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Monday, March 16, 2020

Dealer Leasing Tricks

Too often when it comes to auto-leasing, people get so dazzled by the
myriad terms and the jargon thrown their way that they end-up paying
through the nose, relying on a dealer’s “help” than their own informed
decision.

Here is a look at some of the tricks dealers use to pad their profits and
leave the customers shelling hundreds of dollars more than the deal should
be worth.

Trick 1: Leasing always a better deal than buying

Dealers use the lure of lower-monthly payments to entice customers to sign
for long-term loans, with terms stretching for five years or more, making
the payments even lower. There are two catches with such lengthy contracts:
higher mileage, exceeding the prescribed limit, and hefty repair costs.
With
 leases charging on average 10 to 20 cents a mile for any extra mile over
the agreed amount in the contract, and warranties only covering three
years,   you leave yourself wide open for hefty charges for excessive
mileage and wear and tear. 

Trick 2: Cheap 2-3% APR rate on your lease

The dealer is not quoting the interest rate you would be paying on your
lease; he’s rather giving you the lease money factor. Whilst similar to an
interest rate and important in determining your monthly payment, a more
accurate rate is calculated by multiplying the money factor by 24. For
example a “cheap” 3% money factor is 24 X 0.003 = 7.2%. This gives you a
better sense of what your annual interest rate on your lease contract is.

Trick 3: Stress-free early lease termination

Dealers know consumer driving needs change and they would like to have the
option of getting out of a lease commitment sometime down the road, before
their lease ends. Truth of the matter is, when you sign for a lease, you
are effectively saddled with monthly payments for the remainder of the
lease term and there is little-choice of getting out early. Lease contracts
 carry hefty financial penalties for either defaulting on monthly payments
or terminating the lease earlier than the scheduled term.

To avoid being on the receiving end of such tried-and-true tricks, educate
 yourself about leasing. Get down to the nitty-gritty and understand what
the leasing terms used by dealers mean. Crunch the numbers along with him
and understand how they arrived at the monthly payment figure. Don’t sign
anything until you’ve understood all the terms and your numbers much those
of the dealer. Do not let the dealer pressure you into signing; you are the
one to determine whether the agreement is right for you.

Buy or Lease?

It’s the classic dilemma that faces every auto-consumer out there: Pay
cash upfront or forego the ownership and pay monthly settlements instead?
Buy or lease for a new set of wheels?

As is the case with every other common dilemma, there is no slam-dunk
answer. Each option has its own benefits and drawbacks, and it all depends
on a set of financial and personal considerations.

First, your finances. Affordability is clearly key, and you need to ask the
question of how stable is your job and how healthy is your general
financial situation. The short-term monthly-cost of leasing is
significantly lower than the monthly payments when buying: you only pay for
“the portion” of the vehicle’s cost that you use up during the time you 
drive it.
If you have a lot of cash upfront, then you can opt to pay the down
payment, sales taxes - in cash or rolled into a loan - and the interest
rate determined by your loan company. Buying effectively gives you
ownership of the car and that feeling of “free driving” that goes on
providing transportation.
If, say, you want to get into luxury models but can’t afford the upfront
cash of purchasing the vehicle than you’re a good candidate for leasing.
Unlike buying, it gives you the option of not having to fork out the down
payment upfront, leaving you to pay a lower money factor that is generally
similar to the interest rate on a financing loan. However, these benefits
have a price: terminating a lease early or defaulting on your monthly lease
payments will result in stiff financial penalties and can ruin your credit.
You need to make sure you carve out the monthly lease payment in your
budget for the foreseeable future, at least for the duration of the lease.   

Besides the financial aspect, making a buy or lease decision depends on
your own particular lifestyle choices and preferences. Think about what the
car means to you: are you the sort of person to bond with the car or would
you rather have the excitement of something new?  If you want to drive a
car for more than fives years, negotiate carefully and buy the car you
like. If, on the other hand, you don’t like the idea of ownership and
prefer to drive a new car every two to three years then you should lease.
Next, factor your transportation needs: How many miles do you drive a year?
How properly do you maintain your cars? If you answer is: “I drive 40,000
miles a year and I don’t really care much about my cars as I don’t mind
dealing with repair bills”, then you’re probably better off buying. Leasing
is based on the assumption of limited-mileage, usually no more than 12,000
to 15,000 miles a year, and wear-and-tear considerations. Unless you can
keep within the prescribed mileage limits and keep the car in a good
condition at the end of your lease, you might incur hefty end-of-lease
costs. 

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