Consumer Tips

Vehicle Leasing

1. Before signing a lease, read the document carefully and figure out how much it will really cost you to lease a new car instead of buying it with conventional financing. If you can't qualify for financing to buy a vehicle, you probably shouldn't be leasing it, either.

2. First, obtain the total financial obligation including cost of the vehicle, lease and registration fees, taxes, insurance etc. GET THE TOTAL COST IN WRITING BEFORE SIGNING. Find out the price the lease of the vehicle is based on, the lease rate (interest rate), the residual value of the vehicle, what constitutes wear and tear, and the cooling-off period (if there is one).

3. Then, compare that cost to the cost of purchasing the same vehicle.

4. Next, clarify the amount you will have to pay if the lease is terminated early. Will you be required to continue making full payment or to make all remaining payments in a lump sum?

5. Find out what you will be charged for excess mileage, cost of repairing mechanical defects, repair of all dented, scratched, chipped body panels, cracked or pitted or broken glass.

6. Ask if the lease is 'open-ended', and gives you the option of buying the car for a predetermined price, at the end of the lease (this is known as a 'balloon payment'), or if the lease is closed-ended, which lets the consumer walk away at the end of the lease period, if terms of the agreement are satisfied. A lease with an option to buy is a conditional sales contract which has 'seize or sue' provisions. Under B.C.'s 'seize or sue' laws, companies may either repossess the vehicle or sue for the outstanding balance; they cannot do both.

LEASE CONTRACTS:

B.C. Motor Dealer Regulations require dealers to disclose all lease terms to consumers. The plain language lease contracts must contain detailed information on all costs, credits, liabilities and conditions associated with the lease. The regulations also provide a 24 hour Cooling Off Period, during which time the dealer keeps the vehicle and the consumer may cancel the lease without penalty.

ADVANTAGES:

- Usually no money is required up front.
- Costs less each month than repaying a car loan.
- You can drive a new car every few years.
- You avoid owning a rapidly depreciating asset.
- If it's a company car, taxable benefit may be less than if it is owned.

DISADVANTAGES:

- No true ownership - you can't sell the car.
- Commitment - stiff penalties to get out of it.
- Potentially higher interest rate than on a car loan.
- Possible mileage restrictions and conditions, e.g. charge for mileage over 80,000 km in four years.
- If you buy at the end of the term, you'll probably be paying out more than if you took out a car loan.

For further information on this subject, contact DIAL-A-LAW at (604) 687-4680.

For $15, Lemon-Aid guide author Phil Edmonston will fax motorists a summary of all TSB's (technical service bulletins) for a specific vehicle, and copies of individual bulletins (including hidden warranties) for $5 each. Check the back of any current Lemon-Aid guide for mail order details or fax an inquiry to his Fort Lauderdale, Florida office: (954)563-2448 or E-mail: lemonaid@earthlink.net.