Make sure you read the fine print before you sign that car lease because what you find there could surprise youLeasing a car may not be in your best interest; however, auto dealers don’t want you to know that. They frequently employ tricky maneuvers to tempt you to lease rather than purchase. It’s important to educate yourself on all the ins and outs of leasing so that you can evaluate and make your own decision without “assistance” from the dealer. Below we’ve put together a list of scams most frequently used by auto dealers. Any one of these could cost you a lot of money. Imagine how bad it could be if a dishonest dealer combined more than one of these leasing scams!
1. The dealer offers to take your current car as a trade in, pay off your loan balance on that vehicle (no matter how much is still owed) and lease you a better car than the one you have for lower payments.
Hmmm. What will really happen is the dealer will pay off your old loan as stated. However, making the assumption that you owe more on your current car than what it’s worth for a trade in, the dealer will credit the value of the trade in against the price of the new car then add on the rest of the loan balance you owed to the price of the new vehicle. The payments won’t change for the reason that you’re leasing not buying and will look lower than what you expected. But overall, the deal is much worse.
2. The dealer offers to pay the remaining lease payments on your existing lease in exchange for a new lease from them.
This offer opens you up to a number of potential problems. When the dealer makes this offer, most people assume the dealer is taking over responsibility for the entire lease. That’s not what happens. What they’re really doing is just taking over the rest of the payments and when completed, will return the car to the company that originally leased it to you. Depending on the terms of your lease, if there’s any problem with the car (i.e. damages, excessive mileage, etc…) the leasing company won’t send the bill to the dealer; they’ll send it to you. Additionally, if the dealer doesn’t pay the remaining payments, or doesn’t return the car, the leasing company will come after you, not the dealer. Lastly, the dealer won’t really be making those payments anyway, as they will figure out a way to put the price of those remaining payments back into the total price of your new car.
3. The dealer compares their lease interest rate with the rate on their loans, making it look like it’s a better deal.
A lower lease rate would be a great thing, except that’s not the real rate you’ll be paying. The lease rate being quoted is most likely the “money factor” on the lease. This factor number needs to be multiplied by 2400 in order to convert it into an annual interest rate. For example, if the “lease interest rate” quoted is 4%, it’s really .004. Take that number and multiply it by 2400 and you get the actually annual interest rate of 9.6%. Doesn’t sound as attractive now, does it?
4. The dealer stresses the flexibility angle of leasing versus purchasing by promising early withdrawal or changing cars anytime you want.
This is flat out not true and they’re banking on the fact that some people do want to change their vehicles regularly and want to be able to “trade in” a car whenever they want. So the dealer will push leasing as a way to do these things. However, the reality is that leasing contracts actually make it more difficult to change cars and have clauses in them that make it more expensive if you want to end the contract before the designated end date. Lastly, leasing contracts usually don’t allow for the swapping of cars either.
5. The dealer will say lease payments are considerably lower than the payments for purchasing a car.
While it may seem like what the dealer is saying is true about the payments, they aren’t telling you the entire story. Leasing a vehicle is really only beneficial to those who drive less than 15,000 miles a year and live close to the dealer. If you don’t meet these two criteria, then leasing is probably not in your best interest. Additionally, dealers will often increase the lease term from two or three years out to five, in order to lower the monthly payment even more. Leasing for five years as opposed to two or three exposes you to potential expensive repair costs that aren’t covered after the two year warranty expires. All that for a car that you don’t even own. And of course none of these details will be disclosed to you by the dealer. It’s in the fine print.
6. The dealer will tell you that leasing a car won’t show up as a legal responsibility on your credit report because it’s like renting as opposed to paying on a loan.
This is flat out not true. Contracts for leasing a car will show on your credit report just like any other debt commitment you have. Late making a payment? It will be recorded and affect your credit score just like missing a credit card payment or any other loan payment. If having a good credit score is important to you, leasing won’t be any more beneficial to you and in fact may damage your score due to increasing your debt burden.
7. The dealer will try to convince you that leasing a new car first and then purchasing it is the best way to buy it.
In reality, the costs required at the end of a lease when purchasing the car will add on such a greater amount that the total cost of all the lease payments plus those add on expenses will be more than just purchasing the vehicle at the very beginning. However, the monthly payments will be lower for leasing and if that’s more important to you than the total, overall cost, then leasing may be the better option for you. But keep the dealer honest about all the costs due at the end of a lease and don’t let them persuade you otherwise.
8. Dealers may tell you that leasing won’t allow you to factor in discounts or rebates on the price of the car.
Again, this isn’t accurate information. The dealer is taking advantage of the fact that most people don’t understand all the ins and outs of leasing a car, and is trying to convince you that the listed sticker price is always the price of the car when leasing it. The price of a car is always based on discounted, negotiated and/or rebated prices no matter if you’re leasing or purchasing.
9. The dealer will try to convince you that all leased cars must have extended warranties, maintenance contracts, paint protection, rust proofing and window etching.
Once again, the dealer is telling you bogus and misleading information. Leasing companies don’t insist on any of these things. All the items listed above give dealers higher profits and are unnecessary.