Wednesday, July 11, 2012

Expats beware: Not all car leases are created equal

Expatriates moving to the United States encounter many challenges when leasing a vehicle due to a lack of a U.S. credit history. There are two types of automobile leases that exist in the United States, open-end and closed-end leases, for both new and used vehicles. Expats need to protect themselves and learn the difference before they sign to ensure they are getting a good deal.

Closed-End Leasing - Often called "walk-away leases," are based on the number of miles a customer will typically drive in a year (12,000), that it will be driven in normal driving conditions and the residual value of the vehicle is known upfront. For Expats this is a good option as it is a no-risk lease agreement with all costs known prior to going into the lease. Choosing a manufacturer direct leasing program protects the expat with a higher residual value, low monthly payments and low interest rates not found anywhere else. At the end of the leasing term, the customer simply returns the vehicle and they are not responsible for anything other than possible excessive damage or additional mileage charges.

Open-End Leasing - Typically used in business leases, the lessee takes all of the financial risks. The monthly payments on open-end leases are much higher and the total cost of the lease is unknown until the end of the lease agreement. Therefore if an expat were to enter into this type of lease they would be responsible for paying the difference between the estimated lease-end value and the market value of their vehicle at the end of the lease. Expats beware as open-end leases are often promoted as a good option since customers are not locked into a long-term agreement. However, expats often end up paying more for this flexibility as the higher monthly payments usually exceed those of closed-end leases and the expat would also be responsible for the difference in the residual value and market price, resulting in one large lump-sum payment due upon return of the vehicle!

International AutoSource has been assisting expats without a U.S. credit history lease vehicles for decades. Through manufacturer direct leasing programs, expats have access to safe, low rate, close-end lease programs. (PRNewswire/AsiaNet)

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