There are a few leasing companies and brokers who demand a non refundable "commitment fee" or "application fee" to consider your leasing needs. Such fees are usually only required for major amounts ie $250,000 or more. The fees do have a purpose if legitimately applied. The leasing Co does not want to go through the exhaustive process of analyzing your financial data and giving you an approval only to have you say "forget it". Nor do they want to keep that commitment, rates etc open for you only to find you have decided not to proceed. Usually legitimate leasing Cos either have significant work up costs to develop your credit (in which case the fee will go towards these costs) or will give you a credit for these fees against your first rental once the lease proceeds to funding. A non refundable fee should be factored into the cost of leasing. Beware Lessors or brokers who (& this is pretty rare) take your money with little expectation of finding a funder or getting you approved.
Small ticket leasing Cos sometimes insist that all leases start at a particular time in the month (usually the 1st) and that if the lease is to start earlier (so you can take delivery) you must pay a prorated rental. i.e. if your monthly rental is $100 (& the equipment cost $3,000) and you want to start on the 15th of the previous month then the prorated rental would be $50. Sounds fair! In reality your rental as far as the leasing Co is concerned is a payment of principal and interest and so the cost to it of starting you lease on the 15th is probably about 1/2% of $3,000 or $15.
What can you do about it? Tell the leasing Co to start the lease on the 1st of the previous month and pay $100. Your lease will finish one month sooner and save you $49 (in the example).
Most leases call for the 1st & last months' rentals to be paid at the start of the lease. Your sales rep may forget to point this out. If you do your calculations on the basis only the first rental is due or worse that it is due a month later (as in a conditional sale) means you will be underestimating the effective interest rate 1/2%!
Make sure you get your purchase option in writing!
You have all seen those ads "". Read the small print. Usually the term is 60 months. You add that up and it does not seem at all bad 60 times $199 equals $12,000 which is about what the car costs to buy cash!
What you have to ask is "what then?" The real question is can you walk from the car or MUST you buy it? Here is where the catch comes in.
A number of car leasing Cos deliberately quote low rentals but require the lessee to buy the car at the end of the lease for an amount that is several thousand dollars higher than what the car will be worth. If the lessee balks at doing so they offer to let the lessee continue to lease the car or re lease the car at slightly lower rentals. Of course you are grateful.
In fact you have lost sight of the effective interest cost and what you end up paying can be prohibitive. Indeed you would have been better to pay the buyout. Although it was more than the car was worth when taken with the unrealistically low rentals you probably had a reasonable deal interest rate wise.
Renewing is the real trap!
Odd term! This is the type of lease car dealers or manufacturers offer. There is no obligation to buy the car at the end of the lease. Fair enough. Rentals advertised are also low but check the mileage restriction against your driving habits. Most allow 20 to 25,000 km per annum. If you are over that at the end of the lease you usually pay 10c for each km over. Ex 30 month lease and your km ends up being 75,000 km - you pay an extra $1,500. There is also money to pay if the car is not returned in good condition.
Your lease has been running 3 months then Aunt Emma dies and leaves you a nice inheritance! So you contact your friendly car leasing Co to "pay off the balance".
Now lets be fair. You did agree to a 60 month lease and you might just expect the leasing Co to be a mite sore that you want out already yet!
So some sort of penalty is not really out of line. But some of these guys are really going to sock it to you! Now you get to read the lease and lo and behold there is no provision for early cancellation. Friendly Leasing wants their full pound of flesh - yes all the rents to the end of the lease plus the option. As you might realize this is more than a mere penalty. These guys are earning just as much as if they had their money out in your car for 5 years yet get it all back in 3 months.
Not much comfort to you that Ontario's Consumer legislation is being worked on to correct this. Best bet is to tell these nice people that you have a new job in Quebec and will cancel your lease from there without the penalty. That ought to scare them a bit because Quebec won't stand for this kind of nonsense. In fact they will let you literally walk away from the lease and maybe even keep the car (as a penalty against the leasing Co - wow!)!
This doesn't just apply to leasing. Typically when you have done your deal with the dealer salesperson you will be ushered into the "Business Manager's" office to finalize the lease etc. In reality he is there to sell a bunch of semi useless and certainly overpriced "services" These include
Return to Leasing Guide