by Tatya H.P.
Despite aggressive low-interest financing, cash-back offers and other purchasing incentives offered by leading auto-makers to buyers, leasing numbers keep increasing steadily over the years. Leasing is not only anattractive financial proposition to most auto-consumers, but also a
lifestyle and preference choice.
Benefit Number 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’d rather keep up with the latest trends of the industry and drive the latest models every two to three years.
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.
Benefit Number 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’re
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.
Benefit Number 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 youwill 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 moreintelligently 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.
Benefit Number 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. You can also do some shopping around and compare deals from different auto-insurers to get the cheapest GAP insurance for your lease.
Thursday, January 7, 2010
Auto Leasing Scams
by Tatya H.P.
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. The reality, however, 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
Artificially low interest rates:
Some dealers quote a lower interest rate when in reality it’s 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, something 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.
Terminate your lease early for a low penalty
This is an all-time leasing scam. You ask your dealer how much you will payif you want to terminate your lease and he tells you: “You want to get out early? Sure thing, you only pay an early termination fee of $300”. What heis quoting is only the small administrative penalty of early termination, 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. 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.
No security deposit
Any dealer who advertises a $0 security deposit is not telling you thewhole story. A security deposit is always factored in the lease under the provision for disposition fees.
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. The reality, however, 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
Artificially low interest rates:
Some dealers quote a lower interest rate when in reality it’s 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, something 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.
Terminate your lease early for a low penalty
This is an all-time leasing scam. You ask your dealer how much you will payif you want to terminate your lease and he tells you: “You want to get out early? Sure thing, you only pay an early termination fee of $300”. What heis quoting is only the small administrative penalty of early termination, 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. 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.
No security deposit
Any dealer who advertises a $0 security deposit is not telling you thewhole story. A security deposit is always factored in the lease under the provision for disposition fees.
Auto Insurance and Leasing
by Tatya H.P.
When leasing a car, it’s easier to stick with the same company for your auto insurance. What you don’t know, however, is that you may end up paying too much for your coverage and it’s better to look elsewhere for lower rates.
When you lease, the vehicle that you will drive belongs to the leasing company. They want to make sure that their investment is covered in the event the vehicle gets damaged, totalled or stolen. They typically want to get covered for the difference between what your auto-insurer pays andyour 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 areyour 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.
When leasing a car, it’s easier to stick with the same company for your auto insurance. What you don’t know, however, is that you may end up paying too much for your coverage and it’s better to look elsewhere for lower rates.
When you lease, the vehicle that you will drive belongs to the leasing company. They want to make sure that their investment is covered in the event the vehicle gets damaged, totalled or stolen. They typically want to get covered for the difference between what your auto-insurer pays andyour 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 areyour 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.
An Overview of Asset Finance and its Various Types
by Tatya H.P.
Asset finance allows companies to collect funds for the purchase of assets they might need to make their businesses run successfully. At times, paying a huge amount of cash at one time for buying assets can be really hard to manage. Moreover it would significantly affect the company's working capital. With asset finance one can raise the capital to buy assets and the money can be returned to the finance company through regular payments over an agreed period of time.
Asset finance can be used for purchasing new and used cars, coaches, light and heavy commercial vehicles, plant machinery and office equipment. With the help of asset finance solutions, you can buy equipment for your business without spending a large sum in one go.
In other words, it saves you from the trouble of arranging a large amount of capital for buying much needed assets.
Major Types of Asset Finance Available in the UK
Hire Purchase
This typical credit facility is readily available where the financier allows the hirer the right to possess and use an asset in return for regular payments. Here, the hirer first finds the asset he wants and negotiates the purchase price with the supplier.
After the hirer pays a deposit of 10-20% to the finance company, he can take the asset directly from the supplier. After a balloon payment is made at the end of the term, the title of the goods is transferred to the hirer.
Lease Purchase
Lease Purchase is often confused as a regular lease. It is similar to a hire purchase agreement with the only difference being that in a Lease Purchase the hirer needs to pay a deposit of 10-15% as a multiple of the repayments. The payment for the remaining balance and interest is done in instalments.
Moreover, a Lease Purchase agreement is based on either a fixed or variable rate. The monthly instalment can be reduced by the inclusion of a balloon.
Contract Hire
In Contract Hire, a rental agreement is made between the supplier and the customer. Here the customer hires the asset for a fixed period of time and after the completion of the period, he returns the asset to the supplying dealer. With contract hire, the customer gets the chance to use the new asset without the risks associated with ownership.
Finance Lease
With finance lease, one can get up to 100% finance for the acquisition of plant equipment required in a business. Here, the ownership of the goods remains with the finance company which rents the goods to the hirer over a predetermined period. Initially, the hirer needs to pay the documentation fee and an initial payment of a multiple of rentals. The remaining cost of the asset is paid back over the agreed time period.
Operating Lease
Here an agreement is made to rent the asset for business purposes for a predetermined period. At the expiry of the agreed lease, the asset is either returned to the financier or an offer to purchase it for a mutually agreed price is made. One major line of difference between an operating lease and a finance lease is that the primary rental period for an operating lease does not cover all the capital costs and the hire charges.
Looking at these various types of asset finance, it would not be tough to choose one for buying expensive equipment without forking out a huge sum of money at one go. But it is essential to understand asset finance and its various types properly before applying for it.
There are many finance companies that can help one to get competitive and tailored asset financial solutions to suit one’s personal and business requirements. It is advisable to take professional help to avoid any sort of complications in the future. One can take help from any reputed asset finance based consulting company to get a better deal for one’s business.
Asset finance allows companies to collect funds for the purchase of assets they might need to make their businesses run successfully. At times, paying a huge amount of cash at one time for buying assets can be really hard to manage. Moreover it would significantly affect the company's working capital. With asset finance one can raise the capital to buy assets and the money can be returned to the finance company through regular payments over an agreed period of time.
Asset finance can be used for purchasing new and used cars, coaches, light and heavy commercial vehicles, plant machinery and office equipment. With the help of asset finance solutions, you can buy equipment for your business without spending a large sum in one go.
In other words, it saves you from the trouble of arranging a large amount of capital for buying much needed assets.
Major Types of Asset Finance Available in the UK
Hire Purchase
This typical credit facility is readily available where the financier allows the hirer the right to possess and use an asset in return for regular payments. Here, the hirer first finds the asset he wants and negotiates the purchase price with the supplier.
After the hirer pays a deposit of 10-20% to the finance company, he can take the asset directly from the supplier. After a balloon payment is made at the end of the term, the title of the goods is transferred to the hirer.
Lease Purchase
Lease Purchase is often confused as a regular lease. It is similar to a hire purchase agreement with the only difference being that in a Lease Purchase the hirer needs to pay a deposit of 10-15% as a multiple of the repayments. The payment for the remaining balance and interest is done in instalments.
Moreover, a Lease Purchase agreement is based on either a fixed or variable rate. The monthly instalment can be reduced by the inclusion of a balloon.
Contract Hire
In Contract Hire, a rental agreement is made between the supplier and the customer. Here the customer hires the asset for a fixed period of time and after the completion of the period, he returns the asset to the supplying dealer. With contract hire, the customer gets the chance to use the new asset without the risks associated with ownership.
Finance Lease
With finance lease, one can get up to 100% finance for the acquisition of plant equipment required in a business. Here, the ownership of the goods remains with the finance company which rents the goods to the hirer over a predetermined period. Initially, the hirer needs to pay the documentation fee and an initial payment of a multiple of rentals. The remaining cost of the asset is paid back over the agreed time period.
Operating Lease
Here an agreement is made to rent the asset for business purposes for a predetermined period. At the expiry of the agreed lease, the asset is either returned to the financier or an offer to purchase it for a mutually agreed price is made. One major line of difference between an operating lease and a finance lease is that the primary rental period for an operating lease does not cover all the capital costs and the hire charges.
Looking at these various types of asset finance, it would not be tough to choose one for buying expensive equipment without forking out a huge sum of money at one go. But it is essential to understand asset finance and its various types properly before applying for it.
There are many finance companies that can help one to get competitive and tailored asset financial solutions to suit one’s personal and business requirements. It is advisable to take professional help to avoid any sort of complications in the future. One can take help from any reputed asset finance based consulting company to get a better deal for one’s business.
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