Lease Information Facts and FAQ's

Educators Auto & Lease has taken great efforts to put together a traditional leasing program of the quality our members have come to expect of all Educators products. We are convinced that once you compare the benefits of leasing through Educators you’ll find the program will meet and exceed your highest expectations.

Educators Auto & Lease Traditional Lease Program Features.

  • No down payment Many lease payment ads today require a large down payment to achieve the advertised monthly payment.
  • Customized lease terms that fit you best. Lease anywhere between 24-60 months in one month intervals.
  • Customized lease mileage Many leases require you to choose from either 12,000 or 15,000 miles per year. Educators lease program allows you to choose from 1,000 miles per year to 50,000 miles per year in 1,000 mile intervals. In this way the low mileage driver does not pay for miles they do not use and the high mileage driver can avoid any end of lease mileage penalties by building the miles needed into the lease from the start.

    Educators features one of the lowest excess mileage penalties should go over your allowed mileage at lease end of your lease. You may also elect to purchase the vehicle at lease end and avoid any mileage penalty.
  • No premature buyout penalties With many leases available today if you decide to trade in the vehicle or buy it early, you may still have to make all the remaining payments. You end up paying all the interest for the life of the lease term even though you only kept the vehicle for part of the term. But an Educators lease works very similar to a loan — your lease payoff includes only the interest up to the point that you trade in the vehicle or buy it out.

    Numerous factors can affect the value of the vehicle at lease end. These factors determine whether the vehicle will be a good buy at that point. Your Auto & Lease rep can give you the knowledge you’ll need to select a vehicle and a customized program.
  • Educators leases do not have end of lease disposition fees or exorbitant end of lease damage charges. If there is excess wear or damage to the vehicle at the end of the lease you will be given the choice to have the repairs done by a mechanic of your choice or have an Educators recommended repair shop provide an estimate. You will receive the same pricing Educators Auto & Lease pays for their mechanical repairs, with no additional mark up.
  • If you are involved in an accident, an Educators rep can help you through the repair process by assisting you in choosing a repair facility and making sure the quality of work is acceptable.
  • The Educators Auto & Lease program can also provide an alternative way of purchasing a vehicle. Your Educators rep can provide you with financing cost comparisons. Make an informed decision on which method of financing results in you owning the vehicle for the least amount of money.
  • Our Educators reps can advise you on which vehicles would be the best lease choice for you. Count on receiving facts that will help you make an educated decision.

FAQs About Leasing

  1. Why is leasing terminology so confusing?
    Because there are different types of transactions, there are many different terms used. Below are some of the most commonly used leasing terms with brief explanations.

    Capitalized Cost — The total that you are being charged for the vehicle, including any fees and other items that you’ll pay over the lease term, such as: service contracts, insurance and any other outstanding credit or lease balance.

    Capitalized Cost Reduction — A down payment on a lease, designed to lower monthly payments. A trade-in where there is positive equity would also be defined as a cap cost reduction.

    Residual Value — The balance at the end of the lease, if you wish to buy the vehicle.

    Acquisition Fee — A charge that is added to the cost of the vehicle and is usually set by the financial institution. This fee is generally used to offset lease-processing costs by the lender, such as required insurances to be carried by the lender as they are named on the title.

  2. Does it make sense to lease a vehicle?
    That is a great question that has been a subject of debate for a long time. Some think that ownership makes more sense, but others are quick to point out that when you finance a vehicle purchase, the vehicle is not really owned until the lien is paid in full.

    A vehicle has its greatest depreciation in the early years of its life. At the same time the least amount of principal is being paid in the early years of a long-term loan. It is not uncommon to find a vehicle loan balance that exceeds the actual value of the vehicle by thousands of dollars, even 3 or 4 years into these long-term loans. In addition, the vehicle is often in need of repairs or replacement before the loan is paid off which further complicates the issue.

    Another point to consider when purchasing is that the value of vehicles can drop for many reasons: model change, rebates or incentives on new vehicles, safety issues, body style or option upgrades, fuel economy, etc… When this happens on an owned vehicle it results in lower trade or market value to the owner. If this occurs on a leased vehicle the consumer returns the vehicle to the lessor at lease end and is not effected by these market forces thereby avoiding any negative equity issues.

    A possible negative to leasing would be if the usage of the vehicle drastically changed from how it was originally set up when the lease agreement was signed. If your lease was for 12,000 miles per year, but a job change or life event has required you to exceed the limits previously set up, you could end up owing money at the end of the lease. If this happens there will be additional charges at lease end. However, it should be kept in mind that if you owned the vehicle and exceed normal usage, it will probably require you to trade the vehicle sooner and increasing your negative equity position.

  3. Isn’t leasing like renting, where you never have anything to show for it?

    It is probably best to address this question with an example of how buying and leasing play out in the end. Let’s say a person purchases a $20,000 vehicle and then keeps it for 4 years. At the end of the 4 years they decide to trade it in and receive $8,000 back for it in trade value. The vehicle has cost them $12,000 to drive for 4 years.

    Now let’s say a person decides to lease that same vehicle for 4 years and the total of the payments made over the lease term was $12,000. Both methods resulted in the same cost over the same period of time. The difference was that they went about it differently. One person spent the $20,000 and then received $8,000 back in trade value while the other person only spent the $12,000 to begin with. So, what they have to show for it is the $8,000 they held back and any interest or dividends they earned on the $8,000 that was invested elsewhere.

  4. How can a more expensive vehicle’s lease payments sometimes be lower than a less expensive one?
    The primary reason for this is because of the differences in vehicles when it comes to projected future values. The books that are used to determine these future values (residual guide books) show that some vehicles are projected to be worth as low as 25% of their original cost in 3 years while others are projected to be worth as much as 60% of their original value! Because of this huge variance, it is possible for a vehicle that cost $20,000 new and has a 60% projected value to have a lower lease payment than a vehicle that cost $17,000 new and has a 25% projected value. Some of the reasons for the huge differences in projected value are reliability, amount of factory rebate, popular demand and a host of other factors. When one is looking for a low monthly lease payment, it is essential to know which vehicles have the highest projected future value.

    Your Educators Auto & Lease representative can educate and advise you on the vehicles that have the best projected future values.

  5. Is it a good idea to buy out a lease vehicle at lease end?

    That all depends. There are a number of factors that will come into play when trying to make that decision. The first thing to determine is if the vehicle still meets your current needs. Has it been a reliable vehicle, and what do current consumer reports have to say about the vehicle? Upcoming maintenance costs may also be a factor, and equally important is if the manufacturer’s warranty coverage period is over. Another major factor will be whether the vehicle has maintained its original projected value. If it has not, it may not be a very attractive proposition, but if it has then it certainly makes sense to consider buying it.

    One of the advantages of leasing is that it defers the ultimate decision about buying until you have had enough experience with the vehicle to make a good decision. In a sense, a lease could be called the world’s longest test drive. Remember that up until lease end you have only paid for the part of the vehicle that you have used and can now decide if it makes sense to pay for the remainder.

  6. What about the issue of mileage penalties within a lease?
    The area of mileage penalties is perhaps the most misunderstood aspect of a lease. When calculating a lease payment, it is necessary to forecast what the vehicle will be worth at the end of the lease. One of the factors that determine what this value will be is the amount of miles that are driven over the term of the lease. After the lease is over, if the miles allowed have been exceeded, then the value of the vehicle has decreased and consequently an excess mileage penalty is applicable. In other words, if the higher mileage was known at the beginning of the lease, then the monthly lease payment would have been higher to begin with.

    When looking at the issue of an excess mileage penalty within a lease, it is very important to understand it in the context of purchasing a vehicle. For example, if two people buy identical new vehicles, drive them for three years and then trade them in for a new one, the value of their trade-in will be determined to a great degree by the mileage they have put on the vehicle. If one person put on 60,000 miles and the other 36,000 miles over the three-year period, then the trade-in value of the one with 60,000 miles will be significantly reduced. In other words, THERE IS A MILEAGE PENALTY when a person buys a vehicle and puts mileage on it. The only difference between a lease and a purchase is the method that the mileage penalty is paid. In a purchase, the mileage penalty is paid by reduced trade-in value, while in a lease the mileage penalty is assessed as a final payment adjustment at lease end.

    Educators Auto & Lease’s program has one of the lowest excess mileage charges in the industry. Your Educators representative will help you determine the mileage that is necessary for you in order to help avoid ever being in an excess mileage situation at all.

  7. What happens if I want to change vehicles before my lease/loan is up?

    If you purchased a vehicle and decided that you did not want to keep it, then normally the vehicle would be traded in on another vehicle that is more to your liking. The dealer would appraise your vehicle to determine its value and then obtain the loan payoff. In many cases the payoff is more than the trade-in value, which is referred to as negative equity. This negative equity would then be “rolled into” your next vehicle loan or the difference would have to be paid in the form of a down payment to bring your new loan back into an equitable position.

    If you leased a vehicle, the very same principles are used. The vehicle would be appraised to determine the value and the lease payoff would be calculated. The difference between these would determine your negative equity. The negative equity could possibly then be “rolled into” your new lease or the loss could be paid in the form of a lease down payment.

    For the most part, the above is not the case with non-Educators leases. Many leases have significant penalties for changing vehicles before your lease term is up. In many cases you will be responsible for the remaining payments on the lease including interest charges, even though you no longer have the vehicle. The Educators Lease Program is rather exceptional in this area. Educators does a principal balance payoff the exact same way the payoff on a loan would be handled, so you are not paying all the interest and tax factored on all of the remaining lease payments. That can add up to thousands of dollars if the lease is terminated more than a year early.

  8. Can I make lease payments ahead of time to save on interest charges?

    The Educators Auto & Lease program is unique in this area. Any pre-payments that you make with an Educators lease are immediately applied to your lease loan. This may result in significant interest saving to you over the life of the lease. At lease end your balance will be below what the forecasted lease end value is and you may choose how you would like to apply your interest savings. Whatever the choice may be, all will result in savings to you. As far as we know, this feature is not available on any non-Educators lease.

  9. Isn’t it more expensive to lease than to buy?

    The Educators Auto & Lease program was designed as an alternative way to “purchase” a vehicle. Let’s say you were to purchase a vehicle and finance the total purchase price of it for 72 months to keep the payments affordable. You could easily determine what the overall cost of the vehicle would be by simply taking the monthly payment times 72. On the other hand, if you were to lease a vehicle for 36 months and then at the end of this period buy out the lease using a 36 month loan, you could determine your overall cost by taking the original lease payment times 36 and adding to it the lease buy out loan payment time 36. With the Educators Auto & Lease program, the total paid in using either method in most cases not is significantly different. This may not be true with leasing in general as some non-Educators leases may have additional fees due if a lease is bought out at lease end. The Educators lease program does not have any fees of this type.

    NOTE: The method of calculating the overall cost is not completely predictable because the interest rate may vary up or down in the future. For the most part if interest rate changes are not substantial, it will not greatly alter the overall cost because the lease buy out loan is for a short period (36 months) and interest rates are generally lower for short-term loans.

  10. What about “excess wear and tear” charges at the end of the lease?

    gain, just as with the excess mileage penalty issue, it is important to understand this issue in the context of a purchase. If you were to buy a new vehicle, drive it for a number of years and trade it in, the value would be determined by a number of factors such as mileage, body damage, tire wear and mechanical problems. The appraised value would be reduced to allow for the reconditioning of the vehicle by the dealer. If a lease vehicle were turned in with any of the just mentioned issues applying, then an excess wear and tear charge would be due.

    When a dealer appraises a vehicle they often use an estimate of repairs based on the hourly rate that is charged by their repair facility. These hourly rates can be rather expensive and could reduce the trade-in value. In most cases there is a markup on this work that is a profit source for the dealer. Educators Auto & Lease does not have its own repair shop. We try to use selected local repair shops that are known for their quality of work and reasonable hourly rates. Educators does not profit in any way from these repair costs. In effect, we are passing on to our members our “cost” of repairs. In addition Educators Auto & Lease allows the member to choose any repair shop to handle the necessary repair work.