To get a good leasing deal, focus on the following three figures:
· Capitalized cost (price). In some cases, the price is adjusted for extras, such as extended service contracts and registration fees.
· Residual value (estimated cost at lease end). Negotiate to minimize the spread, i.e., the difference, between the capitalized cost and the residual value. This difference is the amount of depreciation your company will be financing through the lease.
· Interest factor. If you want to know the true annual percentage rate, ask for the “leasing factor,” then multiply it by 24.
Compare the following among leases:
· Excess mileage charges due when you return the car. The lease specifies the number of miles included and the fee for extra miles.
· Excess-wear charges due when you return the car. In the lease agreement are the standards by which excess wear will be determined (body damage, worn tires, etc.).
· Early termination fees for ending a lease early. The earlier that you end it, the higher the fee.
For more: Visit: www.federalreserve.gov, search “leasing,” click on “FEB: Vehicle Leasing: Quick Consumer Guide.”
-Republished from the AIPB newsletter, "the General Ledger" Volume 7, Issue 43
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