Car Dealer Leasing Traps

You've seen the jokes and movies starring that caricature of a slick car dealer. He is the one that will try just about any trick to make a buck. It's a shame that off screen and in real life, these shady characters are all too common in every day leasing scenarios. It's not uncommon for unwitting consumers to get so caught up in the new car excitement, and so overwhelmed by the terms and processes, that they are happy to leave the details to the dealer's "expertise".

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:

"Leasing is Better Than Buying"

Sly marketers often prey on the emotions of the buyer in order to sell the product. Automobile dealers know that most consumers don't have a great deal of disposable income, so they'll use the promise of lower monthly payments to lure customers to signing long term agreements. These contracts can stretch the buyer's commitment to five years or even more, with the promise of lower payments. These lengthy contracts pose danger to the average buyer, for a couple of reasons.

First, having the vehicle for a longer period of time will naturally mean more mileage on the car. It's easy to put 80,000 miles on a car over the course of five years, but this exceeds the 15,000 per year mileage limit that is written into most leasing agreements. Remember, you will be obligated to pay for ever mile over the limit. At 20 cents per mile, those extra 5,000 miles can add up to a hefty lease-end bill. Another disadvantage to an extended lease agreement is the amount of wear and tear that will inevitably affect your vehicle. Many warranties cover three years, making you entirely responsible for any repairs or damages incurred over the remaining two years.

"Lease at Only Three Percent!"

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.

"No-Hassle 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.

If you're not clear about the terms, or if the dealer's numbers seem unreasonable, don't sign anything. You are the boss in this scenario, and it's your choice whether to sign the contract or simply walk away.

Knowledge is power, particularly when you're dealing with slick sellers. With the right amount of confidence and education, you will have the upper hand in the situation, you will be able to avoid falling for the typical tactics, and you will ultimately negotiate the best possible deal.