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Prepaid Car Lease – Single-Payement Lease – One-Pay Lease |
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The term prepaid lease or one-pay lease refers to the concept of making a large single payment at the beginning of a car lease. Some lease companies allow it; others do not. The basic notion of a prepaid lease (sometimes called a Single Payment Lease or One-Pay Lease) is that you save money by avoiding finance charges and interest. This is only partially true and typically does not save the amount of money that might be expected. Let's see why. There are two amounts in a lease that incur interest or finance charges. First is the depreciation amount, which is paid off during the lease. By pre-paying a lease you eliminate the finance charges for the depreciation amount. Second is the residual amount which is the lease-end value of the vehicle. Finance charges for the residual amount remain and are paid as part of the single payment of a prepaid lease. Since you are "borrowing" the car (and it's residual value) for the entire term of the lease, you must pay finance charges for the time you will use the car. The total of those finance charges are part of your single lease payment. Therefore the amount you pay at the beginning of a one-payment car lease is 1) the entire depreciation amount, minus any finance charges on that amount, and 2) finance charges on the residual value. It must be pointed out that some dealers and lease companies do not calculate repaid leases properly. The way it should be calculated, and the way that saves some money, is that the single payment should consist of the depreciation amount added to the total interest on the residual amount. However, some dealers and lease companies simply figure the normal monthly lease payment amount, including interest on depreciation, and sum all the payments to arrive at the single lease payment. This is incorrect and saves the customer no money whatsoever. Therefore, if you think you want to pre-pay your car lease, ask your dealer how he calculates it to make sure you are actually going to save money. Also see the related article, One-Pay Car Leases Explained. For more information,
see: The Lease Guide
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