Lots of people agree that car leasing is the more attractive option when you need to get a new car… but are they wrong?
There are certainly advantages to car leasing – but only if you don’t get sucked into a car dealer scam in the process… and the truth is: a lot of people get a crummy deal.
Leasing regulation does not require as much disclosure as buying a vehicle. This has opened the door for a lot of shady car dealers to work on your pocketbook and take you for all that you’ve got.
Take a good look at the common car leasing scams and make sure you protect yourself.
Ridiculously low interest rates:
Some dealers quote a lower interest rate than what you’ll actually be paying. They do this by either purposefully quoting the “money factor” as the interest rate or calculating the loan without amortizing some closing fees, like the security deposit, into the loan lease.
Take the money factor for example: this is typically expressed as a four decimal digit, something like 0.004. Some dealers quote this as a 4% interest rate when in fact you need to multiply it by 24 to get a rough idea of the interest rate on your loan.
In this example, the interest rate is a much higher at 9.6% than the “quoted” rate of 4%. Make sure you crunch the numbers and understand the formula they use to calculate their interest rate. Look out for any fees not factored into the calculation.
If you’re not satisfied, never enter into a lease agreement.
Terminate your lease early for a low penalty
This is a long standing car dealer scam when it comes to leasing. You ask your dealer how much you will pay if you want to terminate your lease and he tells you: “You can pay only a small early termination administrative fee of $250″…. he/she is misleading you.
What he is quoting is only the small administrative penalty of early termination. In fact, there is a much stiffer penalty called an early termination fee and this runs into thousands of dollars that comes on top of the other administrative early termination fee.
Do not confuse the early termination administrative penalty with the termination fee. Read the small print carefully and know just how much you will get charged should you terminate your lease before its scheduled end.
Pay for an extended warranty you don’t need
Here’s the scam: the dealer slips an extended-warranty into the deal, but it’s already part of your lease! So essentially you’re paying for two warranties, and I don’t have to tell you that that’s a rip off. Another angle is he might even try to sell you on a 36-month warranty when you’re only leasing the car for a 24-month term.
You warranty is already factored into the lease, so don’t get sold on extended warranties by a slick salesman.
This is one of the best car tips I can give you about car warranties: avoid extended warranties provided by the dealer… shop around and find the best price on your car warranty. You’d be surprised what you can find online.
“Zero dollar security deposit”
Any dealer who advertises a $0 security deposit is leaving out some of the details. A security deposit is always factored in the lease under the provision for disposition fees. I may sound like a broken record, but always ALWAYS read the fine print on any agreement that you sign.