Consumer Handbook to credit protection

Leasing Costs and Terms

Leasing gives you temporary use of property in return for n for periodic payments. It has become a popular alternative to buying--under certain circumstances. For instance, you might consider leasing furniture for an apartment you'll use only for a year The Consumer Leasing law requires leasing companies to give you the facts about the costs and terms of their contracts, to help you decide whether leasing is a good idea.

The law applies to personal property leased to you for more more than four months for personal, family, or household use. It covers, for example, long-term rentals of cars, furniture, and appliances, but not daily car rentals or leases for apartments. Before you agree to a lease, the leasing company must give you you a written statement of costs, including the amount of any security deposit, the amount of your monthly payments, and the amount you must pay for licensing, registration, taxes, and maintenance.

The company must also give you a written statement about terms, rms, including any insurance you need, any guarantees, information about who is responsible for servicing the property, any standards for its wear and tear, and whether or not you have an option to buy th property.

Open-end Leases and Balloon Payments

Your costs will depend on whether you choose an open-end lease lease or a closed-end lease. Open-end leases usually mean lower monthl payments than closed-end leases, but you may owe a large extra payment--often called a balloon payment--based on the value of the property when you return it.

Suppose you lease a car under a three-year open-end lease. The The leasing company estimates the car will be worth $4,000 after three years of normal use. If you bring back the car in a condition that makes it worth only $3,500, you may owe a balloon payment of $500.

The leasing company must tell you whether you may owe a balloon loon payment and how it will be calculated. You should also know that: -- you have the right to an independent appraisal of the property's worth at the end of the lease. You must pay the appraiser's fee, however. . -- a balloon payment is usually limited to no more than three times the average monthly payment. If your monthly payment is s $ 200, your balloon payment wouldn't be more than $600--unless, for example, the property has received more than average wear and tear (for instance, if you drove a car more than average mileage). Closed-end leases usually have higher monthly payment than than open-end leases, but there is no balloon payment at the end of th lease.