Termination
Dealers know consumer driving needs change and they would like to have the option of
getting out of a lease commitment sometime down the road before their lease ends.
Truth being said, when you sign for a lease, you are effectively saddled with monthly
payments for the remainder of the lease term and there is little-choice of getting out early.
Lease contracts carry hefty financial penalties for either defaulting on monthly payments or
terminating the lease earlier than the scheduled term.
To avoid being on the receiving end of such tried-and-true tricks, educate yourself about
leasing by doing research online to keep up to date with what is happening right now.
Get down to the nitty-gritty and understand what the leasing terms used by dealers mean.
Crunch the numbers along with him and understand how they arrived at the monthly
payment figure.
Don’t sign anything until you’ve understood all the terms and your numbers much those of
the dealer.
Do not let the dealer pressure you into signing; you are the one to determine whether the
agreement is right for you.

17. 7
LEASING FEES INVOLVED
MENTION AUTO-LEASING AND MOST PEOPLE WILL AUTOMATICALLY ASSUME A
low-monthly payment.
There is actually more than what meets the eye and a number of fees are involved at various
stages of the lease process.
At the beginning of the lease, you have tfo pay a refundable security deposit.
This is typically equivalent to one monthly payment and to safeguard against non-payment
and any incidental damage done to the car at the end of the lease.
You are also required to pay an administrative charge, called acquisition fee.
Other fees include licenses, registration, title and any state or local taxes.
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18. 16 AUTO LEASING GUIDE
During your lease, and you expected to honour your monthly payment obligations.
Failure to do so will result in late-payment charges.
You have to pay any traffic tickets, emission and safety inspections and ongoing
maintenance costs.
Ending your lease early will result in substantial early termination charges.
At the end of the lease, expect to pay any excess mileage costs, charged at 10 to 20 p a mile.
Any incidental damage done to the car, and deemed to be above normal, will result in excess
tear-and-wear charges.
Finally, if you choose not to purchase the vehicle, then you have to pay a disposition fee.

19. 8
WHY YOU SHOULD GO GREEN AND
SAVE ON YOUR LEASING?
HYBRID VEHICLES’ POPULARITY HAS SHARPLY GROWN FROM THOUSANDS IN
early 2000 to close to 300, 000 by the end of 2005.
The trend is rapidly catching with the auto-leasing industry with generous tax credits and
incentives on offer if you go green.
Beginning in 2006, businesses and taxpayers who lease, or purchase, an environmentally-
friendly and fuel-efficient vehicle will be eligible to claim federal income tax credits worth
thousands of dollars.
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20. 18 AUTO LEASING GUIDE
Individual states also offer generous incentives, including hybrid state tax credits, new High-
Occupancy Vehicle (HOV) lanes access and discounted thruway tolls for alternative-fueled
vehicles.
And that is not all you can save from going green!
You can now save on your parking fees at a number of universities and some auto-insurance
companies are offering insurance discounts for hybrid-vehicle owners nationwide.
If you want to take advantage of these incentives and contribute to energy conservation,
then visit Hybrid Center and complete a personal profile about your driving needs and habits.
You will get in-depth advice on hybrid models that would make economic sense to you and
local, state and federal incentives available where you live.

21. 9
HOW TO AVOID EXTRA COSTS AT THE
END OF YOUR LEASE?
$250 TO DISPOSE OF YOUR VEHICLE, $1000 FOR EXTRA MILES YOU PUT on the clock
and $200 to replace the light bulb and the worn tires.
Lease agents constantly nickel-and-dime consumers when their lease runs out.
Here is a rundown of what can trigger those fees and some steps to take in your self-defense.
1. Disposition Fee
Leasing companies charge you if you choose not to buy the vehicle at the end of your lease.
This fee is set as compensation for the expenses of selling, or otherwise disposing of the
vehicle.
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22. 20 AUTO LEASING GUIDE
t typically includes administrative charges; the dealer’s cost to prepare the car for resale and
any other penalties.
Make sure this fee is stated clearly in the contract and is agreeable by you before signing on
the dotted line.
At lease-end, you are left in no position to negotiate as the dealer can apply your refundable
security deposit towards this fee.
2. Excess Mileage Charges
Almost all leasing companies will charge a premium for each mile over the agreed upon
mileage stated in your contract.
This penalty can be as high as 25 cents per mile and can add up quickly.
To avoid the risk of running thousands of dollars in excess mileage penalties at the end of
your lease.
Always check the per mile charges in your contract and be realistic about your mileage
before you sign any contract.
If you think the limit is unrealistic given your commutation needs, then negotiate with the
dealer to get a higher mileage or contract for additional miles.
3. Excess Tear-And-Wear Charges
Another potential cost at the end of the lease is any incidental damage done to the car during
the lease.
This is deemed any excessive damage done to the normal tear and wear of the vehicle.
Notice the use of the terms deemed, excessive and normal.
There is no standard formula to define what’s excessive and normal and it is up to the
leasing company to assess or deem the damage and determine what they are going to charge.
This leaves you at the mercy of unscrupulous leasing agents who set stringent tear-and-wear
standards.
Make sure you read the description of these standards, understand them and agree to them.
If your leased vehicle is damaged prior to the end of the lease, you may find it cheaper to
repair the damage yourself than pay the excessive charges of the leasing agent.
In the event of a dispute over the charges at the end of your lease, get an independent third
party to do a professional appraisal.

23. 10
HOW TO CALCULATE YOUR
LEASE PAYMENT?
UNDERSTANDING HOW TO CALCULATE YOUR MONTHLY LEASE PAYMENT MAKES
IT easier for you to make an informed decision.
Yet, most of us shy away from the complicated math on our lease contract, leaving it up to
the dealer to do the payment formula.
Actually, it is not that difficult!
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24. 22 AUTO LEASING GUIDE
Once you understand all the figures involved in calculating your monthly payments,
everything else falls into place.
These key figures are:
1. MSRP
Short for Manufacturer’s Suggested Retail Price, this is the list price of the vehicle or the
window sticker price.
2. Money Factor
This determines the interest rate on your lease. Insist on your dealer to disclose this rate
before entering into a lease.
3. Lease Term
The number of months the dealer rents the vehicle.
4. Residual Value
The value of the vehicle at the end of the lease.
Again, you can get this figure from the dealer.
Now, let us calculate a sample lease payment based on a vehicle with an MSRP (sticker price)
value of $25,000 and a money factor of 0.0034 which is usually quoted as 3.4%).
The scheduled-lease is over 3 years and the estimated residual percentage is 55%.
The first step is to calculate the residual value of the car.
You multiply the MSRP by the residual percentage:
$20,000 X .55 = $11,000
The car will be worth $13,750 at the end of the lease, so you will be using:
$20,000 - $11,000 = $9,000
This amount of $9,000 will be used over a 36 month lease period giving us a monthly
payment of:
$9,000 / 36 = $250.
This is the first part of the monthly payment, called the monthly depreciation charge.

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How To Calculate Your Lease Payment? 23
The second part of the monthly payment, called the money factor payment, factors the
interest charge.
It is calculated by adding the MSRP figure to the residual value and multiplying this by the
money factor:
($20,000 + $11,000) * 0.0034 = $105.4
Finally, we get the approximate monthly payment by adding the two figures together:
$250 + $105.4 = $355.4
To recapitulate, the sample formula looks like this:
1. Monthly Depreciation Charge
MSRP X Depreciation Percentage = Residual Value
MSRP – Residual Value = Depreciation over lease term
Depreciation over lease term / lease term (number of months in the lease) = Monthly
depreciation charge
2. Monthly Factor Money Charge
(MSRP + Residual Value) X Money Factor = Money Factor Payment
3. Sample Monthly Payment
Depreciation Charge + Money Factor Payment = Monthly Payment
Keep in mind that this is a simplified calculation that does not take into account taxes, fees,
rebates or any other incentives.
The calculation gives you a ballpark figure or a rough idea of what your lease payments for
the vehicle in question should be.
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26. 11
HOW TO GET OUT OF LEASE
BEFORE YOUR CONTRACT EXPIRES
When your lease is up, you can simply turn in the keys and lease another car or buy a new
one.
But how about getting out before the lease ends?
Maybe you can’t afford the sky-high payments on that silky Jaguar JX V6 model anymore.
Or you just had a baby and you need a larger and more spacious vehicle?
Unfortunately getting out of a lease is not as easy as getting in!
24

27. How To Get Out Of Lease Before Your Contract Expires? 25
A leasing contract is difficult and expensive to terminate early.
Simply turning in the keys and walking away from a lease can result in stiff penalties.
You credit could be ruined and you could even get sued for breach of contract.
Good news is it is not all doom and gloom as though there are several options available to
you.
You can sell the car yourself and pay off the bank.
This can be cost effective if the market value of the car is close to the buy-out number.
Do not hesitate to exercise this option even at a loss if it happens to be lower than the
termination fee.
Your best option, though, is to transfer your lease for someone who will assume it and take it
off your hands.
There is a whole set of potential buyers looking for short-term leases without all the hassle
and extra costs.
Check with family and friends or use the services of lease-assumption websites to list your
car.
Make sure you check the credit worthiness of the new lessee and provide the car in good
condition.

28. 12
HOW TO LEASE A NEW CAR?
Whether you lease a car to get into the latest models or have better purchasing flexibility,
getting a good deal is always bound to give you a lift.
Use these guidelines to help you spot one:
1. Check Incentives
Be on the look-out for factory subsidized lease deals.
Car manufacturers realize that consumers who lease vehicles from them are more likely to
be repeat customers than those who simply purchase vehicles.
Through their leasing companies, they adjust the residual value and offer low financing
charge.
26

29. How To Lease A New Car? 27
Other auto-manufacturers are also starting to give incentives on leasing, called leasing
subventions.
They offer these subsidies to put slow-selling models on the street, saving you even more
money.
2. Set Up A Competitive Bidding
Do so to get the lowest price.
If you already have an idea in mind of the make, model and trim level of your desired car,
attempt to calculate your own lease payment before you go shopping to avoid paying through
the roof.
3. Check Online Comparison Tools Or Use A Lease Calculator
This is to check your lease payment based on purchase price.
This gives you greater negotiation leverage as you solicit quotes from various leasing
companies.
Make sure you know all the fees involved at the beginning of your lease as you may have to
pay fees for licenses, registration and title.
Other fees include acquisition fees, freight fees and local or state taxes.
At lease-end, you may have to pay a disposition fee and charges for extra mileage and any
excess wear.
Be aware that those like acquisition and disposition fees are negotiable.
4. Know Your Mileage Needs
Almost all leases limit the number of miles per year by imposing typically 10 to 20 cents per
excess mile over 15,000 miles a year.
If you are the kind of high-commuter who puts 40,000 miles a year on his car, then you
might end up running thousands of dollars in hefty penalties at the end of your lease.
Be smart and negotiate a higher-mileage limit or pad you excess miles at the beginning of
your lease to avoid robber tax rates for excess miles.
Almost all leases limit the number of miles per year by imposing fees typically 10 to 20 cents
per mile over 15,000 miles per year.
If you are the kind of high-commuter who puts a lot miles on his car, then these costs can
add up quickly.

30. 28 AUTO LEASING GUIDE
5. Negotiate
Include GAP coverage: make sure your lease includes GAP coverage.
This covers you in the event of the vehicle getting wrecked, stolen or totalled.
Without GAP insurance, you leave yourself wide open to thousands of dollars in leased
obligations.
Check if the GAP coverage is included so you don’t pay it twice.
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