Friday, November 19, 2010

What should I look out for when turning in a leased vehicle?

Fees for Termination, Wear and Tear, and Mileage are the biggest things to look for. There are many horror stories of people turning in leased vehicles and the leasing companies, banks or dealerships charging them thousands of dollars for these fees. It seems the definition of “Wear and Tear” is typically not defined until you turn in the vehicle. When you lease a vehicle, you need to have all fees CLEARLY laid out for you IN WRITING before you sign the lease.

Here are some examples of fees to watch out for:

Lease termination fee - This is a fee the leasing company is charging you to “turn in” your vehicle to them. This can range from $250 - $500.

Wear and Tear fee - This is a fee the leasing company can charge for something that is typically not defined when you lease the car. When you prepare to turn it in they will come up with charges for excessive paint chips, dings, scratches, tire tread depth, gouges, worn carpeting, wear in seats and the list goes on! This can get really high, from $500 to over $1,000.

Investigation fees – These are fees they try to charge you to further investigate things like engine components, pulleys, belts, drive train, etc. Often the leasing company will try to charge you a flat fee to “check” these items and waive any additional fees if they find things. This fee is usually $250 - $500. Or they may try to “investigate further” to find other things. Refer to what you signed in your lease contract.

Mileage fees - These fees are assessed when you exceed the mileage you have contracted for. If you have an allowance of 12,000 miles per year and you have a 3-year lease, you have 36,000 miles. If you turn the vehicle in with 50,000 miles, you will be charged typically between .10 and .25 cents per additional mile. If you went over by 14,000 miles, this fee would be from $1,400 - $3,500 depending on the per mile charge.

Gap fees – This is the gap (the difference) between what your insurance company will pay if your vehicle gets stolen or totaled in an accident and what you still owe on the lease at the time of the loss. For example: If your vehicle is stolen half way through your lease and the insurance company will only pay $18,000.00 and your lease payoff amount in your contract is $22,500.00, you would have to pay the difference between what the insurance company will pay and what you pay the leasing company. This is the Gap fee.

How can you minimize these charges?

1) Clean up the vehicle before you turn it in.
2) Typically the leasing company will call you for a vehicle inspection before you turn it in. Get everything in writing.
3) Pull out the paperwork you signed when you took out the lease. Were you told any of this before you signed the papers? Did they give you examples of what the charges might be and did they go into this level of detail when you signed the paperwork? If not, why are they doing it now, after the fact? You will need to ask them to justify, from your contract, whatever items they are trying to get you to pay for now.

Be careful when leasing cars. Contracts are changing and leasing companies are looking for opportunities to charge fees on the back end of your contract. What seemed like lower payments during your lease term can end up haunting you when you turn the vehicle in, so be careful! If possible and if it makes fiscal sense (especially given all the fees above), purchasing your next vehicle might be the better way to go.

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