Auto Leasing Sucks - Here's Why

Here's the truth about auto leasing, especially bad credit auto leasing is that leasing is a choice that's filled with several pitfalls for the average customer.  Leasing regulations don't call for as much disclosure as when you're buying a new or used car. This has brought about numerous leasing frauds that pull a fast one on the consumer by making them believe they are into a great deal when, effectively, all they are getting is a bad business deal that only helps the dealer.


Here we look at some of these common scams and how to avoid them:

1. An extremely low interest rate:

A few bad credit lenders will offer a lower rate of interest by either quoting the money factor as the interest rate or calculating the loan without amortizing some amounts into the loan lease.Usually the money factor is shown as a 4 decimal digit, something like 0.004. A few dealers cite this as a 4% interest rate when, as a matter of fact, you need to multiply it by 24 to arrive at a closer idea of the interest rate on your loan. Therein, the interest rate is a good deal higher 9.6% than the "quoted" 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 agreements without a better understanding.

2. You may end your lease early for a low fee

What's the biggest leasing scam of all? This is! You ask your neighborhood bad credit car dealer how much will it cost you if you want to terminate your lease early. The reply: "You want to get out early? No problemo, you only pay an early termination fee of $300".This is how I got in serious trouble on my 1st auto lease. No matter that I didn't have any money to start with..now I had even less. The amount he is quoting is only the teeny-tiny administrative penalty for early termination. There is a much stiffer penalty called early termination fee and this can run into the thousands.

Try not to be quite as naive I as was (of course I had just gotten out of college - what did I know about finance) and don't confuse the early termination administrative penalty with the 'true' termination fee.  Take your time reading all the contracts, even if you think you're head's gonna explode. You may save yourself from a lot of pain and save a lot of money in the long run. 

3. Extended Warranty - I don't think so

On almost all auto leases, the warranty is included in the monthly payments. Why should you pay any extra money for something that is already included. Some of the lenders also try and trick you into purchasing an extended warranty for 36 months, when you only have a 24 month lease. Obviously, not needed! There are numerous games that unethical dealers may try to foist off on you.  As before, READ the small print. If you have problems with understanding anything that's in front of you, ask if you can take the paperwork home for someone more knowledgeable to look over before you sign.


There are several other items that can be tagged on, sneaked in or overlooked by you, including the  zero security deposit.  This doesn't tell the whole story as security deposits have already been factored into the lease. 

As usual...Caveat Emptor! I hope that you received some useful information from this article on auto lease scams.  The most important thing to remember is that you need to read everything before you sign it.