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Car Dealer Leasing Traps
We've all seen the jokes and movies that feature a slick car dealer who will stop at nothing to make a buck. Unfortunately, these shady characters are all too common in real life purchasing and leasing scenarios as well. Sometimes, unwitting consumers get so caught up in the new car excitement, and so overwhelmed by the terms and processes, that they rely on the dealer's "expertise" rather than making their own informed decisions.
We’ve all seen the jokes and movies that feature a slick car dealer who will stop at nothing to make a buck. Unfortunately, these shady characters are all too common in real life purchasing and leasing scenarios as well. Sometimes, unwitting consumers get so caught up in the new car excitement, and so overwhelmed by the terms and processes, that they rely on the dealer’s “expertise” rather than making their own informed decisions.
Automobile dealers and leasing agents do have a few tricks up their sleeves to pull in more profits. Watch out for these tactics, and you can save yourself a bundle:
“Why Buy When You Can Lease?”
The premise behind marketing is to use the emotion of the buyer to sell a product. Automobile dealers know that most consumers don’t have a lot of spare cash and are nervous about parting with their disposable income. Therefore, they lure customers with the promise of lower monthly payments, and convince them to sign long term agreements. What consumers fail to realize is that these contracts can stretch the commitment to five years or even more. The payments are lower, but the term is much longer. These contracts can be dangerous for a couple of reasons.
First, possessing a vehicle for a longer period of time naturally means that there will be more mileage on the car at the end of the lease term. It’s easy to put 80,000 miles on a car over the course of five years, but even this moderate number exceeds the 15,000 per year mileage limit that is written into most leasing agreements. Many consumers don’t fully appreciate their obligations to pay for ever mile over the limit. At 20 cents per mile, those extra 5,000 miles can add up to a hefty bill at the end of the lease. Another disadvantage to an extended lease agreement is wear and tear that will inevitably affect your vehicle. Many warranties cover three years, making you entirely responsible for any repairs or damages that are incurred over the remaining two years.
“Low 3 Percent Lease Rate!”
Don’t believe everything that you see in the advertising headlines. Always read the fine print. When you see a lease rate of, say, three percent, you’re not seeing the actual lease rate that you will pay. This posted rate is really the lease money factor. While similar to an interest rate, it’s not exactly the same. The lease money factor is the number used to determine your monthly payment. In reality, a more accurate rate is calculated by multiplying the money factor by 24. For example take the “low lease rate” of 3%, which is actually the money factor. Multiply this by 24 and you will have a product of 7.2%, which is the actual annual interest rate that you will pay on your lease contract.
“Stress-free Early Termination”
Whatever. There is no easy way to terminate, or end, a lease. Your automotive lease is a legal agreement, and you are bound by the law to meet your obligations. Even though your dealer is well aware that your situation can change, and that you may want or need to opt out early, there is no easy way to end it. When you sign a leasing agreement, you are required to make the monthly payments for the full term of the lease, and there is little chance of getting out early. Hefty financial penalties are imposed upon those who default on payments or terminate the agreement before the end of the scheduled lease term.
Leasing agents and car dealers use these “bat and hook” tactics every day. How can you protect yourself from walking in to one of these traps? Knowledge is always your best defense, so take the time to learn as much as you can about the leasing process. Become acquainted with the terms used by dealers. Do your own estimations to determine what your monthly payments will be, and then bring the calculations with you. Crunch numbers with your dealer to be sure that you clearly understand how he or she has arrived at the monthly lease payment.
Don’t sign anything until you have a clear understanding all the terms, and your dealer’s numbers are close to or the same as yours. Remember, you’re the boss, so don’t let your dealer pressure you into signing.
When you’re dealing with slick sellers, knowledge is power. Learn as much as you can, be confident and you will have the upper hand in the situation. Only then will you be able to avoid falling for the typical dealer tactics, and only then can you negotiate the best possible deal.