About Car Leasing Scams
A scam is simply a confidence trick. It's not necessarily an illegal practice--it just takes advantage of the credulousness of a customer to get him to spend more money than he really should on a product or service. The car leasing industry is rife with unscrupulous operators who take advantage of people who simply need temporary use of a vehicle. Educate yourself before shopping for a lease.
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Identification
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A lease is a long term rental. The lessee finds a car that she would like to make use of, and the lessor loans the car for a set of monthly payments that increase regularly as the car depreciates over the period of the lease. The longer the lease, the more compensation for depreciation will need to be paid out. For most periods longer than 3 months, it is often in the lessee's best interest to simply acquire an auto loan and purchase a car regularly.
Considerations
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Issues surrounding accidents and leased cars often lead to lessors taking advantage of their customers. In many cases, even though the lessee needs to purchase his own auto insurance in most cases, he will need to pay exorbitant additional compensation and penalties to the lessor. As unscrupulous leasing companies will often count on their potential customers not reading through the details of their agreements, many write in clauses about serious penalties being applied for any accidents--even if it's not the fault of the driver of the leased vehicle.
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Warning
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Many car lease companies will advertise that cars can be swapped for new ones at any time, but in many situations this proves to not be the case. They will often charge termination fees and other surcharges for switching cars. Get any promise that a dealer makes in writing in a contract--don't take verbal statements as binding. In addition, potential lessees should know that leasing a car shows up on their credit reports, even though many leasing companies will say that it will not.
Features
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Although many car lease deals show lower monthly payments than taking out an auto loan and purchasing a car, in most cases the difference is more than made up for in hidden fees and other expenses. Open-ended leases in particular are ripe for abuse, as they rely on end-of-lease assessments to determine how much the lessee needs to pay additionally. Closed-ended leases will also tack on mileage surcharges and other such penalties that make it more expensive.
Prevention/Solution
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Leasing a car is often only a sensible decision to make in very specific situations in which the lessee only needs a car for a short period of time. For example, someone might choose to lease a car if her employer is uncertain about whether or not he will transfer her somewhere in the next several months. A lease would provide flexibility that a purchase would not. Consider calling an independent lease consultant who will examine the terms of an auto lease for you and make relevant calculations if you are planning on leasing a vehicle.
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Resources
- Photo Credit jepoirrier, Flickr
Comments
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Joseph Saban
Feb 04, 2011
um what are u saying? open ended leases are illegal in most states especially for consumers
