Top 17 Affordable Auto Insurance to Protect Your Vehicle

The high number of accidents caused car users to seek more protection for vehicles and themselves.

One way to provide more protection when driving a car is to have car insurance.

By having car insurance, if there is a disaster that befalls you, then the risks that are affected can be minimized.

Then, how to determine an affordable car insurance? Find out here, how to choose the best car insurance to protect your vehicle.

Protection is not only given for yourself, but also for our cars.

But how do you choose the best car insurance? Check out the methods below!

A Affordable Auto Insurance to Protect Your Vehicle

Having a private car can make it easier for all the activities we live.

Compared to motorcycles, cars offer more convenience to its users.

Using a car, you can avoid heat and rain.

The car can also bring all your small family members to join in traveling together.

So it is not surprising that almost the majority of the Indonesian population, especially those living in urban areas, have private cars.

But you need to remember that there are risks behind the ownership of motorized vehicles such as probable cars.

The risk can be in the form of accidental damage, natural disasters, destruction by other parties.

This is the reason why the car is one of the assets that needs financial risk to be managed through insurance protection.

The Right Way to Choose a Affordable Auto Insurance to Protect Your Vehicle

But you need to know that choosing the best car insurance right is not as easy as it seems.

So that later you will not regret buying the car insurance. has several ways that you can use in choosing the best car insurance, i.e.:

Know the Best Types of Auto Insurance

The first way is to find out the best type of car insurance available.

In general, the best type of car insurance is divided into two, namely Total Lost Only (TLO) and All Risk. TLO is the best type of car insurance that guarantees damage to cars that occurs above 75%.

As for All Risk, the opposite is true of TLO because it can provide overall protection to your car if there is any risk.

Adjust to your needs

Before choosing a product or type of car insurance, it's better to adapt it to your needs. In general car insurance has two types such as all risk insurance or total loss only insurance (TLO).

All risk insurance guarantees compensation or repair costs for partial or total loss / damage to vehicles that are directly caused by collisions, collisions, upside down, slips, mired, bad deeds, theft, fire, or other traffic accidents.

While insurance Total Loss Only (TLO) provides compensation for loss / total damage to the vehicle that is directly caused by a fire car, the car has an accident such as a car collision, collision, upside down, slip, mired, evil deeds, theft, or accident other crossing. (Maximum vehicle age is 15 years).

Get to know the road conditions that you often go through

Actually the most important thing when you decide to take the best car insurance is to recognize the condition of the car that you have and the roads that are often traversed because this will determine which type of insurance is suitable for your car.

A new car with an old car or a long-used car will not be the same.

Choose a trusted insurance company

In order for prospective customers to feel safe with selected insurance companies, it is good that the company has indeed been recognized by certain institutions.

The institution that controls and oversees the financial services industry is the Financial Services Authority.

Compare More Than One Insurance Company

To get the best car insurance, you have to compare more than one insurance company. Pay attention to the level of credibility of the company and its reputation among users.

Find out as much information as possible, whether through the internet or by asking directly to the closest people to ask for advice.

If there are many complaints about the car insurance company, then you can switch to glancing at another car insurance company.

Pay Attention to the Service of the Service Provided

This one point is equally important because after all, if you are exposed to any risk, the car will definitely go into the workshop to be fixed.

Therefore, you must pay close attention to the credibility and service of the workshop that is the partner of the best car insurance company you choose.

Also ask whether the workshop is close to your residence or place of work.

Spread workshop network

Make sure the insurance company you choose has a network of extensive and quality workshops.

An extensive network of partner workshops will give you the convenience of determining the best car repair shop to repair your car.

Not only that, even better, insurance companies that have standardized partner workshops.

So that the workshop has been ensured to provide the best service for you.

Note also the most famous additional feature is the presence of TPL (Third Party Liability) that provides compensation to third parties, towing cars, hotline services, ambulances, car shuttle services to workshops, to road side assistance that can directly help you repair cars directly at location.

Clarity of the contents of the policy

A good policy is to explain in detail what things are covered, not covered, to become extensions.

Not only explained in the policy, but customers must also get information clearly from the selected insurance company.

Do not let the customer submit a claim but is refused by the insurance company for reasons not covered.

Easy claim process

When a customer submits a claim, make sure the chosen insurance company provides a lot of convenience. 

One of the conveniences that can be felt by customers in the current era if it is integrated with technology. 

Customers can make claims via the application by only filling in a chronological report of the incident of damage, carrying out photos of car damage, filling in personal data and choosing the time of the customer's vehicle to enter the workshop.

Availability of 24-hour customer service

Make sure the insurance you choose provides 24-hour customer service.

Whenever you experience a disaster such as an accident, customer service will be ready to help you.

And make sure the facilities provided are according to your needs.

Don't be tempted by cheap prices

Don't be tempted by cheap premium prices.

First check whether the cheap premium price will affect when filing a claim.

Do not let this will adversely affect your finances.

A Affordable Auto Insurance to Protect Your Vehicle

Auto Insurance and Leasing

When leasing a car, it’s easier to stick with the same company for your auto insurance. What you don’t know, however, is that you may end up paying too much for your coverage and it’s better to look elsewhere for lower rates.

When you lease, the vehicle that you will drive belongs to the leasing company. They want to make sure that their investment is covered in the event the vehicle gets damaged, totalled or stolen.

They typically want to get covered for the difference between what your auto-insurer pays and your outstanding leasing obligations at the time of the accident or damage.

This is called GAP, short for Guaranteed Auto Protection, and is usually included in the leasing contract.

If your leasing company is called BMW Financial Services, Chrysler Financial or any other finance division of an automaker, then chances are your GAP insurance will be offered by the same lease company.

You are under no obligation to accept GAP insurance included as part of your lease agreement. Why pay an insurance premium if you could get the same coverage for a lower price?

Invest some time shopping by comparing quotes from other insurance companies, including your existing one. Ask for discounts that you already qualify for and adjust your coverage accordingly.

Benefits of leasing

Despite aggressive low-interest financing, cash-back offers and other purchasing incentives offered by leading auto-makers to buyers, leasing numbers keep increasing steadily over the years. Leasing is not only an attractive financial proposition to most auto-consumers, but also a lifestyle and preference choice.

Benefit Number 1: Keeping up with the latest trends

Leasing is sometimes more of a personal and lifestyle choice than a financial one. Many people are not comfortable with the idea of owning a vehicle over a long period of time. They’d rather keep up with the latest trends of the industry and drive the latest models every two to three years.

Leasing a car gives you the convenience of having the latest technology and safety innovation, such as an electronic stability system, DVD entertainment systems and advanced stereo equipment. If you are willing to forego ownership for the latest set of wheels, than leasing is your best option.

Benefit Number 2: Purchasing Flexibility

Leasing also offers purchasing flexibility: it allows you to defer the purchasing decision while using the car. You don’t have to haggle with your mechanic over repair expenses, deal with hefty maintenance bills or worry about a depreciating asset. Provided you can keep the vehicle in good condition and stay within the contracted mileage allowance, you’re effectively getting a test drive for the length of your lease. At the end of your lease, you can purchase the vehicle or simply turn in the keys and walk away. No questions asked.

Benefit Number 3: Cash Flow

Leasing offers many short-term benefits. It reduces your initial cash outlay as you do not have to pay the large down payment required for car ownership. You only pay for the depreciation on the car - only the part you will use during your lease, not the entire vehicle. This results in lower monthly payments and frees even more cash. This cash can be put to use more intelligently elsewhere than the questionable investment of owning a depreciating asset. If you are self-employed or use your car for your job, then you can write off your leasing payment as a business expense.

Benefit Number 4: Negotiating Leverage

Although it may seem a little unorthodox in this industry, almost everything about leasing is negotiable. If you know all the fees involved, you can lower your monthly payments, negotiate the purchase price of the vehicle at the end of the lease and contract additional miles on top of your mileage limit. You can also do some shopping around and compare deals from different auto-insurers to get the cheapest GAP insurance for your lease.

Buy a car at the end of your lease

You’ve come to the end of your lease and you like you car enough you wantto keep it in the driveway.

Just like buying a used car, there is someresearch to be done to nail a good deal.

First, you need to know the cost of buying out your lease.

Read the fineprint of your contract and look for the “purchase option price”.

Thisprice is set by the leasing company and usually comprises the residualvalue of the car at the end of the lease plus a purchase-option feeranging from $300 to $500.

When you signed on the dotted line, yourmonthly payments were calculated as the difference between the vehicle’ssticker price and its estimated value at the end of the lease, plus amonthly financing fee.

This estimated price of the car value at the endof the lease is what is termed in leasing jargon “residual value”.

It isthe expected depreciation – or loss in value – of the vehicle over thescheduled-lease period.For example, a car with a sticker price of$40,000 and a 50% residual percentage will have an estimated $20,000value at lease end.

Now that you know the cost of buying out your lease, you need to determinethe actual value, also termed “market value”, of your vehicle.So, howmuch does your car retail for in the market? To pin down a good, solidestimate you need to do some pricing research.

Check the price of thevehicle, with similar mileage and condition, with different dealers.

Useonline pricing websites, such as, and Kelly Blue Bookfor detailed pricing information.

Gleaning pricing information from varioussources should give you a fair estimate of your vehicle’s retail value.

All you have to do now is compare the two amounts.

If the residual value islower than the actual retail value, than you’re into a winner.

Unfortunately, there is a good chance a car coming off a lease is a littleon the high side.Don’t despair though.

Leasing companies know as much that residual valueson their vehicles are greater than their market value and as such arealways on the look out for offers.You can knock down on the price of yourleased vehicle with some smooth negotiating tactics.

Put forward a pricethat is below your actual target and negotiate hard until you wind up near that figure.

Buy or Lease?

It’s the classic dilemma that faces every auto-consumer out there: Paycash upfront or forego the ownership and pay monthly settlements instead?Buy or lease for a new set of wheels?As is the case with every other common dilemma, there is no slam-dunkanswer.

Each option has its own benefits and drawbacks, and it all dependson a set of financial and personal considerations.First, your finances.

Affordability is clearly key, and you need to ask the question of how stable is your job and how healthy is your generalfinancial situation.

The short-term monthly-cost of leasing issignificantly lower than the monthly payments when buying: you only pay for “the portion” of the vehicle’s cost that you use up during the time you drive it.If you have a lot of cash upfront, then you can opt to pay the downpayment, sales taxes - in cash or rolled into a loan - and the interestrate determined by your loan company.

Buying effectively gives youownership of the car and that feeling of “free driving” that goes onproviding transportation.

If, say, you want to get into luxury models but can’t afford the upfrontcash of purchasing the vehicle than you’re a good candidate for leasing.Unlike buying, it gives you the option of not having to fork out the downpayment upfront, leaving you to pay a lower money factor that is generallysimilar to the interest rate on a financing loan.

However, these benefitshave a price: terminating a lease early or defaulting on your monthly leasepayments will result in stiff financial penalties and can ruin your credit.You need to make sure you carve out the monthly lease payment in yourbudget for the foreseeable future, at least for the duration of the lease.Besides the financial aspect, making a buy or lease decision depends onyour own particular lifestyle choices and preferences.

Think about what thecar means to you: are you the sort of person to bond with the car or wouldyou rather have the excitement of something new?If you want to drive acar for more than fives years, negotiate carefully and buy the car youlike.

If, on the other hand, you don’t like the idea of ownership andprefer to drive a new car every two to three years then you should lease.Next, factor your transportation needs: How many miles do you drive a year?How properly do you maintain your cars? If you answer is: “I drive 40,000miles a year and I don’t really care much about my cars as I don’t minddealing with repair bills”, then you’re probably better off buying.

Leasingis based on the assumption of limited-mileage, usually no more than 12,000to 15,000 miles a year, and wear-and-tear considerations.

Unless you cankeep within the prescribed mileage limits and keep the car in a goodcondition at the end of your lease, you might incur hefty end-of-leasecosts.

Dealer Leasing Tricks

Too often when it comes to auto-leasing, people get so dazzled by themyriad terms and the jargon thrown their way that they end-up payingthrough the nose, relying on a dealer’s “help” than their own informeddecision.

Here is a look at some of the tricks dealers use to pad their profits andleave the customers shelling hundreds of dollars more than the deal shouldbe worth.

Trick 1: Leasing always a better deal than buying

Dealers use the lure of lower-monthly payments to entice customers to signfor long-term loans, with terms stretching for five years or more, makingthe payments even lower.

There are two catches with such lengthy contracts:higher mileage, exceeding the prescribed limit, and hefty repair costs.

Withleases charging on average 10 to 20 cents a mile for any extra mile overthe agreed amount in the contract, and warranties only covering threeyears, you leave yourself wide open for hefty charges for excessivemileage and wear and tear.

Trick 2: Cheap 2-3% APR rate on your lease

The dealer is not quoting the interest rate you would be paying on yourlease; he’s rather giving you the lease money factor.

Whilst similar to aninterest rate and important in determining your monthly payment, a moreaccurate rate is calculated by multiplying the money factor by 24.

Forexample a “cheap” 3% money factor is 24 X 0.003 = 7.2%.

This gives you abetter sense of what your annual interest rate on your lease contract is.

Trick 3: Stress-free early lease termination

Dealers know consumer driving needs change and they would like to have theoption of getting out of a lease commitment sometime down the road, beforetheir lease ends.

Truth of the matter is, when you sign for a lease, youare effectively saddled with monthly payments for the remainder of thelease term and there is little-choice of getting out early.

Lease contractscarry hefty financial penalties for either defaulting on monthly paymentsor terminating the lease earlier than the scheduled term.

To avoid being on the receiving end of such tried-and-true tricks, educateyourself about leasing.

Get down to the nitty-gritty and understand whatthe leasing terms used by dealers mean.

Crunch the numbers along with himand understand how they arrived at the monthly payment figure.

Don’t signanything until you’ve understood all the terms and your numbers much thoseof the dealer.

Do not let the dealer pressure you into signing; you are theone to determine whether the agreement is right for you.

Fees involved in leasing

Mention auto-leasing and most people will automatically assume a low- monthly payment.

There is actually more than what meets the eye, and a number of fees are involved at various stages of the lease process.

At the beginning of the lease, you have to pay a refundable security deposit, typically equivalent to one monthly payment, to safeguard against non-payment and any incidental damage done to the car at the end of the lease.

You are also required to pay an administrative charge, called acquisition fee.

Other fees include licenses, registration, title and any state or local taxes.

During your lease, and you expected to honour your monthly payment obligations.

Any failure to do so will result in late-payment charges.

You have to pay any traffic tickets, emission and safety inspections and ongoing maintenance costs.

Ending your lease early will result in substantial early termination charges.

At the end of the lease, expect to pay any excess mileage costs, charged at 10 to 20 p a mile.

Any incidental damage done to the car, and deemed to be above normal, will result in excess tear-and-wear charges.

Finally, if you choose not to purchase the vehicle, then you have to pay a disposition fee.

Go green and save on your lease

Hybrid vehicles’ popularity has sharply grown from a couple of thousands in early 2000 to close to 300, 000 by the end of 2005.

The trend is rapidly catching with the auto-leasing industry with generous tax credits and incentives on offer if you go green.

Beginning in 2006, businesses and taxpayers who lease, or purchase, an environmentally-friendly and fuel-efficient vehicle will be eligible to claim federal income tax credits worth thousands of dollars.

Individual states also offer generous incentives, including hybrid state tax credits, new High-Occupancy Vehicle (HOV) lanes access and discounted thruway tolls for alternative-fuelled vehicles.

And that’s not all you can save from going green! You can now save on your parking fees at a number of universities and some auto-insurance companies are offering insurance discounts for hybrid-vehicle owners nationwide.

If you want to take advantage of these incentives and contribute to energy conservation then visit HybridCenter.

org and complete a personal profile about your driving needs and habits.

You will get in-depth advice on hybrid models that would make economic sense to you and local, state and federal incentives available where you live.

How to avoid extra costs at the end of your lease

$250 to dispose of your vehicle, $1000 for extra miles you put on the clock and $200 to replace the light bulb and the worn tyres—lease agents constantly nickel-and-dime consumers when their lease runs out.

Here’s a rundown of what can trigger those fees, and some steps to take in self-defense.

Disposition fee: leasing companies charge you if you choose not to buy the vehicle at the end of your lease.

This fee is set as compensation for the expenses of selling, or otherwise disposing of the vehicle.

It typically includes administrative charges; the dealer’s cost to prepare the car for resale and any other penalties.

Make sure this fee is stated clearly in the contract and is agreeable by you before signing on the dotted line.

At lease-end, you are left in no position to negotiate as the dealer can apply your refundable security deposit towards this fee.

Excess mileage charges: Almost all leasing companies will charge a premium for each mile over the agreed upon mileage stated in your contract.

This penalty can be as high as 25 cents per mile and can add up quickly.

To avoid the risk of running thousands of dollars in excess mileage penalties at the end of your lease, always check the “per mile” charges in your contract and be realistic about your mileage before you sign any contract.

If you think the limit is unrealistic given your commutation needs, then negotiate with the dealer to get a higher mileage or contract for additional miles.

Excess tear-and-wear charges: Another potential cost at the end of the lease is any incidental damage done to the car during the lease.

This is deemed any excessive damage done to the normal tear and wear of the vehicle.

Notice the use of the terms “deemed”, “excessive” and “normal”.

There is no standard formula to define what’s “excessive” and “normal” and it’s up to the leasing company to assess – or deem – the damage and determine what they are going to charge.

This leaves you at the mercy of unscrupulous leasing agents who set stringent tear-and-wear standards.

Make sure you read the description of these standards, understand them and agree to them.

If your leased vehicle is damaged prior to the end of the lease, you may find it cheaper to repair the damage yourself than pay the excessive charges of the leasing agent.

In the event of a dispute over the charges at the end of your lease, get an independent third party to do a professional appraisal detailing the amount required to repair any damaged parts or the amount by which tear-and-wear reduces the value of the vehicle.

How to calculate your lease payment

Understanding how to calculate your monthly lease payment makes it easier for you to make an informed decision.

Yet, most of us shy away from the “complicated” math on our lease contract, leaving it up to the dealer to do the payment formula.

Actually, it’s not that difficult! Once you understand all the figures involved in calculating your monthly payments, everything else falls into place.

These key figures are: MSRP (short for Manufacturer’s Suggested Retail Price): This is the list price of the vehicle or the window sticker price.

Money Factor: This determines the interest rate on your lease.

Insist on your dealer to disclose this rate before entering into a lease.

Lease Term: The number of months the dealer rents the vehicle.

Residual Value: The value of the vehicle at the end of the lease.

Again, you can get this figure from the dealer.

Now, let us calculate a sample lease payment based on a vehicle with an MSRP (sticker price) value of $25,000 and a money factor of 0.0034 (this is usually quoted as 3.4%).

The scheduled-lease is over 3 years and the estimated residual percentage is 55%.

The first step is to calculate the residual value of the car.

You multiply the MSRP by the residual percentage:

$20,000 X .55 = $11,000.

The car will be worth $13,750 at the end of the lease, so you'll be using:

$20,000 – $11,000 = $9,000

This amount of $9,000 will be used over a 36 month lease period giving us a
monthly payment of:

$9,000 / 36 = $250.

This is the first part of the monthly payment, called the monthly depreciation charge.

The second part of the monthly payment, called the money factor payment, factors the interest charge.

It is calculated by adding the MSRP figure to the residual value and multiplying this by the money factor:

($20,000 + $11,000) * 0.0034 = $105.4

Finally, we get the approximate monthly payment by adding the two figures

$250 + $105.4 = $355.4

To recapitulate, the sample formula looks like this:

1- Monthly Depreciation Charge:

MSRP X Depreciation Percentage = Residual Value
MSRP – Residual Value = Depreciation over lease term
Depreciation over lease term / lease term (number of months in the lease) =
monthly depreciation charge

2- Monthly factor money charge (MSRP + Residual value) X Money factor = money factor payment

3- Sample Monthly Payment: depreciation charge + money factor payment = monthly payment

Keep in mind that this is a simplified calculation that does not take into account taxes, fees, rebates or any other incentives.

The calculation gives you a ballpark figure or a rough idea of what your lease payments for the vehicle in question should be.

How to get out of a lease before your contract expires

When your lease is up, you can simply turn in the keys and lease another car or buy a new one.

But how about getting out before the lease ends? Maybe you can’t afford the sky-high payments on that silky Jaguar JX V6 model anymore or you’ve just had a baby and you need a larger and more spacious vehicle? Unfortunately getting out of a lease is not as easy as getting in! A leasing contract is difficult and expensive to terminate early.

Simply turning in the keys and walking away from a lease can result in stiff penalties.

You credit could be ruined and you could even get sued for breach of contract.

It’s not all doom and gloom though.

Actually, there is a number of options available to you.

You can sell the car yourself and pay off the bank.

This can be cost effective if the market value of the car is close to the buy-out number.

Do not hesitate to exercise this option even at a loss if it happens to be lower than the termination fee.

Your best option, though, is to transfer your lease for someone who would “assume it” and take it off your hands.

There is a whole set of potential buyers looking for short-term leases without all the hassle and extra costs.

Check with family and friends or use the services of lease- assumption websites, like swapalease.

com, to list your car.

Make sure you check the credit worthiness of the new lessee and provide the car in good condition.

How to lease a new car?

Whether you lease a car to get into the latest models or have better purchasing flexibility, getting a good deal is always bound to give you a lift.

Use these guidelines to help you spot one: Check incentives: be on the look-out for factory –subsidized lease deals.

Car manufacturers realise that consumers who lease vehicles from them are more likely to be repeat customers than those who simply purchase vehicles.

Through their leasing companies, they adjust the residual value and offer low financing charge.

Other auto-manufacturers are also starting to give incentives on leasing, called leasing subventions.

They offer these subsidies to put slow-selling models on the street, saving you even more money.

Set up a competitive: bidding environment to get the lowest price.

If you already have an idea in mind of the make, model and trim level of your desired car, attempt to calculate your own lease payment before you go shopping to avoid paying through the roof.

Check online comparison tools or use a lease calculator to check your lease payment based on purchase price.

This gives you greater negotiation leverage as you solicit quotes from various leasing companies.

Make sure you know all the fees involved at the beginning of your lease: you may have to pay fees for licenses, registration and title.

Other fees include acquisition fees, freight fees and local or state taxes.

At lease-end, you may have to pay a disposition fee and charges for extra mileage and any excess wear.

Be aware that some of these fees – like acquisition and disposition fees – are negotiable.

Know your mileage needs: almost all leases limit the number of miles per year by imposing typically 10 to 20 cents per excess mile over 15,000 miles a year.

If you are the kind of high-commuter who puts 40,000 miles a year on his car, then you might end up running thousands of dollars in hefty penalties at the end of your lease.

Be smart and negotiate a higher-mileage limit or pad you excess miles at the beginning of your lease to avoid robber tax rates for excess miles.

Almost all leases limit the number of miles per year by imposing fees typically 10 to 20 cents per mile over 15,000 miles per year.

If you are the kind of high-commuter who puts a lot miles on his car, then these costs can add up quickly.

Negotiate Include GAP coverage: make sure your lease includes GAP coverage.

This covers you in the event of the vehicle getting wrecked, stolen or totalled.

Without GAP insurance, you leave yourself wide open to thousands of dollars in leased obligations.

Check if the GAP coverage is included so you don’t pay it twice.

How to spot a good car lease

Leasing has been lauded as your cheapest ticket to keep up with the industry’s hottest vehicles and trends.

The jury, however, is still out on leasing: with the industry long on hype and short on detail, it is difficult to distinguish between a genuinely good deal and a downright up-selling exercise.

So how do you spot a good deal? First, you need to find out if there are any down payments on the lease.

A down payment refers to the lump sum amount that you pay upfront, either in cash, non-cash credit or trading allowance, to reduce your monthly payment.

You should think twice before putting money down on a lease: not only are you getting a rough deal, as you’re essentially forfeiting the general rule of leasing: not putting any cash upfront, but the money is not recoupable at the end of your lease.

There is another big disadvantage: in the event of your car getting damaged or stolen, you insurance and the gap cost will not cover the loss.

Mileage Limit Most leasing companies allow you a limit of 45,000 free miles over the length of a 3-year lease.

This may seem like a good deal at first sight, but when you consider it only comes to 15,000 miles over a 12 month period it’s not difficult to foresee why it might be difficult to stay within this limit.

Even people working from home have little trouble putting 15,000 miles on their cars.

If you exceed the mileage limit, the penalty for each excess mile can be as high as 20 cents.

This can add up quickly over the length of your lease: an additional 4,000 miles a year over the length of a 3-years lease contract, will end up costing you an extra $2,400 in excess mileage charges! Be realistic about your mileage needs, especially if you have to regularly commute over long-distances, before you sign the contract.

Consider padding the miles that you expect to use since it is less expensive to contract for the extra before you sign than it is to pay the extra charges at end of your lease.

Sales Tax Sales tax is usually capitalized and added to the monthly payments.

However, some dealers choose not to include it in their calculations to drive the advertised lease payments even lower.

What they do instead is state in the small print that the monthly payment excludes “sales tax”.

Make sure you carefully read the fine print for any extra, hidden costs not included in the advertised monthly payment.

Unscrupulous fees that typically slip through the cracks include sales tax, registration and title fees.

Independent Car lease companies

To lease, you have two possible choices: either lease through a dealer’s finance source or through an independent lease company.

A conventional dealer has a captive finance source, which can be the car manufacturer’s financial company, such as BMW Financial Services, Honda Motor Credit or General Motors Acceptance Corporation (GMAC), or a major national bank such as Chase Manhattan.

Independent lease companies are no financial obligation to any single one manufacturer financing source, but work with dealers anywhere in the country.

So which one is better? Conventional dealers provide better lease-deals on limited-time promotions.

Factory-subsidized cars that have subvented money factors and residuals are very attractive lease deals and can be very hard to beat anywhere else.

Independent lease companies can offer you unbiased and professional advice on vehicle selection regardless of make and model.

This is because they are not tied to a single manufacturer or financing source, unlike conventional dealers who have to sell specific models.

They can also be more flexible regarding negotiating lease terms like residual value and mileage.

Ultimately, if you prefer a more personal and customer-oriented relationship with your leasing agent, then you will do well with an independent leasing company.

Lease Financing

For auto-consumers, crunching the numbers is one of the most difficult and confusing aspects of leasing.

Take the finance charge on a lease for instance.

Most people just don’t understand how this is calculated on capitalised cost AND residual value instead of just the capitalised cost.

For most, it seems plainly obvious, just as is the case when purchasing, that a charge should be levied on the capitalised cost of the vehicle.

Well, no quite! When you lease a car, you’re only using the car over a specified period of time with the option of buying the car.

The residual value represents the “loan balance” at the end of the lease.

If you add it to the capitalized cost and divide by two, you’ll get the average capitalized cost outstanding over the lease term.

Let us suppose you’re leasing a car with a capitalized cost of $25,000 and a residual value of $15,000.

You average balance over the lease term, irrespective of how long it is, is $20,000 – the sum of the two divided by two -.

Using this sum works because the money factor is the annual interest rate devided by 24, rather than 12.

Continuing with our example and assuming an interest rate of 6% APR: $30,000 X (6 per cent / 24) = $75 (Capitalized cost + residual value) X (interest rate / 24) = Monthly finance charge This finance charge is added to the depreciation charge to calculate the monthly payments on your lease.

Lease Trading

Ever wanted to terminate your lease early, comfortable with the thought you weren’t going to be hit with hefty fees? You can if you transfer your lease to someone else.

Trading a lease is the best option for people who want to terminate a lease early and don’t want to pay the large termination imposed by most lease agents.

It can also be an alternative to get out of a lease for far less than you would otherwise pay your original lease company for extra mileage and wear-and-tear charges that can run into the thousands of dollars.

For a small fee, you can advertise your car lease for assumption to a large number of potential buyers on the look-out for leases on the Internet.

Such services include LeaseTrader.

com, the originator of online lease-trading and the biggest online marketplace where most lease transfers take place, and smaller marketplaces such as BreakAlead and TradeAlease.

Before swapping your lease, make sure your leasing company approves lease transfer transactions.

Caution must be exercised in choosing a lease swapping service: make sure they facilitate the whole lease transfer process, offer online or telephone customer-service help and registered buyers undergo stringent credit checks.

Leasing Glossary

In order to get a good leasing deal, you need to understand leasing jargon.

Read through this leasing glossary to get an overview of the basics:

Acquisition fee: A fee charged by a leasing company to begin a lease.

Not all leasing companies charge an acquisition fee but if charge it starts at about $300 and is seldom negotiable.

Capitalised cost: The total selling price of the leased vehicle This also accounts for taxes, title, license fees, acquisition fee and any optional insurance and warranty items you elect to fold into the lease and pay overtime rather than upfront.

Depreciation fee: Forms part of the monthly lease payment charge and accounts for the loss in the value of the car at the end of the lease.

The vehicle’s list price minus the expected residual value at lease end is divided by the number of months in the lease to give the depreciation fee.

Suppose you decide to lease a vehicle with a retail price of $23,500.

The leasing company estimates that after a three year lease, the vehicle will be worth 35% of its original retail value, or $8,225.

The difference, $15,275, divided by the number of months in the lease, 36 months, gives us the depreciation fee ($424) GAP insurance Pays off the lease balanced if the vehicle is wrecked, stolen or totalled.

Inception fees any fees that are due at the beginning of a lease.

These typically include a security deposit, acquisition fee, first monthly payment, taxes and title fees.

Mileage allowance The maximum number of miles a leased vehicle can be driven a year without incurring an excess mileage penalty.

A typical mileage allowance is 12,000 to 15,000 miles a year, although this is negotiable with your leasing company.

Mileage charges a penalty that you incur if you exceed your mileage allowance on a leased vehicle.

Typical mileage charges are 10 to 20 cents per excess mile.

Money-factor A fractional number, such as 0.00043, used in calculating your monthly lease payments.

You can get a rough estimate of the annual percentage rate on your lease by multiplying the money factor by 2,400.

If a dealer quotes a money factor such as 3.4 than you can get the equivalent APR, 8.16, if you multiply by 2.4. Residual value Residual value is the amount of money the leasing company says your leased vehicle will be worth when your lease ends.

Higher residual values lead to lower monthly payments but higher lease-end purchase cost if you decide to keep the vehicle.

Security deposits an up-front amount that your leasing company required at the beginning of a lease to safeguard against non-payment.

This is generally refundable at the end of your lease.

Termination or Disposition fee The amount you have to pay the leasing company at the end of your lease if you decide not to purchase the vehicle.

Wear-and-tear charges Extra charges you have to pay at the end of your lease for any wear and use the leasing company considers above normal.