To Lease or Not to Lease

Normal Wear and Tear The amount of physical deterioration to the car that would normally be expected to occur over the period of the lease.

It's a good idea to have "wear and tear" explained to you in advance of signing. Mercedes-Benz, which many regard as the class of the industry, defines excess wear and tear as follows: "Consists only of mechanical failure of and/or required replacement or major repair to the major drive line components (engine, transmission,, differe7zlial) not covered by warranty and existing substantial structural or body damage. "

Residual Value The wholesale value of the car at the end of the lease period as estimated by the leasing company at the time the lease is originated.

Single Payment Recently, manufacturers have been offering single payment, leases. These leases permit the lessee to pay the total amount of lease payments (plus any down payment, fees, etc.) up front in one single payment. The lessor often tosses in a small discount as an added incentive. This has, it would seem, only marginal value. If you have money sitting around earning low interest, and the single payment, less the discount, is equal to or higher than the interest that money would earn, the single payment might make sense. If you're interested in this type of lease, we advise you to discuss it with your accountant.

Subsidized Lease When the manufacturer lowers the lease rate or reduces the cap cost of the car to make it more attractive to the customer.

Upside Down A term the industry uses to describe a customer who owes more on the car-be it financed or leased-than the car is worth in actual cash value.