Consumer Publications List
When an Ellicott City man returned
his leased 2000 Quest he was charged $1205 for paint and labor to repair dings
that he thought were normal wear and tear.
When an Annapolis consumer leased a
car; she experienced numerous repair problems with the transmission, engine and
wiring. Each time the car needed repairs, she was responsible for a $50
deductible under her contract.
A Baltimore couple prepared to sign
what they thought was a car sales contract, but they learned it was a lease
agreement. The salesman told them the transaction was just like a
After looking at the sticker price
of a new or used car, you may be tempted to lease instead of buy. But be sure
you fully understand the lease before you sign the contract.
Maryland's leasing law offers
consumers who lease vehicles many of the same protections received by consumers
who buy vehicles through traditional financing methods. However, there remain
significant differences between leasing and buying a car.
When you lease, you rent a car for
a period of time. You will pay a monthly fee that covers the cost of using the
car, depreciation of the car and other costs. At the end of the contract, you
give the car back. You do not own it. If you then decide to purchase the car,
you will have to pay a substantial amount of money at that time, in addition to
the money you already paid to use the car during the lease period. That means
you probably would have to take out a loan to purchase the car. If you want to
own your vehicle and plan to keep driving it after it's been paid for, you're
generally better off buying it.
Based on the experiences of many
Marylanders who have written to the Office of Attorney General, lease agreements
may contain costs that are not apparent from the ads. Do not make a decision to
lease based solely on the amount of your monthly payment. Before you sign your
contract, make sure you clearly understand how much you will pay in each of the
1. Up-front costs2. Monthly
costs3. Maintenance and repair costs4. Penalties5. End-of-lease
The Consumer Protection Division
suggests consumers visit the Federal Reserve Board's website at http://www.federalreserve.gov/pubs/leasing/ to view the “Keys
to Vehicle Leasing.” The website offers a quick guide to compare leasing versus
owning a vehicle and will help you decide which is better for your needs. A copy
of the publication may also be obtained by writing to “Publications Fulfillment,
Board of Governors of the Federal Reserve System, Washington, DC 20551,” or
calling 202-452-3244 or 3245. A copy may also be obtained by calling the
Consumer Protection Division at 410-576-6500.
Lease agreements are much different
from sales agreements, so be sure you understand the contract before signing.
Once you sign the contract, it is virtually impossible to change your mind
without having to pay heavy penalties.
Advertisements often claim that if
you lease, you won't have to make a down payment. While there may be no charge
called a “down payment,” you may have to pay other up-front costs such as the
first and last month's payment, a security deposit (usually one month's
payment), insurance, acquisition fee, sales tax and license registration and
title fees. Ask for a breakdown of all the up-front costs you will be paying.
Also, some dealers or leasing companies charge a “capitalized cost reduction,”
which is essentially a down-payment. An advertisement that states what the
monthly payment will be must also disclose all amounts that will be due from you
at lease signing.
Your monthly payment is based on
the capitalized cost of the vehicle. Capitalized cost, often called “cap cost”
is negotiable, like the sticker price of a car you buy. You can negotiate a
lower monthly payment by bargaining for a lower cap cost.
You can more easily negotiate your
cap cost if you know what the leasing company paid for the car. Try to do as
much research on cap costs before heading into the dealership by using resources
available at the library, on the Internet or at bookstores.
The money factor, or lease charge,
which is similar to an interest rate, also affects your monthly payment. You can
also negotiate the money factor, if you can get the leasing company to disclose
it. Many leasing companies and car dealers will not disclose this figure to the
consumer, but you can still ask for it.
In addition to monthly payments,
you are usually responsible for routine maintenance and mechanical and body
repairs. For an extra monthly fee, some leasing companies cover all or some
repairs, but you may be charged a deductible each time. Ask about the deductible
and what, if any, manufacturer's warranty applies.
Make sure to ask when you might be
charged a penalty. Some examples of this may include moving out of the city,
state or country where you leased the car, or terminating the lease
If you want to get out of your
lease agreement early, expect to pay a stiff early termination fee, sometimes
several thousand dollars. The earlier you break the lease, the greater the
If the car is stolen or destroyed
in an accident, the dealer may consider this an early termination. Your
insurance may cover the current value of the car, but that amount could be less
than what you owe under the lease.
If you default on your lease
contract, the leasing company must comply with the same procedures as for
repossessing a sold vehicle. As with traditional financing, a consumer who
leases has the right to cure any default. However, a consumer who defaults would
still be liable for substantial default penalties.
Leases typically limit the number
of miles you may drive per year. Exceed that limit, and you could be charged
anything from seven cents to 25 cents or more per additional mile, depending on
You may be charged for excessive
wear and tear - the definition of which is not always spelled out clearly in
every leasing agreement. You may also be assessed a vehicle “disposition charge”
to prepare your car for sale.
Make sure you know whether or not
you'll be entitled to buy the car when your lease expires. If you're entitled to
buy, find out how the purchase price - which may be thousands of dollars - will
be determined and what that price is.
Before you sign the lease, make
sure each of these items is explained in detail within the contract so there are
no surprises at the end of your lease.
Finally, be sure
all of the terms you have negotiated are included in your written lease
agreement before you sign it. For example, be sure you have been given proper
credit for your trade-in, if you have one. As with most contracts, once you have
signed, it is too late to change your mind.
Maryland Attorney General's Consumer Protection Division
Consumer hotline: (410) 528-8662 or 1 (888) 743-0023 toll-free
200 St. Paul Place, Baltimore, MD 21202
410-576-6300 / 1-888-743-0023 toll-free / TDD: 410-576-6372