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Car Leasing

Leasing has become an increasingly popular means of financing a set of wheels.  But it can be complicated, and lessors have in the past taken advantage of unsuspecting lessees.  That's why Congress passed the Consumer Leasing Act in 1976.  Now, there are a number of good resources that can help you understand car leasing better, and will remind you of your rights and responsibilities should you choose to become a vehicle lessee.

Perhaps the best resource is the Federal Reserve's Leasing Guide.  Other helpful resources include the Association of Consumer Vehicle Lessors, the National Vehicle Leasing Association, and this brochure from the American Financial Services Association Education Foundation.

If you're thinking about leasing a car, consider these questions:
  1. How long will you keep the car?  If you only want to have the car for 2-3 years, leasing may be a good option.
  2. How much do you value the warm, fuzzy feeling of ownership?
  3. Is cost a concern, or do you have plenty of extra cash in the bank and at the end of the month?
  4. How much do you drive?  If you drive more than 15,000 miles, you'll have to pay for extra miles on a leased car.
  5. Do you take care of your car?  If you park at the end of the grocery store parking lot, preferring to walk half a mile than risk shopping-cart dents in your car, you probably won't get hit with the beyond-wear-and-tear charges that lessors impose at the end of the lease.
  6. Are your circumstances likely to change?  If you're thinking about joining the Peace Corp, quitting your job to become a traveling musician, or becoming a full-time public transport commuter, you'll find it hard to get out of a lease early.
Then make sure that you're aware of the advantages and disadvantages of leasing over buying.  Some of the benefits of leasing over buying:
  1. Your monthly payment for a particular car will be lower.
  2. Your down payment for a particular car will be smaller (you may not have to put any money down).
  3. You won't have to deal with the hassle of selling the car when you're ready for a new one.
Some of the downsides of leasing over buying:
  1. Leasing is more complicated.  The resources mentioned earlier will help you navigate the leasing process, but nonetheless, leasing a car is more complicated than buying a car.
  2. You won't own anything at the end of the payment term.
  3. You'll always have a car payment (as long as you keep re-leasing).
  4. If your circumstances change and you have to get out of the lease early, it can be very expensive.

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Car Leasing