Seven Auto Leasing Scams That You Should Know About
Know what you are getting into. It should be a simple enough rule to live by. But then again, if it were so simple, the entire practice of consumer law would cease to exist. Fraud occurs when one party takes advantage of another’s lack of knowledge. The more there is to know, the more there is a chance for fraud to occur. Considering the complexity of your average automobile, it should come as no surprise that auto fraud continues to thrive in its many forms. Just the option of leasing a car comes with its own top ten list of auto leasing scams. If you are like many consumers in New Jersey, you prefer leasing over buying anyway, so pay attention.
Auto Leasing Fraud # 1: Secret Price Hike
Get all information such as the interest rate and any applicable fees, rebates or incentives. With that information, you can begin negotiating a price. Once you have that, calculate the payment yourself. Do not shy away from scary figures like the down payment, trade equity, rebates, incentives or taxes. If your numbers do not match the numbers on the contract, do not sign a thing! Be careful of the temptation to trust and do not trust a thing. Watch out for secret price hikes and/or a nice fat bonus slapped on by an unscrupulous salesman.
Auto Leasing Fraud # 2: Disappearing Trade-in
This form of fraud does not only involve trade-ins. It could also involve down payments or rebates. The troublesome detail is the disappearance of the trade-in. Before you lease a vehicle, you may wish to trade in your old car and apply that value to the lease. You may simply wish to make a cash down payment. The car’s manufacturer may extend a rebate to you as a leasing customer. If any of these items are not applied to the price of the car, you may have been made a victim of fraud.
Auto Leasing Fraud # 3: Interest rate vs. Money Factor
Know the difference between the interest rate and the money factor. In fact, have your salesperson write them on the back of his business card, in order to avoid any misunderstandings. This scam hinges on you not paying attention to your decimals. An interest rate is shown as a percentage. A money factor is shown as a decimal. The salesperson is counting on you thinking they are the same thing when they are not. For example, a rate of 2.6% is not the same as a factor of .00260. When the dealer uses the latter to calculate your lease payment, he or she ends up overcharging you. If you catch it, chalk it up to a “simple misunderstanding.”
Auto Leasing Fraud # 4: Phony Lease/Buy Comparison
The odds will always be in favor of the dealer when you decide to buy a car. When it comes to the sheer mechanics or mathematics of fraud, dealers will beat you with experience. However, being able to identify these types of fraud, may help you to see them coming. This type of fraud is what it sounds like. The dealer will try to trick you into signing an exorbitant lease by convincing you that it is better than getting a loan and buying. You will be shown a comparison between the two options. Important facts will be left out. If you see them coming, you can reject the lease/buy analysis outright and do your own with all fees, rebates and taxes included.
Auto Leasing Fraud # 5: The Undisclosed Acquisition Fee
A leasing company usually demands an “acquisition fee” to originate your lease payments. Originally, this was another add-on from the dealer, who would blame it on the leasing company, but pocket the actual fee. The leasing companies caught on and began to institute real acquisition fees. These can be hefty fees and difficult to negotiate. Again, armed with this information in advance, ask about the acquisition fee up front. Go a step further and use it to pit one dealer against another. If it means getting your business, a dealer may just be willing to eat that fee.
Auto Leasing Fraud # 6: Payoff Packing Scheme
Sometimes the leasing company and the dealer are in it together. Once you begin leasing your car, you may wish to terminate for some reason. There is a fee for this, but it is purposely explained in the lease terms in such a way that customers have a hard time figuring out what termination will cost them. When you call the leasing company, it likely will refer you to the dealer, who knows what that cost is. A few hundred dollars are added into the lease and that is what you get charged. Just knowing this in advance should give you pause before you terminate your lease. If you find out too late, do not be afraid to object or complain if you feel that the early termination fee is excessive.
Auto Leasing Fraud # 7: The Extended Warranty Rip-Off
If you sign a lease that lasts no longer than the manufacturer’s warranty period, you have no need to buy an extended warranty. Most warranties are unnecessary, but they are high-profit. The multitude of pitches you may end up hearing during your search should be enough of a clue to what a favorite this fraud is.
A lease is still a contract. It may not say you own the car, but you are still legally bound by it. If you did not see one of these scams coming and you need assistance, make an appointment with the Law Office of H. Benjamin Sharlin LLC for a free consultation.
Please be advised that this blog is for informational purposes only, is not legal advice and does not create an attorney-client relationship.
The Law Office of H. Benjamin Sharlin LLC
is owned and operated by H. Benjamin Sharlin and serves all of Mercer County, New Jersey and the surrounding areas. Mr. Sharlin is a bilingual Spanish-speaking attorney who vigorously represents the interests of all his clients.
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