Luxury cars are no strangers to Miami’s roads. This is because Miami is deemed the top market for high-end vehicles, with the sales of luxury cars and trucks making up a huge percentage of the area’s overall sales total. Don’t think that all the expensive rides that cruise the city streets are purchased, though—some of them are leased. Even Canadian pop star Justin Bieber didn’t own the yellow Lamborghini he was caught racing in when he was arrested in Miami a few days back. The vehicle, as well as the red Ferrari Bieber was racing with, was reported to be ‘on loan’ from luxury car rental company Lou La Vie.
So if you want to drive a luxury car but can’t afford to buy one, lease instead. But watch out for scams. Dealers have some tricks up their sleeves to make more money from car leasing. Here are a few of them:
Acquisition Fee Markup: All car leasing companies charge an acquisition fee, which covers initial administrative expenses. This fee can range from $350 to $1000. The dealer who arranges the lease for you may charge you a marked up fee and take home the excess. Avoid paying a marked up acquisition fee by comparison shopping. See if the fee charged by different lenders are in the same range.
Balloon Loan as Lease: Some dealers trick consumers into getting a balloon loan rather than a car lease. Such loan is like a car lease because monthly payments are low, but you will be expected to give a huge lump sum payment in the end. Make sure you are getting a lease instead of a balloon loan. Read the fine print carefully and do your research about what names auto makers give their balloon options.
The Early Payoff Promise: To persuade you to buy or lease a vehicle, the dealer will promise to pay off your lease’s remaining portion. This is an empty promise, as they would do one of two things: either they will fail to do so, letting you shoulder the late payments and penalties, or roll over the original lease’s balance to your new lease. Keep yourself out of trouble by taking care of the payments yourself and keeping different transactions separate.
Early Termination Penalty Fees: If you terminate your lease early, you know you need to pay an early termination fee. What dealers don’t tell you is that on top of this fee, which is between $200 to $400, you will need to pay early termination penalties. You can find out about this fee by doing your own research instead of just relying on what the dealer tells you.
Extending Length of Lease: If you found the monthly payment of the lease to be too high, the dealer can make it more affordable for you by extending the lease term. The catch: you are unaware of the term extension. You may have agreed to a 24- or 36-month lease but end up with a term that is 39 months long or longer. Read the contract carefully, and sign only if the figures indicated there are what you agreed to.
Doubling the First Payment: With a car lease, you are required a down payment and a first monthly payment. In some cases, the down payment is already inclusive of the first payment. Unfortunately, there are dealers that don’t tell you this so they can ask for a double first-payment. Don’t let them double charge you. Peruse the agreement.
The Sneaky Addition of Extras: You are mistaken if you think dealer add-ons are only for those who buy cars. Those who lease also pay for unnecessary service contracts, among others, because dealers can often hide them into the lease agreement. Pay attention to what the dealer includes in the agreement so you only pay for what you need.
The Money Factor Deceit: In car leasing, there is the interest rate and there is the money factor. The latter is the former as a fraction. Some dealers trick consumers into thinking that the money factor is the interest rate. Know that the interest rate is the money factor multiplied by 2,400. Never mistake the smaller percentage as the total interest.