8. Phantom Options
This scam involves the dealer inflating
both the gross cap cost (price of the car) and the residual value by
adding options that never existed on the vehicle.
How it Works: To enhance
his profit on the deal, the dealer processes the lease paperwork as though
the vehicle has certain options that are not really there. The options
chosen are items whose presence is not obvious by just looking at the car,
such as sport suspensions, anti-lock brakes, and stereo system upgrades.
When the lease is assigned to the leasing company the dealer gets paid the
full price of the vehicle including the phantom options. So why doesn't
the dealer just use a secret price hike? By raising the residual along
with the price, the effect on the payment is much smaller and therefore
less likely to be noticed by the customer. For example, adding a $500
phantom option on a vehicle might increase the payment only $7 per month
verses $23 per month for a price hike of the same amount.
Phantom options carry higher risks for
dealers because they are cheating the lease company as well as
the customer. Many lease companies have demonstrated great indifference
when it comes to cheating the customer (some even participate in the
process). But when it comes to the dealer cheating the lease company,
there is zero tolerance. For this reason, phantom option scams tend to be
rare. But you still need to protect yourself and here's why: 1) You're
still paying depreciation and interest on the option, 2) if discovered at
the end of the lease, you may be held responsible for the missing
equipment - especially something like a radio where the dealer could claim
that you switched the part during the course of the lease. And finally, 3)
if you decide to buy the vehicle at the end of the lease, you will likely
pay a higher price for something that's not there.
How to Prevent: First be
familiar with the pricing structure of the vehicle you are leasing. Obtain
the vehicle's invoice and MSRP from at least two independent sources (this
information is abundantly available on the Internet)
then compare the MSRP to the window sticker item-by-item. The negotiated
purchase price should match the gross cap cost on the lease. If the dealer
quoted the residual as a percentage, multiply this percentage by the MSPR.
This figure should match the residual value in the contract. Finally,
and most importantly, save all the lease paperwork including your notes
and the actual window sticker. These documents may be your only
defense in the event of a dispute.