Car Lease Article
Dealer Leasing Tricks
Too often when it comes to auto-leasing, people get so dazzled by the myriad
terms and the jargon thrown their way that they end-up paying through the nose,
relying on a dealer’s “help” than their own informed decision.
Here is a look at some of the tricks dealers use to pad their profits and leave
the customers shelling hundreds of dollars more than the deal should be worth.
Trick 1: Leasing always a better deal than buying
Dealers use the lure of lower-monthly payments to entice customers to sign for
long-term loans, with terms stretching for five years or more, making the
payments even lower. There are two catches with such lengthy contracts: higher
mileage, exceeding the prescribed limit, and hefty repair costs. With
leases charging on average 10 to 20 cents a mile for any extra mile over the
agreed amount in the contract, and warranties only covering three years, you
leave yourself wide open for hefty charges for excessive mileage and wear and
tear.
Trick 2: Cheap 2-3% APR rate on your lease
The dealer is not quoting the interest rate you would be paying on your lease;
he’s rather giving you the lease money factor. Whilst similar to an interest
rate and important in determining your monthly payment, a more accurate rate is
calculated by multiplying the money factor by 24. For example a “cheap” 3% money
factor is 24 X 0.003 = 7.2%. This gives you a better sense of what your annual
interest rate on your lease contract is.
Trick 3: Stress-free early lease termination
Dealers know consumer driving needs change and they would like to have the
option of getting out of a lease commitment sometime down the road, before their
lease ends. Truth of the matter is, when you sign for a lease, you are
effectively saddled with monthly payments for the remainder of the lease term
and there is little-choice of getting out early. Lease contracts carry hefty
financial penalties for either defaulting on monthly payments or terminating the
lease earlier than the scheduled term.
To avoid being on the receiving end of such tried-and-true tricks, educate
yourself about leasing. Get down to the nitty-gritty and understand what the
leasing terms used by dealers mean. Crunch the numbers along with him and
understand how they arrived at the monthly payment figure. Don’t sign anything
until you’ve understood all the terms and your numbers much those of the dealer.
Do not let the dealer pressure you into signing; you are the one to determine
whether the agreement is right for you.
