Lease Insider FAQs

Do I need an extended warranty?
If your lease term extends past the manufacturer’s warranty period then yes, you need an extended warranty. For a new car lease it is usually better to lease for no longer than the term of the original manufacturer warranty.

What is GAP insurance and do I need it?
GAP insurance is needed when the potential balance of your lease is greater than what your insurance company is willing to pay. This is usually the case with a lease as you normally do not put money down to lower the purchase price. Most leases include GAP insurance—but check to be sure.

What am I required to pay to start my lease?
The minimum is usually your first month’s payment and license fees. Sales tax is either on the monthly payment or can be included in the lease if it’s to be paid up front on the purchase price. You never want to put money down on a lease unless your credit requires it.

What is the acquisition fee?
A lot has changed over the last 10 years in regards to leasing from the lender (lessor) side. Artificially inflated residual values have cost many lenders millions of dollars. Most lenders now carry residual value insurance and contingent liability insurance.

The costs of these fees are real and, in part, make up the acquisition fee. It is charged by the bank and not the dealer.

For accounting purposes these additional fees are usually not added into the rate. GAP insurance has only recently been included. In the late 90's it was the responsibility of the lessee to obtain this insurance. Most lessors now include it and fund it from the acquisition fee.

Is my end of lease purchase option negotiable?
The answer to this question changes every so often for each lessor. Sometimes it is and sometimes it’s not. The best thing to do is NEVER show any interest in buying the car. As soon as you do you will lose all negotiating power.

Who carries the insurance for my leased vehicle?
This is a question that is often asked and the answer is you, the lessee. Even though the vehicle is owned by the lessor, you as the driver must provide car insurance at your cost during the lease term. Most lessors require a minimum amount of full coverage.

How do I handle negative equity on a new lease?
40% of people are faced with this problem when they try to end their finance agreement early. The goal is to get as close to payoff as possible. The negative balance can usually be included into the new lease as long as the final purchase price + negative equity does not exceed the vehicle’s MSRP. The lower the purchase price, the more negative equity you can absorb.

When is the best time to lease a vehicle?
The best time to lease a new car is early in the model year when residual values are naturally at their highest levels. The higher the residual value the lower your lease payment. Although, vehicle discounts or rebates later in the year can help offset the decline in the residual value.

Are those low lease specials I see advertised really that good?
Some captive lease programs offer special low lease payments by artificially raising the residual value. While this can provide a lower payment, it will be very costly if you need to terminate your lease early. Also, the purchase option at the end of the lease will be far above market value, meaning you will probably have to turn the vehicle in and be subject to any fees and/or penalties.