4. Initial Lease Costs
Before signing a lease, you are entitled by law to know the charges that will be assessed "up front" at the initiation of the lease agreement. These usually include the following:
Not unlike the kind required when renting an apartment, this is to make money available to the lessor should you owe money at the end of the lease or fail to make payments as agreed during its term. It can also be used to cover past-due charges or payments, excess wear and tear or damage to the vehicle, excess mileage charges, or an end-of-lease payment. If you fulfill all the terms of your lease, the lessor must return it in its entirety. A no-deposit lease is available through Auto Leasing Specialist Leasing.
First Lease Payment and Deposit In Advance
Sometimes the first payment is required at the beginning of the lease term in addition to a security deposit. If you have a good credit rating, the lessor may not require the deposit. Unlike a loan, lease payments are always made in advance, not in arrears.
Capitalized Cost Reduction
Basically, you may have the opportunity to lower your monthly lease payment by making a one-time payment to reduce the car's "initial capitalized cost." The capitalized cost is the total cost of the vehicle, including any fees, insurance, maintenance contracts, or options you request. As in the case of the loan amount, the more you put down initially, the lower the monthly payments. However, by putting down a large amount in an attempt to reduce your monthly outlay, you also negate one of the primary reasons for leasing - little or no initial cash outlay. An alternative might be able to trade in your current vehicle to defray the capitalized cost reduction amount.
Sales Taxes, Title and License Fees
In most states, when buying a car with a loan or cash, sales tax must be paid in full on the entire value of the vehicle at the time of purchase. With leasing, most states permit taxes to be fixed on each monthly payment rather than on the entire value of the vehicle. The rationale behind this is to tax you only as you consume the vehicle's value.
Tags, title and license fees are the responsibility of the lessee just as they are with a loan. These fees can be paid up front, or included and amortized over the life of the lease.
You must be provided all insurance requirements and information by the lessor when entering into a lessor contract. Either the lessor can provide the insurance (he must disclose any cost to you) or you can provide your own insurance through your existing insurance carrier. Since leasing may require higher limits for insurance coverage than what you presently carry, you must be informed in the lease agreement of the type and amount of insurance required.
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