Study Group: Call Centre Operations Experts (US)

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Is Leasing for Everyone?

April 10, 2006

Analysis by:David Selke, Vice President, Client Services Manager,

Analysis of:For many car hunters today, leasing's the way to go | biz.yahoo.com

While leasing is becoming more attractive because of rising interest rates, one must be cautious about entering into a lease contract. The domestic captives, specifically GMAC and Ford Motor Credit, are moving more to leasing to help offset their current competitive disadvantage because of higher borrowing costs created by downgrades in their credit ratings.

However, the consumer must make sure they understand the commitment they are making to a lease. Most lease contracts have mileage and excessive wear and tear restrictions. Generally, the mileage restrictions range between 12 to 15 thousand miles annually. If you are going to drive more than that, you need to review the penalties as they could be exorbitant and cost the consumer significant dollars at lease termination. Also, excess wear and tear clauses are sometimes vague and need to be reviewed carefully with the dealer prior to considering a lease. If the consumer is not comfortable with the clause, then leasing may not be a good option.

Also remember to review the early termination clause in the lease agreement to determine the type of penalties that may be incurred should the lease be terminated before the scheduled termination date. This also could create a hardship for the consumer.

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