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Get a Grip On Lease - January 13, 2007
Disclosure is an essential part of auto leasing.
I always urge customers to read and understand lease agreements before they sign them.
But I'm surprised at how many don't read this important document.
Customers tend to gloss over it without really understanding all the terms and obligations involved.
New-car dealerships are obligated to ensure that certain things are disclosed in the lease, which contains all of the information you need.
The items of disclosure are contained in Ontario's new, updated Consumer Protection Act, which became law in July 2005.
The act addresses a much different business environment than what existed when the old CPA was first drafted in 1967.
Over the years, the Toronto Automobile Dealers Association has played a key role in providing the written content of a standard lease agreement.
More recently, TADA and the Ontario Automobile Dealer Association assisted the Ontario government in recommending changes to the new CPA, which both associations endorse.
Some of these changes dealt specifically with the rules of disclosure with regard to auto leasing and other car-related issues.
Disclosure means the obligation of dealers and leasing companies to reveal all the facts relevant to a business transaction.
The revised Consumer Protection Act offers shoppers better protection when leasing automobiles.
In particular, it calls for more information on the deal's total cost and requires the use of full-disclosure lease agreements by all leasing firms in the province.
Such a contract spells out the financial terms and clauses so that consumers are able to make informed decisions.
TADA already has a lease agreement in place for in-house leasing companies that conforms to the new regulations and provides clients with the required information.
Some highlights of the full-disclosure lease agreement:
- A dealership must declare whether the lease is open-ended or close-ended and the option price at the end of the lease or guaranteed end value for that type of lease.
- Declaration of terms, including the length of the lease, as well as the monthly payments, excess kilometre charge, residual value, how much money is due on delivery and other relevant details.
- Declaration of monthly lease payments, based on the amount to be amortized plus total lease charges.
- Lease cost disclosure covers the leased vehicle amount (including amounts for additional equipment, freight, air tax and PDI, but not including PST or GST); the amount to be amortized (not including taxes); total monthly lease payments plus lease cost reduction.
- Total lease charges refers to acquisition/administration fees and the monthly lease charge, times the number of months in the contract's term.
TADA's lease agreement defines all terms in clear, concise and plain language, as prescribed by the legislation.
The document explains the calculations for early termination, guaranteed end value, increased lease cost due to manufacturer's increases and excessive wear and tear, to mention a few points.
By understanding the terms of your lease, you will drive with confidence and avoid any unpleasant surprises along the way.
Auto leasing is a very viable option for many motorists today. In fact, the percentage of lease customers, as opposed to those who finance their vehicles, has risen to above 70 per cent in recent years.
Leasing is a popular form of vehicle ownership for good reasons.
Today, many consumers are over-extended financially, impatient and they want the best vehicle they can afford.
Leasing's benefits include little or no down payment and lower monthly payments than those resulting from buying a vehicle outright.
In some cases, leasing makes sense from a tax point of view, as a portion of your monthly payment could be used as a taxable expense for business.
If you're considering an auto lease, your new-car dealer will provide you with one to suit your vehicle choice and budget.
But before you sign any lease agreement, make sure you fully understand all its terms and obligations.
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