Thursday, October 4, 2007

Dealer Takes All: the Leasing Game

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 have more than a few tricks up their sleeves to pull in bigger profits. By watching for these tactics, you can save yourself a bundle:

"Why Buy When You Can Lease?"

Sly marketers often prey on the emotions of the buyer in order to sell the product. Automobile dealers know that most consumers don't have a great deal of disposable income, so they'll use the promise of lower monthly payments to lure customers to signing long term agreements. These contracts can stretch the buyer's commitment to five years or even more, with the promise of lower payments. These lengthy contracts pose danger to the average buyer, 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.

"Low 3 Percent Lease Rate!"

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.

These are all common and effective tactics that leasing agents use to bait and hook customers every day. So, how can you protect yourself from walking in to one of these traps? Education is your best defense. Learn as much as you can about the leasing process. Understand the terms used by dealers. Estimate the payments on your own, bring the calculations with you, and then crunch numbers along with your dealer to be sure that you clearly understand how he or she arrives at a 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.

When you're dealing with slick sellers, knowledge is power. Learn as much as you can, be confident and you will have the upper hand in the situation. Only then will you be able to avoid falling for the typical dealer tactics, and only then can you negotiate the best possible deal.



http://www.myarticlemall.com/Article/Dealer-Takes-All--the-Leasing-Game/43257