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Leasing a Car

August 19, 2011

Leasing a Car

 

Definition

When you lease a car, you never actually own the car. Instead, you receive the use of the car for two to five years in exchange for your monthly payments. At the end of your lease term, you return the car to the dealer, although you may have the option to buy the car at the end of the lease. There are two types of leases: the closed-end lease and the open-end lease. With a closed-end lease you make your lease payments during the lease term, and at the end of the term you simply turn in the car (assuming you haven’t exceeded your mileage allowance or damaged the car). However, if you choose an open-end lease, you may be responsible for a large additional payment at the end of the lease if the value of the car is lower than expected at the end of the term.
Prerequisites

  • Your needs and attitudes fit the leasing profile

Key Strengths

  • You can get a new car every few years
  • Monthly payments are generally lower than car loan payments
  • Down payment requirements are generally less stringent than for buying the same car
  • It eliminates the hassle of disposing of your old car

Key Tradeoffs

  • Lease contracts can be extremely confusing
  • Penalties are generally assessed for early termination, exceeding your mileage limit, and excess wear and tear
  • More liability insurance may be required on a leased car
  • Total costs may be high if you buy the car at the end of the lease
  • If you choose not to lease again, you have nothing to sell or trade in for a down payment on another car

How Is It Implemented?

  • Decide what type of car you want
  • Figure out the cost of buying vs. leasing the car you choose
  • Research lease terms available from various sources
  • Negotiate lease terms with the lessor of your choice
  • Get it in writing

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of  The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com,  access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

The Retirement Group is a Registered Investment Advisor not affiliated with  FSC Securities and may be reached at www.theretirementgroup.com.

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