Ways in which dealers can deceive customers when leasing a car

Car dealers often resort to common tricks and deception to entice consumers to lease when it may not be in the consumer’s best interest. This is why it is so important to understand how leasing works and to be able to make your own decisions, without a dealer’s “help.”

Here is a list of the top leasing tricks used by dealers:

1. “We will take your old car in trade, pay off your old loan balance — no matter how much you owe — and put you into a better car with lower payments.”

Not exactly. It’s true that the dealer will pay off your old loan, as promised. However, what will actually happen, assuming you owe more on your old car than it’s worth, is that the dealer will give you credit for what the car is worth to him and add the remaining loan balance to the price of your new car. Because your new payments are based on leasing, not buying (which he may or may not tell you), your payments will likely still be lower than you expected, although the overall deal is terrible.

2. “We will make the remaining payments on your old lease if you will lease a new car from us today.”

This technique can be a big problem. What most consumers incorrectly assume is that the dealer is somehow taking over responsibility for the lease. What is actually happening is that the dealer is simply making your remaining payments and returning the car to the lease company for you. If the car has damages or excessive mileage, the lease company will send you the bill, not the dealer. If the dealer fails to make those final payments, the lease company will come to you, not the dealer. If the dealer fails to return the car to the lease company, you will be held responsible, not the dealer. Furthermore, the dealer will very likely add all, or some, of those remaining payments back into the price of your new car — and possibly not tell you about it.

3. “You are getting a nice 3.4% rate on this lease, which is better than our loan rates.”

A 3.4% rate would be very good, except that’s probably not the interest rate you are actually getting. The rate you are being quoted is most likely the lease “money factor” which is more accurately written as .0034. Money factor can be converted to annual interest rate by multiplying by 2400. Therefore, a .0034 money factor is equivalent to a 8.16% loan interest rate — not so good. Often, dealer salespeople don’t understand money factor and will misquote it as an honest mistake. Remember, most dealer salespeople didn’t graduate at the top of their class in math.

4. “Sure, we’ll take your old leased car in trade and give you a great deal on a new lease.”

Trading a leased car is usually not a good idea. The reason is that most people will not have any “equity” in their leased car to help them buy or lease a new car. Regardless of what the dealer promises, there are too many potential problems. In the worst case, the dealer takes your old leased car, simply returns it to the lease company, and you get a huge bill from the lease company for early termination or buyout. Or, if he actually wants the car for his used car lot, he can buy the car from the lease company and add the buyout cost, minus trade-in credit, to the price of your new car. This could be a large amount of money. If you are at the end of your lease, and have confirmed that you have no trade equity, simply returning your car to the lease company is your best move.

5. “Leasing is more flexible than buying because you can get out early or swap cars anytime you want.”

Not true. Dealers know that some people like to swap cars often and want the flexibility to get out of a particular car when they choose. Leasing is proposed as the way to be able to do that. What the dealer doesn’t tell you is that leasing is designed in a way that makes it both difficult and expensive to terminate before the normal end date. Furthermore, you can’t swap cars in the middle of a lease. If you read your lease contract, you’ll quickly find that none of the claims are true. When you find out you’ve been deceived, the dealer is no longer in the picture.

6. “Leasing will always be a better deal for you than buying because your payments are significantly lower for the same car.”

It is true that lease payments are lower than loan payments for the same car, which allows dealers to suggest that leasing is a better deal, especially when they are working with a “payments” customer who doesn’t understand leasing. In fact, dealers can stretch out the lease term to five years or more to make the payments even lower. However, leasing may simply not be right for you, especially if you drive more than 15,000 miles per year — but the dealer may not explain that part — and a five year lease on a car that only has a three year warranty exposes you to expensive repair costs for a car that doesn’t belong to you. If you don’t understand how leasing works, don’t lease, regardless of what a dealer may tell you. It’s not his problem if you lease and find out later that you shouldn’t have.

7. “Leasing doesn’t show up as a debt liability on your credit report because it’s like renting.”

Not true. Leasing is not like renting. Leasing shows up on your credit report as a debt obligation just like a loan. If you are late making payments, your credit is damaged, just like with a loan. If you miss payments, your car can be repossessed. If you are concerned about your debt load or credit score, leasing doesn’t help. Furthermore, leasing requires a check of your credit, the same as buying with a loan.

8. “The best way to acquire a new car is to lease first and then purchase the car at lease-end.”

This is mostly false. Although leasing offers lower payments and may allow you to drive more car initially than you might otherwise be able to afford, buying that car at lease-end adds additional cost and makes the total cost of the lease-then-buy scenario greater than if you had simply purchased the car at the beginning. Of course, if the convenience of having low payments early-on is worth the extra cost to you, then that’s your decision. Just don’t let a dealer convince you that the extra cost doesn’t exist.

9.”Price discounts and rebates don’t apply to leasing.”

Some dealers take advantage of the fact that many of their customers don’t understand leasing. Some will tell you that leasing is always based on “sticker price.” Not true. Leasing is always based on negotiated, discounted, or rebated price. Some rebates may not apply to leasing if there are already special lease deals in place.

10. “Price doesn’t matter in a lease because we sell the car to the lease company and they lease it back to you for the payment you want.”

Nonsense. This is mumble-jumble dealer talk. As mentioned above, leasing is always based on negotiated, discounted, or rebated price. The lower the price, the smaller the monthly payment. It’s true that the dealer sells the car to the lease company, but at the price that you settle on with the dealer. That becomes the price on which the monthly payment will be calculated.

11. “We require all our leased cars to have extended warranties, rust proofing, paint protectant, window etching, and maintenance contracts.”

Again, this is false and deceptive. There is nothing about leasing that makes these high-profit dealer add-on items necessary. Lease companies do not require these items, as the dealer may suggest. Refuse the extra profit items or, if they are already on the car, refuse to pay for them.

12. “You don’t qualify for our advertised special deal because your credit score is too low.”

Maybe this is true, but maybe it isn’t. This could be the false credit score trick. The dealer may tell you your score is low so that he can charge you an interest rate (money factor) that is higher than the normal rate charged by the finance company. The only way for you to know whether this is true or not is to already know your credit score before you visit the dealer. Therefore, it is important that you know your credit score prior to applying for a loan or lease. Get a Dark Web Scan and your Experian Credit Report for FREE!