Bad Credit automobile leasing has been praised as a more attractive option to purchasing a car, offering in the process the flexibility to drive a new car for less. The reality, however, is that leasing is an option that is fraught with many pitfalls for the average customer. Leasing regulation does not require as much disclosure as buying a vehicle. This has given rise to many leasing scams that trick the customer into believing they are into a good deal when, in effect, all they are getting is a rough deal on the dealer’s terms.
Take a peek at a few of the common scams and how you can avoid being ripped off by them:
1. Unnaturally low interest rates:
Some bad credit auto dealers will offer up a lower interest rate when actually it is a good deal higher because they are quoting the money factor as the interest rate or possibly estimating the loan without amortizing some fees into the loan lease. For instance, the money factor is generally expressed as a 4 decimal figure, something like 0.004. Many of the less reputable bad credit vehicle lenders cite this as a 4% rate of interest when, it really should be multiplied by 24 to reach a closer approximation of the interest rate on your loan. Therefore, the interest rate is very much higher at 9.6% and not the rate of 4%.
Make a point of understanding all the numbers and what method the lender used to arrive at their interest rate. Look out for any additional fees, such as amortization costs, not added into the calculation. If you’re not satisfied, do not sign any lease aggreements without a better understanding.
2. You may end your lease early for a low fee
This is the biggest scam of all and the one that I fell for the first time I ever took out a lease. The lender told me I could definitely end my vehicle lease early and it would only cost me an ‘early termination fee’ of $400. Guess what… that was only the small administrative penalty for early termination, NOT the actual ‘early termination fee’. This can run into the thousands of dollars.
Do not confuse the early termination administrative penalty with the termination fee. Read the small print carefully and know exactly how much you will get charged should you terminate your lease before its scheduled end.
3. Why pay for an extended warranty
Another game that the car dealers like to play is offering you an extended warranty – to protect your investment. The only investment that will be protected here is the dealer’s profit. 99% of the time on auto leases, the extended warranty is included in your monthly lease payments. So obviously you don’t need to pay for it again. If they do convince you to go for the extended warranty, which by the way, you SHOULDN’T, you need to look carefully at the contract you’re signing as you may be buying a 3 year warranty for a 2 year lease. Not too smart – on your part.
There are some more things that the dealer can add onto your lease, or even sneak in on you. Just be careful that you examine all the documents thoroughly before you sign on the dotted line. I hope you have gotten some new knowledge from this article on auto lease scams.