Introduction: In today's world of motor vehicles, with the average cost of a new vehicle continually raising, it is now more important then ever to fully understand the options of vehicle leasing.

In my opinion, the List Price/Window Sticker or MSRP of today's vehicle is priced so that leasing will reflect the best way to acquire the vehicle. In my 30 plus years of vehicle leasing, here are some of the most Frequently Asked Questions I have received from my prospective clients.

1. Should I lease or buy?

When you lease a vehicle you will be able to have a lower monthly payment and will have a much lower cash outlay.

You will be able to afford to lease a car that you probably would not be able to afford to buy? You will have lower maintenance costs since most new cars come with a 3 year warranty which will cover most major repairs?

You will be able to drive a new car every 3 years. There will be no trade-in or resale hassle at the end of the lease. Your sales tax will be less on a new car lease since it is only calculated on the monthly payment, where on the purchase of a new car you must pay 100% of the tax on all of the vehicle the day you buy it even though you will never use 100% of the car.

When you lease a vehicle you will, conserve your working capital, avail yourself of an additional source of financing, make a minimal investment verse buying a car that will depreciate faster then you can pay for it. Remember one of the basic rules of economics is that if it appreciates in value, own it. But if it depreciates in value, lease it.

The motor vehicle manufacturers of the world have realized that in order to keep new vehicle pricing high they must keep the used car prices high. They can not keep used car prices high if they cannot control the used car market. So therefore by over inflating the price of the new car and then under depreciating it which then makes the buy-out prohibitive, they are forcing the car back to them. Which allows them to set the used car value? Which in turn enables them to keep the new car prices high.

Just think of it, if the cars were priced based on real market value and then depreciated on real future value, (since technology has enabled most cars to be made better today then they ever� were as in the past 50,000 miles is not longer the point of obsolesce), then most people would buy the car at the end of the lease and keep it for another 2 to 3 years and it would kill the 3 year business cycle? It is a stated fact today that the average car has more on board computer technology built in it then the first Apollo space capsule had?

2. What are the advantages of leasing?

More car, less money down, less tax to pay. Economics still dictates that if it appreciates own it, but if it depreciates lease it. You own your house and you lease your car.

3. Mileage?

Mileage is a key consideration. If you do 12 to 15,000 miles a year you should fit easily into most leasing programs. But be sure that you properly estimate you mileage and be sure the lease is written to accommodate your needs.

4. If I don't use my mileage allotment can I get a refund?

You will be responsible for any excess miles at the end of the lease, but in most leases you will not get any refund or credit if you do less.

5. Term of lease?

Most leases run 36, 39, or 48 months, but there are special leases where it may be to your advantage to go shorter or possibly longer?

6. What is the capitalized cost?

This is the cost of the lease. It is the sum of the acquisition cost of the vehicle plus any added on items such as taxes, bank fees or any special equipment.

7. What is the residual value and where does it come form?

It is supposed to be the projected future value of the vehicle. Future values are projected by looking at used car sales market reports and seeing what a similar used vehicle is selling for today.

8. Money Factor?

This is the factor which is applied to the sum of the capitalized cost and the residual value to give you the monthly lease charge.

9. How is the lease calculated?

The capitalized cost less the residual value divided by the lease term gives you the monthly depreciation. The monthly depreciation added to the monthly lease charge gives you the monthly payment.

10. How are taxes calculated?

Each state calculates taxes differently. In NY it is the monthly payment times the lease term times the tax rate.

11. What is the Bank Fee and or Acquisition Fee?

This is an amount the lending institution charges to administer the lease paper. Or it could be a cash capitalized cost reduction disguised as a bank fee or acquisition fee.

12. Security Deposit?

This is a refundable fee that the lending institution charges to secure or minimize their risk on the lease.

13. Can I put down additional cash to reduce my monthly payment?

Yes, any cash you put down is deducted form the capitalized cost and reduces the amount to be financed and lowers the monthly payment. This cash down is taxable.

14. Who insures the vehicle?

You, the lessee insure the vehicle. Insurance can be arranged by the leasing company and added to the lease.

15. Maintenance?

You, the lessee, are responsible for all maintenance that is not under warranty and or included in the manufacture's maintenance plan. Full or partial maintenance programs car be added to the lease by the leasing company.

16. License, Title and vehicle inspection?

All registration fees are billed to the lessee as a one time charge.

17. Manufacturers' rebates and incentives?

All rebates and incentives are applied to the capitalized cost for lease calculations.

18. Can I buy the vehicle at the end of the lease?

Some leases give you the option to buy the vehicle at the end of the lease, but in most cases since the value of the vehicle up-front has been inflated and it has been under depreciated, the option to buy is too high. In most cases it is less expensive to lease a new car then to buy the old one. Again this is all in the marketing scheme of the major motor companies today so it forces the used car back to them and they can control used car values.

19. When I lease is the manufacturer's warranty still in effect?

The manufacturer's warranty is the same whether no matter who buys or leases the car. It stays with the vehicle.

20. Can I lease a used vehicle?

Yes, in some instances it is advantages to lease a used vehicle. However it is most likely to be on a late model more expensive car that has low mileage and has been properly residualized form the original lease.

21. If I lease a used car does it come with a warranty?

Only if it is still under the mileage and time of original warranty. But you can buy an extended warranty form a warranty company to cover major parts of the engine and transmission. This is always a good investment and highly recommended.

22. What is my responsibility at the end of the lease?

You the lessee are responsible for excess miles, body damage, glass damage, neglect or abuse, excess wear and tear and any unusual tire wear.

23. What is the difference between a closed-end lease and an open-end lease/finance lease?

The major difference is who is responsible for the resale of the vehicle. With the closed-end lease you, the lessee are responsible as mentioned above for the leased vehicle. With the open-end lease you are responsible for the residual value. You can pay off the value and the vehicle is yours or you turn it in and are responsible that it sells for the residual value. If it sell for more, then you are credited back the proceeds, but if it sells for less then you are responsible for the deficiency. Open-end leases are best on trucks that have a longer life or high line cars that may appreciate in value or in the case where you may need an unusual amount of mileage and it does not pay for you to buy the excess mileage option.

24. How come the ad in the newspaper or on TV is always so much lower then what I can get?

Creative advertising is usually the case. To put an ad in the paper, on TV or radio is very costly and if a car dealer does so he better be able to get your attention. Most car dealers only know how to sell if they get you to come into their showroom. So they must entice you with something eye popping ad. What they do is back out every conceivable cost out of the amount they must capitalize in the lease and then offer mileage, terms and a vehicle which would not really work out for anyone in any situation. When the real sale is made it is a totally different story with many hidden costs. The unaware consumer only sees or hears the monthly payment, gets all excited and runs into the dealer ship where it becomes a different story.

25. Credit Score?

It is very important that the consumer know his credit score before he every starts to go shopping for any vehicle or for any major purchase for that matter. Most car dealers advertise their specials based on you qualifying for the super preferred rate and if you don't then of course it is a whole different story. A different story that usually plays out at the last minute when you are left with know other option but to take their deal or be ready to walk to work tomorrow morning.

26. Can I end the lease early?

No, the leases written today based on over inflated vehicles which are again under depreciated make it impossible to get out of a lease without incurring substantial costs.

27. What is excess wear and tear?

This is usually defined by any thing on the vehicle which will need to be repaired to allow the vehicle to be sold for what it's speculated value is. If you are concerned with a car dealer or leasing company when negotiating a lease you should get their written definition of excess wear and tear.

28. Should I make any necessary repairs before I turn in the vehicle?

Yes, when you know you have damage or excess wear it always pays for you to get the repairs done in advance yourself rather then leave it up to the car dealer or lending institution.

29. Does it make a difference who I lease form or should I just look for the lowest monthly cost?

As you can see from reading all of the above that it makes a ton of difference who you lease form. Check references and do your homework and do not fall for the lowest price at first sight.

30. Car dealer or Professional Leasing Company?

When you have a choice usually do your due diligence first with a professional leasing company. It is important to remember that the professional leasing company has no interest in the make and model car you lease but only in you the lessee. The professional leasing company wants you to have a great leasing experience, get the vehicle you want, at the cost you want to budget cause he builds his business on building a relationship with you. At most, not all, car dealers it is unfortunate but the only way they know how to sell is by playing a game. They must get you in the showroom. The guy who sells you the car shakes your hand and could care less about you or if he ever sees you again. It is likely that he is not building his business around you and if you go into the dealership a few months later that guy probably does not work there anymore? So in my opinion you should lease form the professional leasing company whenever possible.