Q. I am new to leasing. How do I learn what I need to know?
A. That's why we're here. The best place to start is at the first page of our free Lease Guide. Although there is a lot of information in the Guide, you don't need to try to soak it all up at once. Go through it quickly the first time, making mental notes of sections that you want to return to later for a more detailed reading. If you don't get all your questions answered in the Guide, come back here to the FAQ page, use our Search tool, read our Home Page, use our Resources page, read our Articles, use our Calculators, try our Visual Guides, check to see if our optional Lease Kit has what you're looking for, or send an email to our Leasing Expert. Everything can be easily accessed from our Home Page.
Q. What parts of a lease deal are actually negotiable?
A. Primarily, and most importantly, vehicle price should be the focus of your negotiation. This is the only element of the deal that is directly controlled by the dealer. All other elements such as residual, money factor, down payment, security deposit, and acquisition fee are all controlled by the leasing company, for which the dealer is only acting as an agent. Sometimes, though not often, the leasing company gives the dealer authorization to negotiate some of these factors. You can, however, shop around for better deals.
Q. Where can I find new car prices and dealer invoice prices?
A.
Check the Edmunds website for these
prices. Of course these are "sticker" prices, not the prices
you would actually pay. For actual price quotes, you should use
a reputable online pricing / buying site such as InvoiceDealers.
Also try
, CarsDirect
,
and Yahoo!
Autos
,
Get free price quotes from all of them for a good comparison.
Unfortunately,
in Canada there are no websites from which you can get free invoice
prices. However, CarCostCanada
is
the best of the prices-for-fee sites.
Q. Can I shop for better lease terms at other leasing companies?
A. You don't have to use the dealer's or car manufacturer's leasing companies. Some banks (except in Canada), and credit unions do leases, and independent leasing companies. Often, a dealer will be able to offer deals from leasing companies or banks that they work with independently of the car manufacturer. Or you can find your own lease company. We recommend Primelease who will provide you with competitive leasing quotes when you tell them the vehicle you're interested in.
Q. When is the best time to lease? End of month? End of year?
A. The best time to lease is when the car manufacturer is sponsoring (subventing) promotional deals. These deals usually have a short time period in which they are available. You'll see the deals advertised on TV and in local newspapers. The reason these are better deals than a dealer alone can offer is that the manufacturer can manipulate ALL factors in the lease, price (rebates), money factor, term, and residual value — whereas a dealer can only manipulate price (discounts). The very best deals are those in which you get "contribution" from BOTH the manufacturer AND the dealer. If there are no manufacturer subvented deals at the time, then the best chance (repeat, chance) of a discounted dealer price is at day-end, month-end, quarter-end, or model-year end.
Q. Where can I find out the trade-in or retail market value of my used car?
A.
We suggest the Edmunds
website again. You can also use Kelley
Blue Book but we've found that their values are often unrealistically
high. Trade-in values are more related to local used-car dealer auction
prices, which can vary widely from week to week. Local retail values ("asking"
prices) are often determined by advertised prices in newspapers and auto
"trader" magazines, which are usually a little lower than local
used-car dealer prices.
Q. I've already leased, but I'm not sure I got a good deal. How can I find out?
A. The Lease Inspector in our Lease Kit was designed just for that purpose. Simply plug in the numbers directly from your lease contract and you'll get your answer immediately.
Q. I purchased a Lease Kit but don't remember how to access it.
A. Access your Lease Kit at www.LeaseGuide.com/leasekit/ If you've also forgotten your registration code, send us an with your name, email address used at time of order, and approximate order date.
Q. I just leased and I think the dealer made a mistake in calculating my payment. Is there a way to check?
A. Yes, you can do the calculations yourself using our Payment Formula. Or you can use our Payment Calculator, or the Lease Inspector in our Lease Kit. If you find that the dealer made a mistake, bring it to his attention immediately before the contract goes to the lease company.
Q. If I decide to buy and not to lease, will your website help me?
A.
You bet, since leasing is just another way to finance your car, much of
the material related to finding deals, pricing, negotiating, and contracts
still applies. But since you'll be using a loan, you should shop online
for for the best loan deals and then simply take your dealer a check for
the car you want. If it's a used car your want, be sure to check its previous
history at
CARFAX Vehicle History Reports
before you buy.
Q. Which is better — leasing or buying?
A. The answer depends on a number of factors that are different for everyone. Your driving "personality", your vehicle choices, and your financial objectives are important factors. For more details see Lease vs Buy in the Lease Guide.
Q. I just leased (or bought) a new car and have decided I don't want it. Don't I have 3 days to cancel?
A. No. This is a common misconception. There are no 3-day right-of-recission laws that apply to automobile purchases or leases. Your only recourse is to appeal to the good graces of the dealer management. This is why it is so important to do your homework, understand how leasing works, and know how to read a lease contract. Of course, that's what LeaseGuide.com is here for.
Q. Can I let someone else drive my leased car?
A. Most lease contracts allow any licensed driver who is covered by your auto insurance.
Q. My only experience with leasing is apartment leasing. Isn't car leasing the same thing?
A. No. Although there are similarities, don't confuse the two types of leasing. For example, in apartment leasing, there is no equivalent to a down payment or lease-end residual value as in car leasing. Apartment leasing is much more like renting, whereas car leasing is more like loan financing.
Q. Are 0% loan payments less than lease payments for the same car?
A. No. Lease payments will always be lower. But this doesn't mean that leasing is always better and you shouldn't base your decision strictly on payment amount. For more details see Lease vs Buy in the Lease Guide.
Q. A dealer ad in my local newspaper had a new Honda Accord LX lease for $239. Is this a good deal?
A. Maybe. But you won't know for sure unless you examine all the figures and conditions associated with that lease ad. The best way to do it is simply plug the figures from the ad into the Lease Evaluator in our Lease Kit, and you'll get your answer immediately.
Q. The residual on my new leased car is lower (higher) than the residual in your Lease Kit. What's wrong?
A. Nothing. The residual value for each vehicle make/model in our Lease Kit are average values. Since residuals are independently set by leasing companies and car manufacturers, and can vary considerably, you can compare your offered value to our value to determine how good, or bad, it is. This is similar to comparing interest rates to national averages. In the case of residuals, the higher the better.
Q. My dealer wants to "buy out" my current lease and get me into a new lease. Will this work?
A. Probably not like you think it will. If you only owe a few payments on your old lease, the dealer will make the payments, and simply return your car to the lease company. The lease company will send you a bill for damages, extra mileage, and any disposition fees. If you owe more than just a few payments on your old lease, you are probably not in a "positive equity" situation such that trading will be beneficial to you. See the next question below.
Q. The dealer said he would allow me to trade in my current car, regardless of what I still owed on my loan or lease, and give me a great deal on a new car. Anything wrong with this?
A. Maybe. If you are "upside down" (you still owe more than your car is worth), the dealer will simply add the difference to the cost of your new car, which can dramatically increase your payments. So, the only time that this tactic makes sense is if you have some trade-in value ("equity") built up in your old car, over and above what you owe, that can be used to reduce your new payments. Take great caution with dealer salespeople's advice. If your trade-in vehicle is leased, you must be especially careful because by trading, the lease company considers this an "early termination." Don't make the mistake of thinking that the dealer is somehow taking the lease completely off your hands. Our Early Termination Guide in our Lease Kit provides all the details on this potentially problematic situation.
Q. Should I use my current car as trade-in on a new lease?
A. It depends. (See previous question) If your current car is paid for, you can certainly use it as a trade-in. Just be sure you know its fair trade-in value, and that the dealer gives you full credit when your lease payments are calculated. If you still owe on your car, you will want to get the "payoff" from your finance company and compare that amount to the trade-in value of the car. If the trade-in value is higher, you have "trade equity." If not, you're "upside down" and you may want to reconsider. You know, too, that you would do better financially if you sold your car yourself.
Q. I just leased and made my first month's payment as part of my "lease inception" charges. Isn't this just a part of my down payment?
A. No. With leasing, payments are always made at the beginning of the pay period, which means your first payment is due at the time you sign your contract. With loans, payments are due at the end of the pay period. This confuses many people, who may often think that the first lease payment is considered part of a down payment.
Q. What is the difference between "lease inception" amount and "down payment?"
A. This often causes misunderstandings. Lease inception amount (same as "due at signing" or "drive out" costs) include all the charges that require up-front payment, such as taxes, fees, deposits, first month's payment, and down payment. Notice that "down payment" is only part of the total "lease inception" amount. The down payment amount is the only part that reduces the capitalized cost (amount financed) of the lease, which reduces the monthly payment amount.
Q. I want to end my lease early. How do I do it and how much will it cost me?
A. As you probably already know, lease contracts are not designed to be easily terminated before the normal end date. However, you do have a number of options available to you that could minimize your costs and headaches. Unfortunately, an adequate discussion of these options would be too lengthy to present here. A full discussion of all your lease termination options, including how to choose the right option for you, is contained in our article, Exit Your Lease Early.
Q. How are sales taxes applied to leases?
A. Sales tax laws can be quite different between states and localities. Most states simply apply the local sales tax rate to each monthly lease payment. Others want the tax paid up front, based on the value of the vehilce or the sum of all monthly payments. See Lease Fees and Taxes for more details.
Q. What happens with my lease if I move from one state to another?
A. First, notify your lease company of your move. Because sales tax rates may be different between your old location and your new one, the tax portion of your monthly payment may change — up or down. This should only amount to a small change in your total payment, unless you move into a state, such as Texas, in which taxes are required to be paid, in total, up front. Registration and property taxes may also be different.
Q. I'm over my miles in my car lease. What should I do?
A. It's important to realize that if you drive lots of miles, you'll pay for those miles one way or the other, whether you lease, buy, or rent. Any vehicle depreciates in value for every mile that it is driven. You could consider purchasing your vehicle, which avoids mileage fees but this may not be your best option. You can track your mileage and determine lease-end mileage costs with our Lease Mileage Calculator. For more details on other lease-end strategies, see "The Lease-end Advisor" in our Lease Kit.
Q. Can I swap vehicles during my lease?
A. No. A lease is for a specific vehicle which means you can't simply switch vehicles in the middle of your lease. It's not like renting.
Q. Can I refinance my lease to get a better finance rate?
A. Maybe. You would have to end your new-car lease early, and get another used-car lease or loan. The cost of ending your original lease might offset or exceed any gain you would hope to make by refinancing. However, you should check to be sure. Get your lease payoff amount from your lease comapny and go to Primelease to get a free quote to see if you'll come out ahead.
Q. What are the advantages and disadvantages of making a down payment on a lease?
A. Making a down payment can substantially reduce your monthly payment amount. If you think you might ever want to end your lease early, an initial down payment can reduce or eliminate the cost of early termination. Many promotional lease deals require a specific down payment amount in order to get the deal. Some people mistakenly think that a down payment is a kind of deposit that you get back at the end of the lease. Not true. Having said the above, a disadvantage of a down payment is that, should your vehicle get stolen or totaled in an accident, you probably won't get any of the down payment returned to you.
Q. What about prepaid or "one-pay" leases — is it worth paying everything up front to avoid monthly lease payments? Do I save any money?
A. Yes, if you can afford the large initial outlay of cash, you do save some money, but this defeats one of the primary reasons for leasing — little or no up front money. By paying up front, you avoid paying interest on the depreciation portion of your lease (you still pay interest on the residual). As an example, for $22,000 cap cost, $13,200 residual, .0037 money factor, for 3 years; you would have to pay $12,327 up front. If you had elected to pay monthly, the total of your payments would have been $13,500. You saved $1,173 over 3 years. Is it worth it? You decide. Here's more details: Pre-paid Car Leasing Explained.
Q. How about those "lease-like" deals such as GM's Smart Buy, Chrysler's Gold Key Plus, and Ford's Red Carpet Option?
A. These are not leases, but conventional "balloon" loans that are promoted as having the benefits of both leases and loans. In order to have smaller monthly payments, there is one huge last payment, the "balloon." At the end, you either pay the balloon payment and buy the car, or you return it. The catch is that the balloon payment is generally less than the car is worth, making it almost a certainty that you'll buy. If you return it to the dealer, you're handing him this "equity" that belongs to you.
Q. I know that some makes and models of cars are better lease deals that others, based on their rate of depreciation. Which are best and which are worst?
A. We provide an updated list of lease ratings for all vehicle makes and models in our Lease Kit. The list rates each vehicle as Above Average (best deals), Average, or Below Average (worst deals). Car manufacturers sometimes offer special limited-time lease deals on certain models that temporarily improve its rating.
Q. How about leasing used cars?
A. Although you should be able to get great lease deals on used cars due to their having lower depreciation rates than new cars, it sometimes doesn't work out that way. This is largely due to the fact that the leases are based on on high cap costs, low residuals, and high interest rates. And you also have to factor in the extra costs of maintenance and warranties. For more details, see our article, Used Car Leasing and our Used Car Advisor website.
Q. I've read the Lease Guide and decided that leasing in not for me, but buying a new car is too expensive? How about buying a used car?
A.
This could be the right answer for people who don't qualify for leasing.
You can possibly get similar loan payments on a good late model used car.
Just be aware that you have higher risks of up front problems (always
have a mechanic check a car over before you buy), higher maintenance costs
(due to having no warranty, or having to purchase an extended warranty),
and higher loan interest rates. Make sure you get the VIN number off the
vehicle before you buy and check its history at
CARFAX Vehicle History Reports.
For more details, see our Used
Car Advisor website.
Q.
I'm near the end of my lease and I don't know whether I should buy,
trade, extend, or simply return my vehicle. How do I decide which is best
for me?
A. Be careful here. You have a number
of options and regardless of which option you may be leaning toward, it
may not be your best choice financially. For example, it would not be
wise to return a car that is worth more than your lease contract purchase
price. Buy it, then sell it and pocket the profit. There are a number
of factors you need to look at to make your decision, but It's not possible
to explain it all here. Therefore, you should consider getting our optional
Lease Kit, which contains a special
section, "The Lease-End Advisor," that fully explains
everything you'll need to know.
Q. I may have to co-sign a car lease for my boyfriend, who has bad credit. Is this a good idea?
A. Probably not. If your boyfriend fails to make payments on time, the lease company will come after you without even trying to get the money from your boyfriend. As a co-signer, you are legally obligated to pay. If you don't pay, both your credit ratings will suffer a blow. And if you break up with your boyfriend after you co-sign, it doesn't change the contract. You're on the hook until the lease ends.
Q.What are the tax benefits of leasing?
A. If you use your leased vehicle for business purposes, you can generally directly deduct the costs as business expenses — monthly payments, insurance, mileage, maintenance — based on the percentage of business use versus non-business use. The actual benefits depend on the specifics of your business situation. For this reason and because tax rules are never simple, you should get the advice of a CPA or tax advisor before making any decisions. Otherwise, the information and advice provided here in the Lease Guide are perfectly applicable.
Q. I don't understand how the financing charges can be so much of my monthly lease payment when I'm only financing the depreciation, which is the relatively small difference between Cap Cost and Residual.
A. This is a very common misunderstanding about leasing. In leasing, you not only pay interest on the depreciation amount, but also on the residual. Even though you turn the car back to the leasing company in the end — which means you "repay" them the residual — you still have to pay interest on that amount during the time you're driving the car and tying up the leasing company's money. This is no different than any other loan, and it makes perfect financial sense.
Q. I just leased a car and I can't find the interest rate or money factor specified anywhere in the figures in my contract. Why?
A. Lease contracts aren't required to show interest rate or money factor directly. However they do show the total of all your monthly finance charges as "Lease Charge" or "Rent Charge." You can calculate the interest rate very easily as follows: Divide the Lease/Rent Charge by the number of months in your lease. Then divide the resulting number by the sum of Adjusted Cap Cost plus Residual. This is your Money Factor, which can be converted to Interest Rate by multiplying by 2400. The Lease Inspector in our Lease Kit will also tell you your interest rate, as well as telling if you got a good deal.
Q. What is the "Rent Charge" is my lease contract?
A. See answer to previous question above. It really has nothing to do with renting.
Q. How does my credit history affect my ability to lease?
A.
Considerably. A lease is similar to a loan in that the leasing company
is trusting you to make regular payments against the money they have tied
up in the car you drive. You may find it difficult if not impossible to
lease if the dealer obtains your credit report and finds that you have
a spotty payment record or have too many financial obligations already.
Unfortunately many people have never seen their credit report, which may
have old or inaccurate information — which can result in problems
on leases and loans. Before you ever step into a dealer showroom, you
should already know your all-important FICO
Score
that determines what kind of deal you'll be offered, or if you'll
be turned down.
Q. How does a lease show up on my credit report?
A. Just like a loan. In fact, leases are often not identified as leases and look just like loans on the report. Sometimes the amount owed includes the lease residual amount, sometimes not. It depends on the company doing the reporting.
Q. If the cost of a lease is directly related to depreciation, why does a short lease have higher monthly payments than a longer lease?
A. The reason the shorter lease is more expensive is that a typical car (let's use an Acura TL as an example) depreciates 35% in its first 24 months, 9% more in the next 12 months, and only 7% more in the next 12 months. So in a short lease, you're paying primarily for the large initial depreciation that all new cars and trucks experience.
Q. I am currently negotiating a lease with a dealer, but his monthly payment figures are higher than those I get from using the formula in your article. What's wrong with your formula?
A. Absolutely nothing. The problem is that the dealer is plugging different numbers into the formula than you are, which means there's something he's "forgetting" to tell you. In this case you should sit down with the dealer, explain that you know how payments are calculated, and ask him to please give you each of the numbers he's using in his calculation so that you can verify the results yourself. Most dealers will gladly cooperate. If yours doesn't, it's time to walk out.
Q. How can I get actual residual values for the car I want before I walk into the dealer's showroom?
A. You can't. Since leasing companies can set residual values as they see fit, the only way to get the actual residual value being used for a specific car, from a specific dealer, who uses a specific leasing company, is to ask. Most dealers will provide you this information. If they refuse, walk out. We provide estimated average residual values for all new makes/models of vehicles in the Residual Calculator in our Lease Kit.
Q. How can I get money factors for the car I want before I walk into the dealer's showroom?
A. Essentially the same answer as for the previous question. You can estimate the money factor by dividing the current local new-car loan interest rate (see Bankrate.com) by 2400. But each leasing company sets their own factors. And it can be different, depending on the term (length) of the lease — and on your credit rating. So, as before, you have to ask to get the actual value that will be used for your intended car. Again, if the dealer refuses to give you this information, they shouldn't be trusted with any other part of the deal. Walk out immediately.
Q.
I had a salesman give me a 3% money factor. Another dealer gave
me a 7.2 money factor for the same model car. I thought money factors
were expressed as very small numbers such as .00375 or .004. What's going
on here?
A. Dealers, in an ongoing effort to
keep consumers confused, often quote the money factor in different ways:
.003 money factor is often stated as 3% (I know, it doesn't make sense),
which is really .003 x 2400 = 7.2% interest. Then, they sometimes quote
an interest rate like 7.2%, and call it money factor. Sometimes this is
intentional confusion and sometimes it's just plain ignorance. Remember,
dealer salespeople often don't understand leasing.
Q.
What is the importance of the 2400 figure used in converting money
factor to interest rate, and is it always 2400 regardless of the length
of my lease?
A. To convert money factor to annual
interest rate, multiply money factor by 2400. To convert annual
interest rate to money factor, divide interest rate by 2400. Yes,
it's always 2400, regardless of the length of your lease.
The 2400 is just a method of consolidating three other figures to simplify
the lease payment formula. It is made up of the number 12 (divisor
to convert annual interest to monthly interest), 2
(divisor to calculate the average amount financed), and 100 (divisor to convert a percentage to a decimal) — 12 x 2
x 100 = 2400 (for
more details, click
here).
Q.
In the lease payment formula, why does it look like I'm paying interest
on Cap Cost PLUS Residual? Is this a mistake?
A. Nope. The part of the formula that
determines the finance portion of your monthly payment is (Cap Cost +
Residual) x Money Factor. It looks like we're multiplying the sum of Cap
Cost and Residual by interest rate, but Money Factor is not interest rate,
although it can be converted to interest rate (see previous question above).
The reason Cap Cost and Residual are added is to facilitate the calculation
of average amount financed: (Cap Cost + Residual) / 2 (the divisor
2 is part of Money Factor). For more details, click
here. By the way, we didn't invent the formula folks. It's used throughout
the leasing industry and is perfectly legit.
Q. How is the acquisition fee and security deposit determined?
A. These are fees established by the leasing company or bank, not the dealer. Money factor, disposition fees, and mileage fees are also set by the leasing company. You normally can't negotiate these fees with the dealer but you can shop around at other dealers, at your bank, your credit union, or at independent leasing companies, such as PrimeLease, for better terms. By the way, you typically won't see the acquisition fee ("bank fee") specified anywhere in your contract — but it's there — hidden in your cap cost.
Q. Why don't I get my down payment back at the end of the lease?
A. You do not get your down payment back because it is simply an up front prepayment of part of your capitalized cost — to help reduce your monthly payments. Some people confuse "down payment" with "security deposit," which is refundable to you at the end of your lease.
Q. My 3-year lease specifies 12,000 miles per year. Does the lease company actually inspect my car each year for mileage?
A. No. All this means is that you have 36,000 miles (3 times 12,000) as a total limit for the entire lease. It doesn't matter when you drive those miles.
Q. I want a short-term lease — less that 24 months. Possible?
A.
Typical lease terms are set by lease
companies at a minimum of 24 months. And because most of a vehicle's depreciation
happens in the first year, a shorter new-car lease would be very expensive.
A better solution is to "assume" an existing lease
from someone who wants to get out and only has a year or few months remaining.
These are very often good deals. Swapalease
provides listings of such deals.
Q. Are leased cars covered by state "lemon" laws?
A. Yes, in most states, whether you buy or lease, you are protected as a consumer from getting stuck with a car that's a dud. However, Consumer Reports identifies the following states as having lemon laws for purchased cars, but none for leased cars: Alaska, Alabama, Colorado, Michigan, Missouri, Nebraska, New Mexico, Ohio, Oklahoma, Pennsylvania, and W. Virginia. Check with your state Attorney General's office of Consumer Affairs to be sure and to check for more specific information. Also check LemonLawClaims.com on the web.
Q. Do I have "gap insurance" and do I need it?
A. If your car is totaled or stolen, your insurance money likely won't cover the total amount you owe to pay off the lease. You would have to pay the "gap" amount out of your own pocket, unless you have gap protection. Many leasing companies include it automatically, but if yours doesn't, you really want to get it. Check your lease contract to see if you have it. If you don't have it, ask the lease company or check with your car insurance company to get it. Like any insurance, you don't need it until you need it, and then you really need it.
Q. What about insurance on my leased car?
A. Leasing requires that you carry and pay for insurance on your leased car, just as you would if you purchased. However, the amount of insurance specified in your lease contract may be more expensive than you might otherwise carry on your own vehicle. See Car Leasing Insurance for more details.
Q. If I know I'm going to drive more miles than my lease contract allows, can I ask to pay for those extra miles as part of my monthly payments, instead of waiting until the end of the lease?
A. Yes, most leasing companies will allow you to "buy" extra miles up front — often at a less expensive rate — and include the cost in your monthly payments. For example, say you know you'll drive 20,000 miles over the limit in a 24 month lease. If the "buy" rate is 12 cents per mile, you'll spend 20,000 x $.12 = $2400. Spread over the 24 month lease, this means you'll pay $100 extra per month, but you'll avoid a $2400 (or more) bill at lease end. Most companies will even refund you any unused miles (of your 'bought' miles) at lease-end.
Q. I just received a letter from an insurance company offering to sell me "excessive mileage" insurance on my current lease. Is this worthwhile or not?
A. Maybe. One such deal requires you to pay $.10 per mile of insurance. They'll pay you up to $.15 per mile if you exceed your mileage limit. Let's say you decide to buy 15,000 miles of insurance near the beginning of your lease. Your cost is $1500. If the excessive mileage charge in your lease contract is $.20 per mile and you exceed your total mileage by 20,000 miles at the end of your lease, the insurance company would pay you $2250. You then have to pay the remaining $.05 per mile for 15,000 miles plus $.20 per mile for all miles above 15,000 miles. So the insurance saved you $2250 - $1500 = $750. But what if you had only 10,000 excessive miles? You break even on the insurance. How about 5000 miles? You lose money — they don't refund.
Q. My dealer asked me to sign a lease contract in which a number of important details were not filled in, saying that they would be filled in later. Should I sign?
A. Don't even think about it. This is asking for trouble. Once you sign, anything can be entered in the blank areas later, and you have no recourse if you don't like it. Although your dealer may be completely honest and have the best of intentions, it's just not good business practice.
Q. My father has died and left a leased car that was in his name only. Is the lease automatically canceled?
A. No. A lease is like any other financial obligation in that it is typically settled during the probate process for the deceased. Some lease companies, however, have unwritten policies that may help in these situations. The executor or lawyer for the deceased's estate should contact the lease company for instructions.
Q. What's the deal in Illinois with sales taxes on leases?
A. An Illinois reader did some research and here is what he said, "I called the Illinois Department of Revenue and I was informed that when one purchases a leased vehicle at lease-end, one has to pay tax again on the residual value [or the negotiated lease-end purchase price]. Talk about unfair! So, In Illinois, one has to pay full sales tax at the beginning of the lease, and if you want to buy the car at the end of the lease, you have to pay it again. This is a tax situation begging for some reform". —— Here's a response from the State of Illinois: "The State of Illinois taxes leased vehicles differently than the majority of other states. In Illinois, tax is due up front on the full selling price of the vehicle. This applies to vehicles that are leased for a period of more than one year. As the owner of the vehicle the lessor is liable for tax. However, the lessor generally passes this tax liability on to the lessee of the vehicle. If at the end of the lease term, the lessee chooses to purchase the vehicle, the lessee becomes the owner and is responsible for paying tax on the purchase price at that time. The rate of tax that applies to retail sales within Illinois varies based on the location of the sale. Please refer to our publication "Sales Tax Rate Reference Manual". You may download this publication from our web site. Click on "Publications". Please refer to our publication "STS-76 Illinois Vehicle Tax Information Guide"." —— Also be aware that in some cities, such as Chicago, you also pay a use tax (currently 6%) with each monthly payment.