BUSINESSWEEK ONLINE : APRIL 24, 2000 ISSUE
BUSINESSWEEK INVESTOR Leases: Dings to Watch How to avoid unpleasant surprises when you turn your car in Your lease is up, and it's time to turn in that three-year-old Lexus. But when the leasing company's inspector has a look at your car, you get an unpleasant surprise. Your car is one of the nearly 30% of leased vehicles that are returned with dings, dents, scratches, and other faults that leasing companies deem excessive for the age of the car. The average bill for such ''excess wear and use'' comes to more than $1,600--and you'll have to pay. Or maybe you drove more than the lease allowed. Get ready to shell out as much as 25 cents for every mile beyond the permitted distance. Of course, there is a way out of this dilemma: You have the right to buy your car from the lessor. If the mileage isn't too high and the dents not too severe, this might be a good deal. And if you do buy the car, you can forget about any penalties. Remember, though: You already agreed on a buyback price--called the ''residual value''--three years ago when you signed the contract. Is it a bargain today or way above the car's true market value? To figure out what kind of penalties you may face and whether it's wise to buy your car, pull out your contract and see what you agreed to when you signed on the dotted line. Or at least open your mail. Many leasing companies, especially those owned by car manufacturers who want you to to be a repeat customer, send out hints on how to minimize those nagging end-of-lease charges. At the very least, you'll get a better idea of what you might be penalized for. If your finance company offers free inspections, take the offer. You can always fix any damages and come back for a second inspection. If you're worried about a rip in the upholstery or chip on the windshield, hire an independent appraiser for $40 or $50 to establish the actual damage to the car. You can find certified appraisers by calling your insurance company, or you can find them at glass repairers, auto-body shops, or auto centers. Many leasing companies will accept an appraiser's estimate in lieu of their own. And be sure to take your jalopy to the car wash before the inspector shows up. It's worth paying extra to have the carpets and upholstery scrubbed. If the inspector turns up a lot of damage, you may be able to get your insurance company to pay for some of it. Replacing a windshield with a crack or ''stars'' is almost always covered without an adverse impact on your premiums. Other fixes will be cheaper if you have them done yourself, such as pulling out dents that don't require repainting. Pay particular attention to tires: Virtually every lease requires a matched set and will bill you manufacturer's list price for them. At this late date, there's not much you can do about any excess mileage except minimize your driving for the remainder of the lease. If you're lucky, your lessor is one of the few that does not exact a heavy penalty. Toyota Financial Services and Wells Fargo, for example, charge a reasonable 10 cents a mile. Some luxury-car lessors charge as much as 25 cents. If you really love that Lexus and you're thinking of buying it, ignore the extra charges. Look up your car's market value in the Kelley Blue Book (www.kbb.com) and compare it with the residual value in the contract. If there's a big difference, you can use it to dicker with the leasing company. Let's say that your bank is faced with taking back a $25,000 car that's worth only $22,000 on the open market. You wouldn't buy it at $25,000. But the bank might be willing to cut you a deal on the purchase price if you take out a car loan at the same time. Or it may extend your lease on more favorable terms. And the next time you lease a car, treat it as if you owned it. In the end, you'll be paying for it as if you did. By LARRY ARMSTRONG _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Leases: Dings to Watch TABLE: What You'll Get Charged for...And What You Won't INTERACT E-Mail to Business Week Online

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