Car Leases Explained

Leasing a vehicle is an alternative to buying. While a lease offers lower monthly payments, there is no equity built into the vehicle, although the lessee may purchase the vehicle at the end of the term. A lease can be an attractive option for the individual who prefers to change vehicles frequently and is not concerned about ownership.

Types

There are two types of car leases: open-end and closed-end. In an open-end lease, the value of the vehicle is determined at the end of the lease period and is compared against the residual value that was set at the start of the lease period. The lessee is responsible for paying any difference. In a closed-end lease, the lessee returns the vehicle at the end of the lease period, but must pay any applicable charges for excess mileage driven and wear and tear.

Residual Value

The amount of a car lease is based in large part on the vehicle's residual value. This is the estimated value of the vehicle at the end of the lease period, which is determined at the beginning of the lease. For example, when leasing a vehicle worth $20,000 with a 50 percent residual value, the amount of the lease payments will be based on $10,000. The higher the residual value, the lower the lease payments will be.

When to Lease

In general, leasing is better when you want to keep the vehicle for a relatively short period of time, such as two to three years, and as long as the amount of driving is such that the mileage limits will not be exceeded. It can also be advantageous when you want a specific vehicle but the monthly payments of a full purchase are not affordable.

Advantages

One advantage of a car lease is that it normally requires lower monthly payments than when purchasing a vehicle. In effect, the lessee is only paying for the value of the car that is actually used over the term of the lease. A lower down payment is also an attractive feature, although as when purchasing a vehicle, the higher the down payment made, the lower the monthly lease payments will be.

Disadvantages

Costs associated with a lease can be higher than when purchasing the vehicle. For example, many leases come with a predetermined mileage limit, such as 12,000 miles per year. If at the end of the lease term the mileage limit has been exceeded, the lessee is required to pay a per-mile charge. There can also be charges for having to terminating the lease early, and the cost of insuring the vehicle is typically higher.

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How to Repossess a Car Legally and Properly

If you have sold a vehicle to a private party on an installment basis, the purchaser's right to possession of the vehicle depends on making timely payments in accordance with the contract. If the customer misses a payment, he has defaulted on the loan, and you have the right to repossess the vehicle. Legal vehicle repossession requires following specific steps and procedures to repossess the vehicle properly.

Instructions

Notice of Default

1

Review your state's vehicle repossession laws. Each state imposes different requirements regarding notification to the borrower before repossession, as well as on the procedures followed to repossess the vehicle.

2

Compose a notice of default identifying the name and address of the borrower and the vehicle identification number of the vehicle in which you hold a security interest. State in the letter that you have contacted the borrower to attempt to cure the default, and that the borrower has not voluntarily paid past-due loan amounts. Document the exact amount past due as of the date of the notice of default.

3

State a future date by which the borrower must pay all past due amounts to bring the loan current, and indicate that if the borrower pays the past-due amount, the loan will continue as though the default had not occurred.

4

Explain in the notice of default that if the loan is not brought current by the specified date, you have the right to engage in collection activities, including involuntary repossession of the vehicle.

5

State in the letter that the amount due may include payments that become due between the date of the letter and the final date for payment of the past-due balance.

6

Mail the letter via certified mail so you will have documentation that the borrower received the notice of default. Keep the confirmation and a copy of the notice for your records.

Repossession Order

7

Compose a repossession order if the borrower has not brought the loan current by the date indicated in the notice of default. Include your contact information, as the lender and owner of the vehicle, and the customer's information as the borrower. Detail the vehicle identification number, year, make and model in which you hold a security interest.

8

Write in the repossession order that the borrower has not cured the default, and that you are exercising your right to repossession of the vehicle.

9

List all charges to the borrower, including the remaining balance of the loan, repossession fees and storage fees. Indicate your right to impose additional charges for damage to the vehicle found after repossession.

10

State that you and your repossession agent are not liable for any damages, other than those caused by negligence, that occur during repossession, transport or storage of the vehicle. Provide the location where the vehicle will be stored, so the defaulting borrower can collect personal belongings from the vehicle and exercise her right of redemption, if applicable.

11

Take the repossession order to a notary public and have it notarized. Keep a copy of the notarized order for your records.

Vehicle Repossession

12

Contact a repossession agent in your area to perform the repossession. If you cannot locate a repossession agent, contact local banks, automobile dealerships and "buy here, pay-here" lots to obtain a repossession agent's contact information.

13

Provide the repossession agent with a copy of the notarized repossession order, as well as a copy of the title showing that you are the legal owner of the vehicle.

14

Pay the repossession agent his fee for performing the repossession. Fees vary considerably in the repossession industry; however, $300 to $600 is typical for a private repossession, at the time of publication.

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The Statute of Limitations on Repossession

A statute of limitations (SoL) is a law that sets a maximum period of time for which a claim or action can be filed in a court of law. These periods are set by, and vary by state and type of legal action.

Written Contract

Because a contract is signed, vehicle purchases fall under the written contract clause of each state's statute of limitations.

Time Frame

The statute of limitations becomes effective on the date of the last activity on an account. In most cases, this means on the date of the last payment made. However, entering an additional agreement, either written or verbal, with the debt holder will reset the statute of limitations.

How SoL Affects You

Once the statute of limitations expires, debt collectors can no longer file a lawsuit against you in an attempt to collect on the debt. This does not mean you do not still owe the debt, it simply means that debt collectors have no legal means to force your repayment of the debt.

State Limits

Each state has established its own time limit on SoLs, with the average being six years. Kentucky and Ohio have the longest limit at 15 years, while North Carolina and South Carolina have the shortest at only three years.

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Can I Back Out of a Car Lease After Signing?

Before you sit down to sign a lease for a new vehicle, make sure it's exactly the car you want and can afford. Turning the wheels around and heading back into the showroom with your newly leased vehicle can be a costly mistake.

The Lease is a Final Contract

When you sign an auto lease, you may notice a sign in the finance manager's office stating, "There is no cooling off period." Unlike a mortgage or other loan, a car lease contract is final, and there is no three-day right to rescind your contract. You cannot turn in your keys and change your mind. You have signed a contract to lease the auto for the terms and price described on your lease. You are responsible for the remaining payments that are left on the lease plus other early termination penalties that may be outlined in your paperwork, according to Lease Guide. Furthermore, once you drive the car off the lot, the car is now used and worth considerably less, even if there are just three miles on the odometer.

Unprocessed Paperwork Scenario

If your paperwork is still sitting in the finance manager's office and you can make a case for your costly mistake, ask to speak to the general manager. Explain your situation. The dealership may feel your pain and let you cancel the lease. This is not a likely scenario. But if the paperwork has been processed and the title has been transferred to the car, the car is now yours, and you are stuck with the car.

Request a Lease Restructure

If you want to cancel the car lease because it is too expensive for your budget, you may better off asking the lender or leasing company if you can restructure the lease to a payment that is more affordable. Explain your situation in detail and ask for a lower lease price for the car. Explain that you are willing to extend the term period of the lease to cover the original agreed-upon lease price. According to Bankrate, this tactic may work if you describe in detail why you cannot afford the car and put it in writing.

Fraudulent Lease

Suppose your car has been tampered with; for instance, the odometer has been rolled back from a higher mileage reading. If so, you may have a case for canceling the lease. Tampering with an odometer is a federal crime, according to the website Auto PI, and you should return the vehicle to the dealership and demand the lease to be canceled. If the dealer has misrepresented the lease by manipulating the car's residual value, or by charging excessive early termination fees or deceiving you in any way, you should contact an attorney if the dealer will not cancel the lease.

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How to Compute Vehicle Interest Rates

The interest rate on your car loan determines your monthly payment and how much of each payment goes toward interest. Your interest rate is based on your credit score and the state of the financial sector when you take out the loan. Your lender tells you your interest rate when you first get your loan, but if you forget it, you can calculate it later based on information on your monthly statements.

Instructions

1

Subtract the outstanding balance on your most recent auto loan statement from the balance on your previous monthly statement. This gives you the amount of your payment that went toward the principal balance during that month.

2

Subtract the answer in Step 1 from the amount of your monthly car payment. This answer is the amount of interest you paid that month.

3

Divide the amount of interest from Step 2 by the outstanding principal balance on the older monthly statement. For example, say you paid $65.50 in interest on a balance of $9,247. The result is 0.00708, which is your monthly interest rate expressed as a decimal.

4

Multiply the monthly interest rate by 1,200 to find the annual interest rate as a percent. In this case, it is 8.5 percent.

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Does a Car Loan From a Bank Need to Know If a Husband Is Deceased?

When your spouse dies, his property goes into probate. The executor of the estate is responsible for settling debts and disposing assets. If you want to keep a car after the death of your husband, you have a few options, most of which involve probate. However, in community property states, the laws vary and you may be able to bypass probate.

Responsibilities of Probate

Although laws vary from state to state, the probate process is very clear and precise; when someone dies, debts must be paid and then assets can be transferred to the beneficiaries. Under probate law, a car loan would be considered a debt and the car itself would be an asset. The executor of the estate is responsible for notifying all debtors of an individual's death and settling all debts before the executor can dispose of assets.

Settling the Debts

During probate, the executor must settle any debts as a part of the estate before assets can be distributed. The executor of the estate must notify all debtors, including credit card companies, banks and lenders, so they can attempt to collect any outstanding debts. If the estate doesn't have enough money to pay outstanding debts, banks and lenders may attempt to seize assets to pay off these debts. The executor must negotiate outstanding debts with lenders based on how the decedent or family members want the property disposed.

Keeping the Car

If you want to keep a car by assuming the payments after the death of your spouse, you must negotiate this directly with the creditor. In many cases, the lender will allow you to take over the payments and keep the car. Some banks may require you to qualify for the loan individually after the death of your spouse. If you can't qualify for the loan, a lender may choose to repossess the car after your husband's death.

Community Property States

If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin, any property that you acquire during a marriage is considered to be community property: a joint asset that is divided upon divorce, annulment or death. In most community property states, you're responsible for paying your spouse's car loan after his death. The bank should still be notified during probate, but in most cases you can assume the property and loan as long as you continue to make payments.

Credit Life Insurance

Some lenders provide "Credit Life Insurance" on outstanding debts, such as credit cards or car loans. If your husband purchased this coverage, the coverage may pay off a portion of the debt or may pay off the car loan entirely. A car note itself typically doesn't state whether this coverage is purchased; it's typically an add-on that the spouse buys after the fact. Contact your lender to find out if your husband had this coverage and your car loan is paid upon death.

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Florida Laws on Purchasing a Car With a Learner's Permit

Learner's permits are given to help teens learn how to drive safely. With a learner's permit in Florida, you are allowed to drive between daylight hours only for the first three months and always with a licensed driver over the age of 21. After three months, curfew is 10 p.m. It is possible to buy a car in Florida when you have your learner's permit, but you may face some complications.

Features

It is not required by law in Florida that you must have a license to purchase a car. Licensing is only required to drive a car and does not affect the purchasing process. However, dealerships may require a license if you are applying for a loan or a lease for the vehicle. You can pay cash to purchase a used car in Florida while only holding a learner's permit.

Considerations

An insurance company in Florida is not likely to provide you with an individual policy for the newly purchased car if you only have your learner's permit. Instead, they may be willing to add you and the car onto your parent's policy if you live at home. The reason that the insurance company requires a license is it gives them access to a driving record to rate you on.

Time Frame

Your insurance company may give you a time frame to meet licensing requirements to keep your policy active on your newly purchased car. According to the Car Insurance website, companies may require that you have upgraded your learner's permit to a full license within 30 days to continue coverage. The car may continue to be insured if you are not listed as a driver on the policy.

Significance

To register a vehicle in Florida, you must present the vehicle title and proof of insurance. If you were able to obtain both of these items with only a learner's permit, you can register the car. Once registered, you'll be given plates and allowed to drive the vehicle. However, you must still follow the restrictions placed on your learner's permit. Otherwise, you may have the permit taken away.

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