Single-Payment Car Leases - Good Deal or Not?
By Al Hearn

Single-payment car leases can save you some money, but probably not as much as you might think. Furthermore, there are some disadvantages that are worth noting.

Car leases are normally paid off in monthly payments over a specified period of time, the "term" of the lease. Each payment includes a portion of the amount by which the vehicle will depreciate in value over the lease term, a finance charge (interest), and possibly sales tax (in most states).

By making a single payment up-front, you avoid monthly payments and save some money that would normally be paid as finance charges. However, you don't avoid all finance charges, only some of them. Since you never pay off part of the value of the vehicle (the lease-end residual value), you will pay interest on that value. By pre-paying your lease, you only avoid interest on the depreciation value portion of your lease.

There are also some other reasons that pre-paying a lease may not be a good idea. First, it negates one of the primary reasons for leasing, which is the fact that, with leasing, you don't tie up your cash in a depreciating asset -- an automobile. Your cash could likely be put to better use elsewhere. Second, if your vehicle is stolen or destroyed in an accident, your insurance only pays the market value of the vehicle and you stand to lose much of the money you paid into the lease. Without the pre-paid lease, the gap waiver in the lease would pay for any difference between insurance payoff and lease balance. You lose nothing. Furthermoe, you may have difficulty getting a sales tax refund from your state/county.

In summary, if you are thinking of pre-paying your next car lease, you should carefully consider the benefits versus the possible disadvantages.

Al Hearn is owner and operator of LeaseGuide.com, a web site for smart automotive consumers. the web site provides car leasing information, expert advice, payment calculators, and a leasing kit.

Article Source: http://EzineArticles.com/?expert=Al_Hearn