A worry-free end to your auto lease
By Michelle Warren • Bankrate.com

Whoever said that the fear of something is often worse than the thing itself must have leased a vehicle. The end of the auto lease and the accompanying inspection evokes dread for many first-time lessees, who worry about being hit with excess wear-and-tear charges.

Most have images of hard-nosed inspectors going over the vehicle with a fine-tooth comb and tallying costs for every little thing, from a scratch on the bumper to a scuff on the seat.

However, industry experts insist those fears are unfounded as long as lessees understand what's expected of them and treat the vehicle as their own.

Jeff Dobson, of Hallmark Toyota in Orangeville, Ont., recognizes "there are definitely fears when returning a vehicle at lease end" and says the biggest concern is paying for excess kilometres.

Excess mileage headaches
All lease contracts specify the number of kilometres allotted (usually about 24,000 per year). Anything above and beyond is subject to charges ranging from about six cents per kilometre to upwards of 20 cents.

Karen Moffatt was a sales rep based in Kitchener, Ont., when she leased her first car. At the end of the lease, she was hit with a $3,000 bill for excess kilometres. "My second lease, I was so far over my kilometres that the buyout to purchase the car was cheaper than my kilometre overage, so I purchased the vehicle," she recalls.

While Moffatt knew she'd owe for extra kilometres, wear-and-tear charges weren't an issue. "I always kept up my vehicles as if I owned them," she says. "I had the normal dents from door bangs in parking lots, but I considered that normal wear and tear."

So did her leasing company. However, not all lessees and lessors see eye to eye when it's time to hand over the keys. In fact, what's considered normal wear and tear differs from leasing company to leasing company.

Defining normal wear and tear
Most people lease through the financial arm of a vehicle manufacturer, such as Ford Credit, GMAC or Honda Canada Finance Inc. However, some dealers also have in-house leasing programs, and there are a few independent leasing companies, and each company sets its own standards for lease returns.

That's why it's essential that lessees read and understand their contract, mileage limits, what they're expected to do as part of the vehicle's regular maintenance and how the lessor defines excess wear and tear.

"The general rule is the more expensive the vehicle, the more picky they are," says Paul Timoteo, president and CEO of Armada Data Corp., which operates CarCostCanada, an automotive pricing website for consumers.

An ounce of prevention
While some top-of-the-line manufacturers, such as BMW, have full maintenance packages as part of a lease, most lessees are financially responsible for maintenance from oil changes to replacing brake pads or worn tires.

Failure to service a vehicle regularly and repair damages often come back to haunt lessees at the end of their contracts.

"Many lessees believe that as they do not own the car, and can simply drop it off in four years, that they have no responsibility for the maintenance and upkeep of the car," says one industry executive, who spoke on the condition of anonymity. "I have talked to countless people that believe they do not have to change the oil or clean the car. Bringing your lease back to the dealership dirty, full of cigarette butts or with that great hockey equipment smell is just asking for trouble."

In addition, you should keep detailed records and receipts for all maintenance and repairs. "The old belief that dealerships are the most expensive place to take your car for service is no longer true. The upside of using the dealership is that at the end of your lease, they have a paper trail of all the work you have done, which will quickly end a lot of end of term debates."

Also, routinely ask your service adviser if your vehicle's wear and tear is normal and get him to document this on your repair order.

The dreaded inspection
To further avoid expensive surprises, have your vehicle pre-inspected by an authorized agent a month or two prior to the end of lease -- this way you have time to resolve issues, such as replacing worn tires or fixing unacceptable dents and mechanical problems.

Often, inspectors will come right to your home or office. "On that inspection day, get your car washed -- make it look as pretty as you can," says Timoteo, adding the vehicle will be scrutinized equally inside and out.

The process usually takes about an hour, and it's smart to stick around, ask questions and ensure you fully understand any issues.

"We have a check list that has to be filled out on every lease return," Dobson explains, noting that the inspector uses a picture of the vehicle to log large scratches, dents, wheel cover scuffs, chips or cracks in the windshield, torn upholstery or other interior damage.

"We expect stone chips, tire wear, door dings," he says. "Any damage that would normally be fixed through insurance should be fixed."

Timoteo says the best way to gauge what's acceptable is to "look at your car at the end of your lease with buyers' eyes." In other words, if there something that would deter you from buying the vehicle, fix it.

As a general rule, he offers the following advice: "If you can hide the damage with a twoonie, you can get away with it."

The fearless lessee checklist
Here are some final tips on how to avoid end-of-lease charges:

• Do not customize your vehicle in any way, such as tinted windows, body stickers etc.
• Regularly service your vehicle, and keep thorough maintenance records.
• Have your vehicle washed, detailed and waxed before inspection.
• Ensure all tires match and are in good condition.

While the definition of normal wear and tear is subjective and differs from company to company, industry experts say common sense prevails. Bottom line: If you understand your contract and maintain your vehicle accordingly, end-of-lease fears are unfounded.

Michelle Warren is a freelance writer in Toronto.