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Top 10 Leasing ScamsTM
  1. Secret Price Hike
  2. Disappearing Trade
  3. Quote the Factor As APR
  4. Phony Lease/Buy Comparison
  5. The Undisclosed Acquisition Fee
  1. The Payoff Packing Scheme
  2. The Extended Warranty Rip-Off
  3. The Phantom Options Scam
  4. The Single-Payment Ripoff
  5. Phony Lease Trade-in

Free Bonus Scam: The Call-Back Leasing Scam

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.

 


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