Leasing a Vehicle

[AndyLL]

THAT DEPENDS WHETHER TO PURCHASE GAP INSURANCE, OTHERWISE YOU ARE ON THE HOOK FOR THE DIFFERENCE AT THE END OF THE LEASE.

Sorry but that is incorrect. GAP insurance pays the difference between what you owe on a car and what it's worth if something happens to it. It's like mortage insurance.

At the end of the lease term you either turn in the car or you purchase it for the price in the contract.

Your choice and the price does not change.

MUST VARY FROM STATE TO STATE, HERE, YOU HAVE TO PAY THE FULL SALES TAX ON THE PURCHASE PRICE OF THE VEHICLE, WHICH CAN BE DIVIDED OVER THE TERM OF THE LEASE

If 'here' is California like your profile says then you pay a state use tax on the payments which means not the full price. Individual cities/states sometimes force tax payments upfront instead of on the payment.

I'd be surprised if there is a state that charges full tax on a lease... companies would revolt because they tend to lease a lot of items.

 

[Longsx3]

One thing to consider when leasing is insurance costs, everyone I know who has leased has had much higher insurance rates there by negating at least some of the savings. Also if something changes in your income, selling a lease is much more difficult.

 

[jlewisinsyr]

One thing to consider when leasing is insurance costs, everyone I know who has leased has had much higher insurance rates there by negating at least some of the savings. Also if something changes in your income, selling a lease is much more difficult.

Leases typically require 100/300/50, some are less, some are more, but that is the general rule. All the same, driving around with less than that is almost crazy in this day and age.

 

[auntie]

This is completely wrong! All general consumer leases are closed-end, meaning the final value is set and regardless of market value, there is no further obligation. It is possible to get an open-ended lease, but they are VERY rare and gap insurance would mean nothing in this case as that's not what gap insurance is.

Gap insurance is only utilized if the vehicle is declared a total loss due to an accident/comprehensive claim and the difference between the residual balance is greater than the insurance/market value. Gap insurance is almost always included in closed-end leases from a dealership and it's fairly inexpensive anyway. Rarely, if ever do you see gap insurance for consumer financing, including dealership financing, it just is rarely purchased/leveraged.

Regarding taxes, here is a great site that explains how taxes are calculated and the exceptions to how these are calculated:

http://www.leasetips.com/salestax.htm

The only state that charges up front on the purchase price is IL, all others are based on the lease payments or depreciation amounts (cap minus residual).

This has been exactly our experience..

 

[tvguy]

Sorry but that is incorrect. GAP insurance pays the difference between what you owe on a car and what it's worth if something happens to it. It's like mortage insurance.

At the end of the lease term you either turn in the car or you purchase it for the price in the contract.

Your choice and the price does not change.



If 'here' is California like your profile says then you pay a state use tax on the payments which means not the full price. Individual cities/states sometimes force tax payments upfront instead of on the payment.

I'd be surprised if there is a state that charges full tax on a lease... companies would revolt because they tend to lease a lot of items.

Sorry, wrong terminology, the common name for this insurance is "Residual Value Insurance".

 

[tvguy]

This is completely wrong! All general consumer leases are closed-end, meaning the final value is set and regardless of market value, there is no further obligation. It is possible to get an open-ended lease, but they are VERY rare and gap insurance would mean nothing in this case as that's not what gap insurance is..

See my other reply about the insurance. I will check at work tomorrow on open vs closed end leases. I made my statement based on the ads in the auto section of the local paper, all say they are for open ended leases.

 

[AndyLL]

Sorry, wrong terminology, the common name for this insurance is "Residual Value Insurance".

Buyers don't buy that... the leasing company might to protect their investment because the buyer can turn in the car no matter what it's current value is

 

[clarkshel]

Buyers don't buy that... the leasing company might to protect their investment because the buyer can turn in the car no matter what it's current value is

The auto insurance companies in Alberta, where I live in Canada, offer this kind of insurance. Usually it is a little extra. The residual insurance here protects the buyer if there was an accident. The Insurance company will pay what it costs to replace the vehicle, not what your vehicle is worth. So if you have an accident a year later. They will pay what it costs to replace the vehicle at that time. You don't get dinged for depreciation. The coverage period of my insurance company is 60 months.

 

[jlewisinsyr]

The auto insurance companies in Alberta, where I live in Canada, offer this kind of insurance. Usually it is a little extra. The residual insurance here protects the buyer if there was an accident. The Insurance company will pay what it costs to replace the vehicle, not what your vehicle is worth. So if you have an accident a year later. They will pay what it costs to replace the vehicle at that time. You don't get dinged for depreciation. The coverage period of my insurance company is 60 months.

It's typically called GAP insurance, its almost always found on leases, sometimes on loans but much less common in the US.

 

[joedplumber]

Thanks everyone!

So I did end up leasing and I am really happy about it.

Negotiated a really good price for the vehicle and then told the dealer I would lease.

Never was asked about any type of insurance though. Also, the sales tax is added to the monthly payment so I am only being taxed on what I am using.

Also got free oil changes and tire rotations included for the term of the lease.

 

[jlewisinsyr]

Thanks everyone!

So I did end up leasing and I am really happy about it.

Negotiated a really good price for the vehicle and then told the dealer I would lease.

Never was asked about any type of insurance though. Also, the sales tax is added to the monthly payment so I am only being taxed on what I am using.

Also got free oil changes and tire rotations included for the term of the lease.

Did you have to present any of your insurance declaration pages or who your insurance company was? If so, they probably just verified it from that information.

 

[I Love Pluto]

The extra charges at the end of the lease is the sales tax being added.

Leasing does not include sales tax on the vehicle. At the end of the lease - if you choose to purchase the car - the sales tax on the new vehicle price is added. People don't realize this when they lease, and get mad at the dealer for the "hidden charges" when attemptingi to buy it. These are not hidden charges, it's the sales tax.

 

[auntie]

Thanks everyone!

So I did end up leasing and I am really happy about it.

Negotiated a really good price for the vehicle and then told the dealer I would lease.

Never was asked about any type of insurance though. Also, the sales tax is added to the monthly payment so I am only being taxed on what I am using.

Also got free oil changes and tire rotations included for the term of the lease.

Congratulations and enjoy your new vehicle!

 

[jlewisinsyr]

The extra charges at the end of the lease is the sales tax being added.

Leasing does not include sales tax on the vehicle. At the end of the lease - if you choose to purchase the car - the sales tax on the new vehicle price is added. People don't realize this when they lease, and get mad at the dealer for the "hidden charges" when attemptingi to buy it. These are not hidden charges, it's the sales tax.

Sales tax is charged every month as part of your lease payment (with a few exceptions, ie. IL). There are no hidden charges, and lease quotes either state tax included or plus, tax, tags, etc. Either way you are paying the sales tax during the course of the lease, not at the end.

As for at end of lease, you are charged sales tax on the residual as you already paid tax on the difference between Cap and Residual in your lease payments.