Leasing Costs and Terms

Leasing gives you temporary use of property in return for

periodic payments. It has become a popular alternative to

buying--under certain circumstances. For instance, you might

consider leasing furniture for an apartment you'll use only for

a year. The Consumer Leasing law requires leasing companies to

give you the facts about the costs and terms of their

contracts, to help you decide whether leasing is a good idea.

The law applies to personal property leased to you for

more than four months for personal, family, or household use.

It covers, for example, long-term rentals of cars, furniture,

and appliances, but not daily car rentals or leases for

apartments.

Before you agree to a lease, the leasing company must give

you a written statement of costs, including the amount of any

security deposit, the amount of your monthly payments, and the

amount you must pay for licensing, registration, taxes, and

maintenance.

The company must also give you a written statement about

terms, including any insurance you need, any guarantees,

information about who is responsible for servicing the

property, any standards for its wear and tear, and whether or

not you have an option to buy the property.

Open-end Leases and Balloon Payments

Your costs will depend on whether you choose an open-end

lease or a closed-end lease. Open-end leases usually mean lower

monthly payments than closed-end leases, but you may owe a

large extra payment--often called a balloon payment--based on

the value of the property when you return it.

Suppose you lease a car under a three-year open-end lease.

The leasing company estimates the car will be worth $4,000

after three years of normal use. If you bring back the car in a

condition that makes it worth only $3,500, you may owe a

balloon payment of $500.

The leasing company must tell you whether you may owe a

balloon payment and how it will be calculated. You should also

know that:

-- you have the right to an independent appraisal of the

property's worth at the end of the lease. You must pay the

appraiser's fee, however.

-- a balloon payment is usually limited to no more than three

times the average monthly payment. If your monthly payment

is $ 200, your balloon payment wouldn't be more than

$600

--unless, for example, the property has received more

than average wear and tear (for instance, if you drove a

car more than average mileage).

Closed-end leases usually have higher monthly payment than

open-end leases, but there is no balloon payment at the end of

the lease.

Prepaid Services, No Turndowns, No Credit Check, No Employment Needed!

Home | Credit Introduction | Credit Comparison | Leasing | House Settlements | Credit Laws | Women and Discrimination | Credit Turn Downs | Credit Records | Credit Bureau Records | Credit Errors | Defective Goods | Electronic Fund Transfer | Loss and Theft of Credit | Credit Complaints | Glossary | Federal Agencies