Ways to Master Dealer Leasing
People sometimes get overwhelmed by the auto-leasing language and terminology, leading them to pay exorbitant prices and depend on the dealer’s “help” rather than making an educated decision on their own.
The following are examples of some of the tactics used by dealers to increase their profit margins at the expense of their clients, who often wind up paying hundreds of dollars more than was originally agreed upon.
First Tip: Leasing is almost always more affordable than buying.
In order to get consumers to sign for long-term loans with periods that extend for five years or more, dealers provide cheaper monthly payments as an incentive. Higher mileage (beyond the specified limit) and substantial repair expenses are the two downsides of such long contracts.
Excessive mileage and wear and tear can rack up significant bills, especially considering that most leases charge 10 to 20 cents per mile for every mile beyond the agreed-upon quantity in the contract and that warranties only cover three years.
Tip 2: Lease at a low APR of 2-3%.
Instead of providing you with the interest rate that you would pay on a lease, the dealer is providing you with the lease money factor. A more precise rate is determined by multiplying the money factor by 24, which is comparable to an interest rate and plays a significant role in establishing your monthly payment. Take a “cheap” 3% money factor as an example: 24 x 0.003 = 7.2%. Your annual interest rate on the lease can be best understood in this way.
Step 3: Ending Your Lease Effortlessly
Dealers are aware that customers’ driving demands fluctuate, and they would prefer to have the opportunity to terminate a lease before its expiration date. The reality is that there is little leeway to break out of a lease early once you sign it, and you are essentially stuck paying monthly payments for the whole time. In the event that you fail to make a monthly payment or terminate the lease before the agreed-upon term, you will be subject to substantial financial penalties.
Learning the ins and outs of leasing will help you avoid falling victim to such tried-and-true scams. Identify the meaning of the dealer-used leasing terminology and get down to brass tacks. Join him in crunching the numbers to figure out how they arrived at the monthly payment amount. Before you sign anything, make sure you understand all the terms and compare your numbers to the dealer’s. It is your responsibility to decide if the agreement is suitable for you; the dealer has no business pressuring you into signing.