6. The Payoff
In the event of early termination, the
dealer inflates the lease payoff amount then pockets the difference. This
scam has been found to involve the close cooperation of the leasing
company and the dealer.
How it Works: Most leasing
customers know to expect some sort of fee for early termination. The
problem is that leasing contracts are very vague about early termination
penalties making it near impossible for consumers to calculate the payoff
amount themselves. When a consumer contacts the leasing company requesting
the payoff amount, the customer is referred to the dealer. The dealer
obtains the true payoff amount from the lease company, then inflates the
amount by several hundred dollars. Upon arranging the payoff the dealer
pockets the difference.
How to Prevent: First, try
not to terminate early unless you are really compelled (no penalties are
even lower than un-inflated penalties). If the termination is forced (the
vehicle is stolen or wrecked), and your lease includes gap insurance, the
penalty should be significantly reduced. Second, re-read your
contract carefully before beginning early termination negotiations. This
may give you some insight into what penalties and fees will be assessed.
Third, always contact the leasing company first and avoid involving the
dealer in the process. Finally, don't be afraid to object or complain if
you feel the early termination penalty is excessive.