Auto Leasing Scams

Some dealers quote a lower interest rate, when it is actually a lot higher. This is done by either quoting the money factor as the interest rate or calculating the loan without amortizing some closing fees into the loan lease. The security deposit and any other fees should be included in your total purchase price to come up with your interest rate. The money factor is typically declared as a four decimal digit, like 0.004. A lot of dealers quote this as a 4% rate of interest when you really need to multiply the money factor by the amount of months in the lease in order to calculate the actual interest rate of your loan. In this example, the rate of interest is a much higher 9.6% on a 24 month lease 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. Most of all if you are not satisfied, do not enter into the lease agreement.

This is an all-time leasing scam. You ask your car dealer how much you will pay if you want to terminate your lease early and he says: "If you want to get out early you only pay an early termination fee of $300". What he is quoting is only the low administrative penalty of early termination, there is a stiffer penalty called "early termination fee" which runs up to thousands of dollars. Do not confuse the early termination administrative penalty with the termination fee. Study the fine print carefully and know exactly how much you will be charged should you end your lease before the scheduled date.

The extended warranty is another shell game designed to inflate the dealer's profit at your expense. The dealer slips an extended warranty into the deal when it has already factored into the monthly payments. Even worse, he tricks you into purchasing a 36-month warranty on a 24-month lease. You do not have to pay extra money for a warranty because it is already built into your payments; never pay for a warranty that extends beyond the terms of your lease. Even though they may try to slip an extended warranty in, don't be fooled, the warranty is already factored into your payments.

Any dealer who advertises a $0 security deposit is not telling you the whole story. A security deposit is always factored into the lease under the provision for disposition fees.