Dealer Lease Tactics

We've all seen the stereotypical care dealer. You know; the one in the movies and jokes who will go to any length just to make a buck. Sadly, these shady characters are all too common in real-life purchasing and leasing scenarios as well. Unwitting consumers can get so caught up in the new car excitement, and so overwhelmed trying to understand the terms and processes, that they rely on the dealer's "expertise" instead of 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, 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!"

Always read the fine print in a lease advertisement. The dealer or leasing agent is not quoting the actual lease rate that you will be paying. Rather, he or she is giving you the lease money factor. While this is similar to an interest rate, it's not exactly the same. The lease money factor is used to determine your monthly payment, but a more accurate rate is calculated by multiplying the money factor by 24. For example this "low" lease rate of 3% is actually the money factor. When we multiply 24 x 0.003, the product is 7.2%. This is the annual interest rate that you will actually pay on your lease contract.

"Easy 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 salespeople. Arm yourself with the right amount of confidence and education, and you'll have the upper hand in the situation. You can avoid falling for the typical tactics and, ultimately, you'll negotiate the best possible deal.