Like any parent, Jamie Burson didn’t want her 11-year-old son to discover how frightened she really was about the novel coronavirus. But it’s hard to mask anxiety when you’re living and sleeping together in the same car.
After Burson was evicted from her two bedroom apartment in Vacaville the second week of April, she heeded Gov. Gavin Newsom’s order to shelter in place by cooping up in a two-door sedan near her Walmart job. With school campuses shuttered, her son propped his school-issued laptop on top of the glovebox and attended class in the same passenger seat he slept in.
It helped that he could occasionally spend a night at a relative’s or friend’s house, although Burson hesitated to ask to sleep there herself, partly out of fear of spreading the virus to friends and family.
“I was scared because of how many people were dying on a daily basis,” said Burson, who was evicted for a late February rent payment. “Made me feel like mankind was going to go extinct. I’ve never lived to see any type of disease take people out the way this one has.”
More than 1,600 California households like Burson’s have been evicted since Newsom declared a statewide state of emergency March 4, according to data CalMatters obtained via public record requests from more than 40 California sheriffs’ departments. Nearly a third of those evictions took place after Newsom’s March 19 shelter-in-place order, and more than 400 since Newsom issued a self-described March 27 “eviction moratorium.”
The 1,600 evictions are likely a significant undercount of how many renters have been forced to leave their homes since the pandemic struck, as both court-sanctioned and informal evictions often do not show up on the sheriffs’ lockout lists obtained by CalMatters. Additionally, sheriffs’ departments in 14 counties did not respond to data requests; more than 14 million Californians live in those counties, including Los Angeles County with 10 million residents.
Newsom’s moratorium — which tenant groups criticized as belated and inadequate — focused on delaying eviction cases related to financial hardship from the pandemic until May 31. An April 6 emergency rule passed by the Judicial Council, the governing body for the state court system, went further, halting nearly all eviction court proceedings in California.
But neither Newsom’s executive orders nor the Judicial Council rule addressed a major subset of eviction cases: tenants like Burson who already lost in court, often for missed rent payments in February or March, and were simply waiting on sheriffs’ deputies to lock them out. Federal eviction moratoria also did not stop these evictions.
As state lawmakers scramble to find a solution for a looming “eviction wave” when courts reopen as early as this month, tenant groups and public health experts warn that the loophole in state protections continues to endanger renters who may become homeless or move into unsafe and overcrowded housing.
Just last week, the Los Angeles County Sheriff’s Department resumed serving its backlog of nearly 1,000 scheduled eviction lockouts, even as the county remains on a state watchlist for surging coronavirus cases. When performing eviction lockouts in the past few months, San Bernardino County sheriff’s deputies encountered two separate households where tenants claimed they were quarantining because of COVID-19, according to a sheriff’s spokesperson. Those households were allowed to complete their quarantine before being evicted.
“(These evictions) could have been prevented, and it really is distressing to hear that this many people have been evicted when we have these shelter-in-place orders,” said Madeline Howard, senior staff attorney at the Western Center on Law and Poverty, which has lobbied for tighter eviction protections during the pandemic.
Burson now stays in a one-bedroom motel room in Fairfield, paid for by a temporary Solano County homelessness program. She’s unsure where she’ll live once the program ends this week.
Jamie Burson sits on the bed of her motel room in Farfield on August 4, 2020. Burson, who has been living between her car and motels since being evicted in April, says she feels unsafe at the motel and spends all of her time in her room with the curtains closed. Photo by Anne Wernikoff for CalMatters
She was evicted because of a late February rent payment, lost the eviction lawsuit by default when she says she misunderstood how to respond within the legally required five-day window, and was given until early April to vacate the property. She left before she thought law enforcement was scheduled to lock her out.
While she understands that it was technically within her landlord’s right to kick her out, she wonders why the eviction wasn’t postponed.
“Why wasn’t everything set aside, period?” said Burson, who had been living in the Vacaville apartment more than a year.
ROEM Development Corporation, owner of the apartment complex from which Burson was evicted, and FPI Management, the building’s property management company, did not respond to requests for comment.
Upon being informed by CalMatters that Burson was no longer occupying the apartment, Todd Rothbard, the landlord attorney who represented ROEM in the eviction lawsuit, said his firm would consider no longer contesting a legal motion Burson had filed to remove the eviction from her record. Evictions stay on tenant records for seven years, and can make it very difficult for renters to find another place to live.
But although Rothbard sympathizes with some tenants, he pushed back on the notion that Burson should not have been evicted in the first place.
“Life can be hard,” Rothbard said. “To the extent people need help, it’s nice to see when society is able to provide help. But it is somewhat unfair to say to a landlord who is in business ‘Hey, it’s now your obligation to support this person.’ Because it’s not.”
Rothbard also said Newsom and the Judicial Council have already overstepped their constitutional powers by the eviction protections they’ve mandated. Instructing sheriffs to not perform eviction lockouts would likely be challenged in court.
Some constitutional law experts say it’s at best unclear what is and isn’t within Newsom’s power when it comes to “enforcing writs” in eviction cases — legalese for court orders to sheriffs’ departments to perform lockouts. Separation of powers between the court system and the executive branch complicate his authority.
“While a governor possesses broad authority under the Emergency Services Act to respond to the pandemic, directing county sheriffs to disobey or slow-walk lawful court orders is beyond a governor’s emergency powers,” said Stephen Duvernay, a senior research fellow at UC Berkeley’s California Constitution Center.
But pro-tenant attorneys disagree, arguing Newsom has remarkable powers during public emergencies — powers they urged the governor to deploy in early March as the first reports of hospitalizations and deaths mounted.
Navneet Grewal, litigation counsel for Disability Rights California, said that there was nothing legally restraining Newsom from ordering sheriffs to stop performing evictions for cases that pre-dated the pandemic. Newsom had included such a provision in one of his executive orders, although it only applied to cases where tenants could demonstrate financial hardship because of the virus.
“I think part of the unique thing here really is that there is no precedent of the situation that we’re in,” Grewal said. “There’s clearly a lot of broad powers to deal with emergencies; we just haven’t had an emergency like this in our lifetime.”
The Newsom administration declined multiple requests for comment.
Tenant groups also approached Attorney General Xavier Becerra to intervene.
“The reports of ongoing evictions in communities across the state and in the midst of the public health crisis are profoundly troubling,” Becerra’s press office said in an emailed statement. “Our office does not have the authority to direct Sheriffs to refuse to comply with lawful orders issued by Courts hearing eviction cases.”
But pro-tenant lawyers say Becerra is constitutionally empowered to oversee how local law enforcement executes court orders.
“I think the attorney general seems to have some priorities that are focused on dealing with the Trump administration, which are obviously very important,” Howard said. “But some of these very important issues are not getting addressed.”
On the morning of March 19, Sgt. Lydia Montoya anxiously awaited an announcement from the governor. She had heard news reports that a shelter-in-place order was coming.
The civil unit she oversees at the Kings County Sheriff’s Department had performed three evictions already that day, which they believed they were legally obligated to carry out. But Montoya and other officers in the department harbored concerns about the potential health risks — to the community and the deputies themselves — of pushing renters onto the street.
When Newsom issued the shelter-in-place order that afternoon, Montoya believed she had the legal justification she needed to stop evicting people. Conferring with a county attorney and the publicly elected sheriff, the department decided to stop performing eviction lockouts except in emergency cases that threatened public health and safety. Six evictions on their calendar have been indefinitely postponed. If the shelter-in-place order had come a day earlier, so would the three performed the morning of the 19th.
“The (shelter-in-place) order implies that it is a public safety issue to have people out and about,” said Montoya, who also supplied her deputies with handmade masks before her department acquired personal protective equipment. “And certainly evicting people, them out and about looking for rentals or whatnot, or making them homeless, is not in line with his shelter-in-place order.”
But not every California sheriff’s department shared Kings County’s interpretation of the governor’s executive order. Without clear guidance from the state, individual sheriffs’ departments were left to choose whether to continue with evictions already on their lockout calendars.
Many did just that. According to data obtained by CalMatters, three counties in the Inland Empire and Central Valley led the pack: San Bernardino, with 135 evictions since shelter-in-place; Riverside, with 93; and Kern County, with 68.
“It was a combination of considerations looking at both sides, obviously with the stay-at-home orders as well as the other side of the actual landlords and the people that own the property and their ability to make rent, pay bills and things like that,” said Adam Plugge, a commander at the Kern County Sheriff’s Office that oversees its eviction unit.
After Kern County sheriff’s deputies paused lockouts in late March, Plugge said his department fielded phone calls and emails from frustrated landlords and attorneys, including those referred his way from local elected officials. The lockouts resumed in April.
Plugge said that an explicit directive from the state would have avoided considerable confusion.
“It would have made decisions a lot easier to decide whether or not something could be done, and I think it would have been clearer for the public as well going forward in any shape, fashion or form,” Plugge said.
Evicting without masks
On July 1, deputies from the Humboldt County Sheriff’s Department showed up at 7886 Myrtle Avenue in Eureka to tell Ernie Bull and Mary Wildman the two had to leave.
Bull, 59, had lost a dispute with his step-brother about who should inherit the property he had been living at with his late father and step-mother. Bull said he missed a key court date because he accidentally dialed into the wrong Zoom number for a remote court hearing. Humboldt County Superior Court stopped in-person hearings because of coronavirus.
A group of Wildman’s friends were there to help them with the move. While some of their friends wore masks, Bull and Wildman didn’t — and neither did the sheriff’s deputies who came to evict them.
“If we can socially distance 6 feet away, then we’re not going to wear a mask,” said Lt. Mike Fridley, who oversees the department’s eviction unit.
While he couldn’t speak to the specifics of Bull and Wildman’s eviction, Fridley said that his deputies carry masks with them, and can put them on at their own discretion. Wearing masks makes it difficult for the deputies to use their radios, he said.
Like most sheriffs’ departments, Humboldt County deputies typically perform multiple lockouts on the same day at different addresses. On the day they evicted Bull and Wildman, three other addresses were scheduled for lockouts, according to sheriff’s department documents.
Asked if he believed there was a health risk in performing multiple evictions on the same day, Fridley said “I wouldn’t see any more risk than five people going to the cashier’s line in Costco.”
Dr. Margot Kushel, director at the UCSF Center for Vulnerable Populations, said she knows of no documented case of sheriffs’ deputies spreading coronavirus through eviction lockouts. But she does fear a “nightmare scenario.”
“If you had a situation where there was a group of deputies going into different people’s households in a highly charged atmosphere, where people might be upset and might be yelling, I think you could potentially have risks for both the deputies going in and for the households being evicted,” Kushel said.
Other sheriffs’ departments interviewed for this story say they require deputies to wear protective gear while performing lockouts.
Neither Bull nor Wildman — who has kidney problems — have shown symptoms of the coronavirus since the eviction. Wildman has been staying at a friend’s place, while Bull has slept outside.
“I want to stay away from people. I’m scared,” said Bull. “I gotta admit, I’m scared.”
Of course, keeping tenants in a unit for multiple months while they can’t pay rent has a cost. For Karen Clark, that cost is $10,000 — and the fear of falling behind on her mortgage.
Clark, who owns and lives in a triplex in walking distance from the University of Southern California, rents one of her units to a single father and his twin teenage daughters. She was charging $2,400 for the unit — a deal she said was well below market value for the three-bed, three-bath home near downtown Los Angeles.
“I just really liked them and I wanted to help them,” said Clark, who preferred the stability of renting to families instead of students.
Her tenant began to fall behind in his rent payments last fall when his catering business began to decline, according to Clark. Then COVID-19 hit this spring — evaporating most of what remained of her tenant’s income and, along with it, the rent.
Clark said she had seriously considered evicting the tenant in March, but never filed the necessary paperwork with a court. Now those courts are closed to new eviction cases, and Clark said she has been digging into her savings to pay for utilities and other costs. She has explored forbearance options on her mortgage, but was scared of the prospect of a lump-sum payment due at the end of the forbearance period.
“I don’t know what to do,” said Clark, who has kept her job working at City National Bank during the pandemic. “I’ve got to get my cash back. I went through some of my savings, now I’m robbing other bills. It’s just not gonna give forever.”
Clark helps financially support her son and grandchild in Oregon, and rents her other unit to her daughter and son-in-law. When courts resume eviction proceedings, she plans on filing.
While sheriffs’ departments across the state continue evictions for cases that pre-date the pandemic, Newsom and state lawmakers are scrambling to head off what experts say is a looming “eviction wave” of tenants who have lost their income because of COVID-19.
A U.C. Berkeley analysis found that as of June, nearly 1 million renter heads of households in California lost their job because of COVID-19.
Two proposals to compensate landlords and prevent more evictions are making their way through the Legislature, but both face daunting questions about how they’ll actually work.
California State Supreme Court Chief Justice Tani Cantil-Sakauye, who chairs the state Judicial Council, said the state court system could resume eviction proceedings as early as Aug. 14th. If tenants contest them, proceedings can take weeks. Because supplemental federal unemployment benefits of $600 per week expired last month, tenants groups fear swelling ranks of renters unable to afford a roof over their heads.
Unless the state intervenes or a new round of federal support is extended, 24-year old Gabriella Aldana is one of those at-risk renters, and could be evicted for the second time since the virus hit California.
Just before 10 a.m. on March 26, three Riverside County Sheriff’s deputies banged on Aldana’s front door. None of the deputies wore a mask, she said, and they told her she had to leave the premises with her two children, ages 6 and 3. The family was permitted to take only what they could carry.
Aldana, then two months pregnant, and her two children piled what they could into her 2013 Honda Accord and drove off into a pandemic at a time when public health officials didn’t know much about the virus.
She left her job at Walmart, she said, over fears of infecting her daughters or complicating her own pregnancy. The night of her eviction, she stayed in a hotel, then moved in for a few days with her parents. She eventually found a studio apartment for the April for $1170. After that, they moved into a two-bedroom duplex in downtown Riverside. The new place is beyond their current means, but also the only place that would accept Aldana, who said she has bad credit.
She has survived on unemployment benefits and, especially, the $600 weekly federal unemployment boost.
If the federal unemployment boost isn’t renewed by late August, Aldana and her children will likely once more be evicted. Even if she gets one of the jobs she’s interviewed for recently, her monthly take-home pay after taxes would be about $1,600. Her rent is $1,595.
“I have some savings to cover some of (rent) next month, I might look for a roommate if the job doesn’t come through and the (federal unemployment benefits) goes away,” Aldana said. “I have to start looking for all of that because now it’s just me.”
Ben Christopher contributed to this article.
This article is part of The California Divide, a collaboration among newsrooms examining income inequity and economic survival in California.
Red-hot market: Tips for first-time homebuyers
With Long Island’s housing market sizzling hot, the process of buying a new home can seem like a daunting one. It doesn’t have to be.
To help first-time homebuyers chart the waters of buying in this market, Newsday Live hosted a question-and-answer session Tuesday with local housing experts as part of its web series “Hot Tips for a Hot Market.”
The virtual session, moderated by Newsday anchor Faith Jesse and residential real estate reporter Maura McDermott, included Tricia Gleaton, vice president of the Homeownership Center at the Community Development Corp. of Long Island, and Quentin Hardy, branch leader with Movement Mortgage in Huntington.
Responses have been edited for length and clarity.
Where should buyers get started? And what first steps should they take?
Gleaton: For somebody who’s looking to buy a home for the first time, a great place to start is by seeking out homebuyer education and counseling. A lot of people aren’t aware they exist. And part of that process will be to help establish a budget, understand what’s affordable and what’s going to be [financially] comfortable long term … and then getting access to loan programs, down payment assistance and closing costs, and grants that are out there that may be leveraged in the home purchase.
Many first-time homebuyers don’t have the standard 20% down payment. What tip can you give them on saving up? And what options do buyers who don’t have 20% to buy their first home have?
Hardy: There are lots of options. I think the phrase “the standard 20%,” that’s not the standard. It’s sort of a myth and a belief that’s been propagated but I bought my first home back in the late 1990s with 3% down. Fannie Mae, Freddie Mac, FHA … there are lots of 3%, 3.5% down payment programs so you do not need 20% as a first-time homebuyer. There are lots of low down payment options buyers should look into. I know for my first home, we had to sacrifice. I lived at my parents’ house as an adult, married with a child because that’s what we needed to do to save up to buy our first home.
Gleaton: Many lenders offer down payment and closing cost assistance as well as state [and municipal] grants. There are programs available where someone can rent with the plan that they’re moving forward with the purchase of the home. And there are unique programs. One of the programs CDC of Long Island offers may help [people who are] Housing Choice Voucher holders, commonly known as Section 8.
A lot of people have blemishes on their credit report. So what can people do if they have bad credit, but they still want to get a home?
Hardy: I think where we have to start is with that word bad. How bad is bad? You can have credit that’s so poor that you cannot get a home loan. But there are banks that will do loans at 580. There are situations where you can get loans as a first-time homebuyer even if you have bad credit. It can be low enough that you’ve got to work on the credit first, though it would probably be a great start to have a conversation with a professional about how bad bad is.
The market is hot right now. Should buyers try to wait it out in hopes that it’ll cool down?
Gleaton: It is a very competitive market right now but that hasn’t necessarily dampened people’s desires to become first-time homeowners. One of the things that we tell people is you don’t have to rush … it doesn’t necessarily mean you don’t want to continue your search. Continue to save, continue to work toward your purchase, but be patient recognizing that you want to make an informed decision that’s not emotional. Be careful with bidding wars. Take your time to do your search and research in a methodical way. Be patient. The right home is out there for you.
Hardy: The general rule is it’s not the timing of the market, it’s time in the market … so that now is a good time to buy.
Car Leasing Guide: Everything You Need to Know
At first blush, car leasing seems like a grand idea. After all, you can get more car for the same monthly financing payment. Who wouldn’t want that? Well, there’s a lot more to weigh between financing and leasing than simply getting more car for your buck. Although, that is the primary reason people lease.
Numbered among the other reasons people lease is the thrill of that new car smell. Some folks simply like the idea of driving a new car every two or three years. Leasing also streamlines writing off your vehicle as a business expense at tax time.
Another reason to lease is that sometimes the carmakers offer really sweet leasing deals that aren’t available to those financing a car purchase. Repeat leasers also always have a car that’s usually under a factory warranty. And finally, when the lease expires, you don’t have to negotiate a trade-in value or go through the selling process. You just hand over the keys and walk away. Easy peasy, right? Well, usually. Read on.
What is a Car Lease?
A car lease is basically a long-term rental for a contracted number of months. Unlike financing a car purchase based on you eventually owning the car, leasing is like a long-term rental. You are still locked into the deal for a contracted number of months and a monthly payment.
However, instead of paying down a loan and building equity, you are paying for the car’s estimated lost value (depreciation) during the term (length) of the lease. You are paying for that and the interest on the money borrowed to underwrite the lease.
What Do You Need to Know Before Leasing?
Arguably the key concern when considering car leasing is, on average, how many miles you drive yearly. According to the United States Department of Transportation, most Americans drive a total of 13,476 miles per year.
Signing a lease binds you contractually not to exceed an established mileage limit. That limit, or mileage cap, is averaged out over the number of years in the agreement.
Depending on the lease, agreements range from 10,000 miles per year to as many as 15,000 miles per year. Whatever the limit might be, the leasing company will penalize you for every mile above the limit. Generally, that penalty can be between $0.12 to $0.30 per excess mile. At $0.30, that works out to $300 for every 1,000 miles over the limit. It can add up.
Can I Negotiate the Price of a Leased Car?
Yes. As with a financing deal, you can save yourself money by negotiating down the car’s selling price you are going to lease.
What is the Money Factor in Leasing?
When you finance a car, you must also pay for the money you are borrowing. What you pay is called interest, and it’s displayed as a percentage (2.5%, 3.0%, and so forth). You need to know the rate of interest you will be paying. The higher the interest rate, the higher your monthly payment.
When you lease, you must also pay for the money the lessor used to buy the car. In leasing, however, the interest is called the money factor. It’s calculated and displayed differently (0.0010, 0.0023, and so forth). How in the world do you know what the interest rate is on a lease, right?
To translate the money factor into a form more easily understood, just multiply it by 2,400. So, 0.0023 x 2,400 = 5.5%. We know: Why don’t they just say that?
Who is Responsible for Maintaining a Leased Car?
The leasing company expects you to maintain your leased car carefully. That means following the maintenance schedule outlined in the owner’s manual. The good news is, many new vehicles come with some sort of free maintenance plan.
At the end of the leasing period, an agent of the leasing company will inspect the vehicle for any damage beyond “normal” wear and tear. Determining what is normal is entirely up to the inspector. If the inspector decides any damage is beyond normal wear and tear, you will be charged for it.
Who is Responsible for Insuring a Leased Car?
You are responsible for insuring your leased car. The leasing company dictates the amount of coverage you must have for the vehicle. Determine what those amounts will be and contact your automobile insurance agent to establish the annual premium before you lease.
What if I Want Out of My Lease Early?
It bears repeating: A car lease is a binding contract. The leasing company sets the monthly payments based on the length of the lease established in the agreement. If for some reason — any reason — you want or need to bail on the lease early, there will be a penalty for doing so.
At worst, that penalty may require a balloon payment to cover the remaining outstanding payments. You can’t just return the leased car or sell it to pay off the leasing company. It’s not your car, and you have no equity in it.
Market conditions these days make it possible to negotiate with a dealership if you’re planning to buy a car. Or, because the used car supply is tight, dealerships may be more willing to make a deal to get you out of your lease early.
Brokers with auto lease transfer companies like swapalease.com can also attempt to connect you with a deal that lets you sign over the lease to someone else.
Before you make any choices, weigh all your options to determine the best option for you.
How Does My Credit Affect Car Leasing?
As with financing a car purchase, a leasing company will use your credit score and history to determine whether or not it will lease to you. Roughly 83% of new car leasing during the first three months of 2021 was to borrowers with a credit score above 660. This is according to the national credit bureau Experian. It also found that the average credit score for leasing during that period was 734.
If your credit score is 501 to 660, you may be able to find a lender willing to lease to you, but expect to put down a hefty down payment. Also, you can expect to be tagged with a higher-than-average interest rate.
It has always been true that leasing generally requires better credit than financing. When leasing, you have little or no skin in the game. All you stand to lose if you stop making your lease payments is whatever down payment you made.
You don’t now and never will have any equity in a leased vehicle. You are really renting it, remember? Leasing companies know you have little to lose. Consequently, they tend to be pickier when evaluating lessees rather than buyers.
RELATED STORY: Can I Buy a Car with Poor Credit History?
Car Leasing vs. Buying
Whether you lease or buy and finance your next car, you will be obligated to make a monthly payment. In most cases, both will also require some amount of money upfront. When financing, it’s usually a down payment of some sort.
With leasing, you may have to put up a security deposit, the first month’s lease payment, a fee for arranging the lease (acquisition fee), a down payment, or some combination of those. In either case, there are also car title and registration fees.
Pros of Leasing
Because you are only paying for the estimated depreciation while driving the car and not the entire purchase price, monthly leasing payments tend to be lower than financing payments. It simply means your money will go farther leasing a car than financing one. A lower monthly payment is the top reason people give for leasing. It isn’t the best reason, but it is the most common.
Another perk of leasing is the freedom to drive a new car every two or three years with no strings attached. A side benefit of having a new car every few years is, you probably will always have a vehicle protected by the factory new car warranty. There may even be a free maintenance warranty for a portion, if not all, of the lease. And, every couple of years, you can have a car with the most up-to-date technological advances.
At lease end, you don’t need to worry about the hassle of selling the car or negotiating its value as a trade-in. You drop the keys on the lessor’s desk and walk away.
Leasing is better geared to writing off the cost of driving on your taxes if you can deduct business expenses.
Here’s some excellent news: If you still like the car at the end of the lease, you can buy it. Because the leasing company estimated what the car would be worth at the end of the lease (the residual value or residual), they may have guessed wrong.
If they underestimated the car’s worth at the end of the lease, you could cash in by buying that car for less than the current market value. It’s the smart thing to do in a tight market when supply struggles to meet demand.
RELATED STORY: How to Profit from an Off-lease Car
Cons of Leasing
Yes, the idea of driving a new car every few years with the benefit of always being under warranty is tempting, as is that lower monthly payment. Sadly, though, it means you will never build any equity. What you pay for with a lease is the depreciation. A car will lose roughly 35% to 40% of its value in the first three years. At the end of the lease, you won’t have a thing to show for those two or three years of payments.
Typically consumers sign a closed-end lease. There are also open-end leases. The difference is discussed in What Are the Types of Leases? in the section below. Closed-end is the type of lease covered here.
Driving a leased car is like counting calories to lose weight — every mile driven counts. Every lease comes with a mileage limit. It may average out as low as 10,000 miles per year, although 12,000 miles is more likely. You may be able to find a lease with a yearly cap of 15,000 miles. There are even some more expensive high-mileage leases on the market.
You’ll pay more per month but may avoid getting slapped with a mileage penalty at the end of the lease. That penalty is usually about $0.25 per excess mile. If you do a lot of driving, that can really add up.
The leasing company will hold you accountable for anything beyond its definition of normal wear and tear. You will be on the hook for any repairs the lessor deems over and above normal. Suddenly, with the excess mileage fee and damage fee, returning that leased car isn’t the easy-peasy experience expected.
Leasing is also like joining a street gang. Once you’re in, you’re in. Suppose some change in your life creates the need to get out of the lease early? Good luck. You may find yourself faced with owing a balloon payment equal to the outstanding payments on the lease. At the very least, you will have to pay some sort of stiff penalty. There are online companies like swapalease.com, brokering deals between people who want out of a lease and people willing to pick up a lease. But, such brokered deals will cost you, too.
Pros of Buying
The top advantage to buying versus leasing is that the vehicle is yours when the loan is paid off in five or six years. There will be the value you can cash in by selling or trading it in as a down payment on another car. It’s an asset. Of course, you can always decide to drive it until the wheels fall off. No payments for another five years or more is a pretty good perk. Especially when you consider by year four, the repeat lessee is paying for the depreciation on a second new car and still gaining zero equity.
Getting out from under your car loan is much easier than breaking a lease. As long as the lienholder is paid off, you can sell or trade in your car at any time.
Cons of Buying
Particularly if your credit is a bit sketchy, you may want to put down a larger down payment of around 20% if you want better odds of getting approved. That would be $5,000 on a $25,000 car. Leasing would allow you to keep at least some of that up-front cash.
Depending on the length of the loan, depreciation, and the way interest is calculated, you may owe more than the vehicle is worth until the last year or so of the loan. By that time, the car warranty may well have expired, too. Not only do you have to continue making payments on a 5- or 6-year-old car, but you may have to pay for any repairs out of your own pocket.
The Differences of Leasing a Car vs. Buying a Car
You can draw some fairly strong contrasts between leasing and financing. Both have advantages and disadvantages. Short term, a lease will cost less. In the long run, however, two leases will cost more than buying one car. And, at the end of five or six years, the loan will be paid off, and whatever value the car retains will be yours.
Here are some other stark differences.
- Monthly payments: Leasing payments are almost always lower than financing payments on the same vehicle.
- Early Termination: You will pay a hefty fee if you want to end a lease early.
- End of term: Although you may owe some penalties, you can just hand the car back to the lessor at the end of the lease.
- Mileage: A lease restricts the annual mileage. Exceeding that mileage will cost you big.
- After-market: A leased vehicle is not yours to do with as you wish. Any alteration will cost you.
- Taxes: Leasing a vehicle allows you to write off the monthly payments as a business expense if you’re eligible.
- Warranty: Most leased vehicles come with a warranty that will likely cover your car for the duration of the leasing period, saving you money should something happen to it.
- Monthly payments: For the same vehicle, financing payments will almost always be more than leasing.
- Early Termination: You can sell or trade in a financed vehicle at any time, as long as you satisfy the loan balance.
- End of term: When the loan is paid off, the car is yours to keep, sell, or trade in.
- Mileage: There are no mileage limits with a financed car.
- After-market: Financing a car allows you to make it yours. Take care not to void the warranty. Otherwise, customize it to your heart’s content.
- Credit: If you have bad credit, you will most likely have to put down a bigger down payment to get approved.
Leases aren’t one size fits all. The leasing concept doesn’t vary, but the contract details do.
What is a Closed-End Lease?
A closed-end lease is the most common form of leasing. Sometimes called a “walk-away” lease, it sets firm terms, allowing the lessee to walk away at the end of the lease. All variables like the length of the lease, monthly payments, and the mileage cap are established in the leasing contract. As long as the contract terms get met, the lessee can just drop off the car at the end of the lease. The lessee also has an option to buy the vehicle at a pre-determined value.
What is an Open-End Lease?
An open-end lease is a bigger gamble for the lessee, who is accepting more of the risk. Typically that lessee is a commercial enterprise or business. The leasing company still sets a residual value and the monthly payments. Luckily, open-ended leases usually have more flexible mileage options than their closed-ended lease counterparts. However, unlike a closed-end lease, it’s the lessee taking the hit if the residual value at the end of the lease is less than the vehicle’s actual market value. The lessee must pay the difference.
What is a Single-Pay Lease?
Also called a one-pay lease, this is a lease in which you pay the entire run of monthly payments upfront. There are two primary reasons for going this route. One, it usually reduces the interest or money factor rate. You wind up paying hundreds less than if you were to pay monthly. Two, if your credit is questionable, a single, up-front payment may motivate a leasing company to take a chance on you.
How Long is a Car Lease?
You may find carmakers offering leasing specials of odd durations, 39 months, for instance. But, generally, leases are for 24 or 36 months. You can, however, find leases out there for longer terms. As with financing, the longer the term of the lease, the lower the monthly payment. That difference, though, may not be much.
What is a Leasing Mileage Cap?
Even when you finance a car, the higher the mileage when you sell it or trade it in, the less it’s worth. The difference with leasing, the lessor factors in a specific number of miles when estimating depreciation. Over the course of a lease, the allowable mileage or mileage cap might average out to 10,000, 12,000, or 15,000 miles per year. Exceeding the mileage cap reduces the car’s value at the end of the lease. This is why a leasing company will charge you a predetermined penalty for each mile over the cap. Be sure you know the per-mile penalty before signing the lease.
Can a Car Lease Be Extended?
Say you haven’t found a replacement vehicle, and you are at the end of your lease. Is there a way out? Yes, most lessors will gladly extend the lease on a month-to-month basis or for a fixed number of months. You will have to continue making the monthly payment. Also, in the case of a multi-month extension, you may have to sign another contract.
What Are the Key Leasing Terms I Need to Know?
We have been using some reader-friendly shorthand in this guide, but here are the formal leasing terms you should understand.
- Acquisition Fee: This is a fee a lessor charges for setting up the lease. This fee varies greatly and can be as much as $1,000. Ask before signing any lease what fees get included in the acquisition fee. Fees you might see could include destination charges and documentation fees for processing the lease title, license plates, and car registration. It is firm and can’t be negotiated away. However, it can be folded into monthly payments.
- Allowable Mileage: Also called the “mileage cap,” it is the average number of miles per year you can drive the car. The lessor will penalize you for every mile above that number.
- Capitalized Cost: This is the agreed-on selling price of the vehicle plus any fees to be included in the monthly payments.
- Capitalized Cost Reduction: Also called cap reduction, it is any element lowering the capitalized cost. It usually takes the form of a down payment or trade-in allowance.
- Depreciation: The lost value of the vehicle over the course of the lease is the depreciation.
- Disposition Charge: This is a charge to clean and dispose of your car at the end of the lease. You may be able to negotiate it away if you buy the car or lease another from the same agency.
- Drive-Off Fees: Any fees and deposits due to begin the lease. Don’t forget that sales tax will be due for your lease transaction. Ask the lessor what fees are included in the drive-off fees. You may be able to negotiate some of the lessor’s tacked-on fees.
- Early Termination: Breaking a lease contract before the end of the leasing period. If you want out of your lease early, it will cost you dearly. You may need to come up with a sum of money equal to the remaining payments.
- Gap Insurance: Some leases automatically include gap insurance in the capitalized cost. If the car is a total loss through theft or collision, your insurance may not cover the entire loss. Gap insurance pays for what your car insurance doesn’t pay.
- Lessee: The party leasing the car.
- Lessor: The entity financing the lease. It could be a bank, credit union, or a carmaker’s financial division.
- Money Factor: In financing, this is called the interest rate, but it looks markedly different. As with financing, though, the higher the money factor, the larger the monthly payment.
- Payoff Amount: This is what it will cost you to buy the car at the end of the lease. It should be roughly the residual amount minus any security deposit.
- Term: The length of the lease.
Is it Possible to Lease a Car for One Year?
It is possible to lease a car for one year. But, why would you? A car depreciates as much as 30% by the end of the first year. Because your monthly payment is based on depreciation, that one year will be wildly expensive. You might do better with a long-term rental car. It’s worth checking out. Another idea you could try is a club. These are offered by luxury car club leasing companies and sometimes by manufacturers. The clubs allow members to drive new models for short periods of time. They usually include insurance and don’t require a long-term contract.
Can I Lease a Used Car?
Yes, you can lease a used car. In fact, most dealerships offer leasing incentives on their certified pre-owned (CPO) vehicles. These are gently used, newer model cars with factory warranties and other CPO benefits.
How to Lease Your Car
For the most part, the process of shopping for a leased car is about the same as shopping for a vehicle you plan to buy. Research is the key. Other steps to take include:
- Check your credit score. A credit score under 600 will be a very tough sell. When your credit score is low, the down payment is typically larger to get approved. The higher your credit score, the lower the money factor.
- Crunch the numbers. Figure out how much cash you can pay upfront. Some deposits and fees must be paid when you sign a lease, and many are not negotiable. The lessor may also demand a down payment.
- Determine the average annual mileage you drive. Your lease will have an average annual mileage cap of 10,000 to 15,000 miles. Be realistic about your driving habits. You will pay a penalty for every mile over the cap.
What to Look For in a Vehicle to Lease?
Find a model that retains its value. Some brands of vehicles simply retain more value as they grow older. Brands like Subaru, Lexus, Jeep, and Ram tend to retain much of their value through the years. When you buy a vehicle, value retention is important, but not until you sell it or trade it in. Value retention in a leased vehicle is important because the more value a leased vehicle is expected to retain, the lower the monthly payment.
What Questions to Ask Before Signing a Car Lease?
Here’s a list of questions to consider asking the dealership or other lessor before you leap.
- What is the residual value for the car I’m leasing?
- Once the lease ends, what is the price I can buy the car for?
- What is the money factor? If you don’t want to do the math, ask for it in percentage form.
- What is the monthly payment grace period?
- What is the delinquent fee for late payment?
- Will I be charged any other fees at the end of the lease?
- What are the penalties for early lease termination?
- What is normal wear and tear?
- How much do you charge per extra mile driven?
How Can I Reduce a Monthly Lease Payment?
- Reduce the capital cost by negotiating a lower vehicle purchase price.
- Ask for a lower money factor. Particularly if your credit score is over 750, go for a lower rate.
- Put additional money down or, if there’s a trade-in, negotiate for a higher trade-in value.
- Shop other dealers for a better deal.
What Are the Negotiating Points in a Lease?
- The vehicle purchase price is framed as the capital cost.
- The down payment.
- The trade-in value.
- The money factor.
- The disposition fee.
What Can’t You Negotiate in a Lease?
- Residual value is generally set in stone. You can give it a try, but don’t expect much.
- Acquisition fee. This is a charge that lessors rarely budge on.
Read Related Car Leasing Stories:
MTA’s ban on cash payments at station booths draws heat from advocates, pols
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The MTA’s decision to permanently end cash payments at station booths drew the ire of advocates and politicians Thursday, who accused transit honchos of depriving access to tickets for riders without bank accounts.
“Governor Cuomo must let transit riders pay with cash at subway booths. With one-third of New York City residents unbanked or underbanked, cash remains essential for millions of people.” said Betsy Plum the executive director of Riders Alliance in a June 24 statement.
At an MTA press conference on June 24, Chief Safety Officer Pat Warren said, in response to a reporter’s question, that the agency would continue its pandemic-era ban on cash transactions at the booths indefinitely, citing the rollout of its OMNY tap-payment system as making the booth transactions redundant.
“We currently do not plan to resume cash transactions in the booths,” Warren said. “We’re changing to the new OMNY system, which is the largest change that’s going on in the system… so there really is no need for it.”
Commuters with damaged MetroCards will have to mail them to the agency for replacement or shlep to MTA’s customer service center in lower Manhattan, reported the New York Daily News.
The City Council in early 2020 made it illegal for businesses to refuse cash, unless shops provided devices converting cash to cards, as is common in laundromats and at larger venues like Barclays Center in Brooklyn.
Warren noted that riders can still pay with cash at the 1,688 ticket vending machines in the system.
“No one should be inconvenienced, the opportunity is there to use cash to get a MetroCard and or we hope you start to use the OMNY soon,” he said.
But Plum and others said that riders will be left stranded any time those machines malfunction, which one advocate described as a “chronic” issue.
“Many low-income New Yorkers do not have access to forms of electronic payment, and as any frustrated straphanger rushing to work during a morning commute can attest, MetroCard vending machines are chronically broken,” said Jaqi Cohen, director of New York Public Interest Research Group’s Straphangers Campaign.
At stations for the MTA’s commuter trains on the Metro-North Railroad and Long Island Rail Road, cash payments resumed at station booths, and one union chief accused the agency of giving preference to suburban riders.
“Are they better than subway riders? Are they more deserving of this level of customer service? It’s an insulting outrage,” read a statement by Transport Workers Union Local 100 president Tony Utano, who represents the majority of the agency’s workforce.
According to city data from 2017, 11.2% of households in the city have no bank account and another 21.8% are underbanked, meaning they have an account but use other financial products for some banking needs.
More than a third of unbanked households, or 35%, are in ten neighborhoods that are predominantly Black or Hispanic, poorer, and where residents are more likely to have no credit score or bad credit and debt, according to the report, and one state legislator decried MTA’s new policy as a direct attack on working class New Yorkers.
“This decision is a crime against poor people, full stop,” said Brooklyn state Sen. Julia Salazar on Twitter.
A spokesman for the governor referred a request for comment to the MTA.
In a statement Thursday afternoon, the MTA’s chief spokesman, Tim Minton, appeared to walk back Warren’s comments from the day before, saying cash payments were merely under review and that transit bigs have yet to make a final decision.
“To be clear, no decision has been made and no decision was announced yesterday regarding cash returning to station booths,” Minton said in a statement. “The MTA continues to review logistics and other considerations associated with accepting cash payments at subway station booths post-pandemic.”
The spokesman noted that MTA still accepts cash payments for MetroCards at its vending machines, its MetroCard Mobile Vans that regularly travel the Five Boroughs, and via 1,470 select merchants and convenience stores.
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