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Excessive wear and tear also
reduces the value of the vehicle. The leasing company
is charging you for the excessive wear and tear because it
will reduce the value of the vehicle when they resell it,
usually at auction. If you had purchased the vehicle,
when you went to sell it, you would get less for it, based
on its condition. Look
at table 1 for some examples using the same vehicles that
were used in the excess mileage example. Let's assume
that you purchase the vehicles and have 60,000 miles on them
which is similar to what you may have on them if you lease
them for 4 years with a 15,000 per year mileage allowance.
The source of this information is Kelley Blue Book (www.kbb.com)
recognized as |
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Table
1:
Private Party Value of Various Vehicles Based on
Condition
Source: Kelly Blue Book, Oct 17, 2005 |
|
Vehicle |
Excellent |
Good |
Fair |
|
2002
Honda Accord |
$12,555 |
$11,660 |
$10,550 |
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2002 Ford
F150 |
$
8,990 |
$
8,315 |
$
7,460 |
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2002
Dodge Caravan |
$
9,760 |
$
9,035 |
$
8,125 |
|
2002
Lexus ES300 |
$19,075 |
$17,825 |
$16,225 |
|
2002 Ford
Explorer |
$12,440 |
$11,580 |
$10,460 |
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the expert in valuing used
vehicles. We have chosen Private Party Value as the
appropriate number since you will most likely not get retail
for your vehicle and should get more than the auction
amount. They rate cars in four categories:
- Excellent - The
vehicle looks great, is in excellent mechanical
condition and needs no reconditioning.
- Good - The
vehicle is free of any major defects. The paint,
body and interior have only minor blemishes, and there
are no major mechanical problems.
- Fair - The
vehicle probably has some mechanical or cosmetic
defects, but is still in safe running condition.
The paint, body and/or interior need work to be
performed by a professional in order to be sold.
- Poor - The
vehicle has severe mechanical and/or cosmetic defects
and may be in questionable running condition. The
vehicle may have problems that cannot be readily fixed
such as a damaged frame or a rusted-through body.
Kelley does not give average
prices for vehicles in Poor condition because the value of
vehicles in this category varies greatly, so we have
included only categories 1 to 3 in our table. Going
from Excellent Condition to Good Condition will cost you
from $675 on the F150 to $1,250 on the Lexus ES300.
Going from Good to Fair will cost you from $855 on the F150
to $1,600 on the Lexus ES300. We can only assume that
going to poor will
probably cost you several thousand extra dollars.
To quote Milton Friedman,
"There is no Free Lunch." If you lease a car you will
pay a fee for excess wear and tear, but if you purchase a
vehicle, you will also pay a fee for excess wear and tear
when you go to sell it. The lessor will likely charge
you an excess wear and tear charge that is similar to the
reduction in value you would receive if you sold the
vehicle.
If you do have excess wear
and tear on a leased vehicle, there are some strategies that
you can use to minimize your fees. In most cases you
can go to the lessor a couple of weeks before the turn-in
date and they will tell you what specific charges you will
incur in excessive wear and tear. This will give you
the opportunity to fix them yourself. For example, if
you need new tires, go to Pep Boys and buy a decent set
rather than being charged retail by the lessor. We
suggest that you always find out in advance what you are
going to be charged for before you fix anything on the
vehicle. In many cases you will find out that you will
not be charged for items that you thought you would be
dinged for, and in other cases you will find that the charge
is less than what it will cost you to fix it. So, if
you do not totally trash out the vehicle, and plan your
turn-in strategies, the turn-in charges for excessive wear
and tear should not be excessive.
Minimizing lease turn-in
charges is one of the services that we offer to our
customers. If you have any questions or concerns in
this area, please call us at 1-800-800-5327 or shoot off an
email. |
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