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Was I Ripped-Off On My Lease?

We've all had that sinking feeling at one time or another after making a major purchase. At the time, everything sounded so good, but now you just can't shake that feeling you made a huge mistake.

If you leased your vehicle after January 1, 1998, then your lease documents should contain enough information for you to determine if you were ripped-off. We have provided the following steps and worksheets to help you understand all of the elements of your lease and then determine if your lease was executed properly.

1. Taking Inventory
The first step in analyzing your lease is to take inventory of all the "Start-up Costs" of the lease. These costs include first payment, security deposit, sales tax, registration and title fees, acquisition fee, and luxury tax. The fees may have been paid by you up-front, or capitalized (financed) in the lease. Identifying all of these items may require a little detective work on your part and a few well placed calls to the dealer or lease company. Use the worksheet below to record this information.

Start-Up Cost
Capitalized
Paid Up-Front
1st Payment

 

 

Security Deposit
+
+
Registration Fee
+
+
Title Fee
+
+
Sales Tax**
+
+
Sales Tax on Cap Reduction and Rebates
+
+
Luxury Tax
+
+
Acquisition Fee or Lease Origination Fee
+
+
Sub-Total
=
=
Subtract: Factory-to-Customer Rebate
-
-
Subtract:
Equity from Trade-In
-
-
Total
=
=

** For Illinois, New York, and New Jersey only. All other states tax monthly payment stream.

2. Cash Paid at Signing
The total amount you paid at signing should be equal to the total of the right-hand column above plus any cap-reduction cash payment:

Total Start Ups Paid Up Front (Right column from above)

 

Cap Reduction (cash down payment)
+
Total Paid at Signing
=

3. How Much Did I Pay for the Car?
For this step you will need the "Adjusted Capitalized Cost" or   "Net capitalized Cost" from your lease contract or Federal Consumer Leasing Act disclosure statement. To determine the Gross Cap Cost or purchase price of the vehicle, Add any Cap Reduction payment you may have made and the total capitalized start-ups (left column from step 1) to the adjusted cap cost . This figure should agree with the negotiated price of the vehicle.

Adjusted Cap Cost or Net Cap Cost

 

Cap Reduction Payment
+
Total Capitalized Start-Ups (left column from step 1)
+
Total: Gross Cap Cost or Purchase Price
=

4. What Interest Rate Am I Paying?
If your lease contract specifies the total "lease charges" or "rent charges", divide the total lease charges by the number of months to determine the lease charge per month then start with step E.  Otherwise, start with step A.

A) Determine Monthly Payment before tax**:   Payment with tax / (1+ tax rate)

Monthly Payment w/tax:
________________
Divide by 1 + tax rate :
________
Monthly Payment Before Tax:
________________

** This step is required if your state taxes the monthly payment stream (most states do). If you live in Illinois, New York of New Jersey, skip this step.

B) Determine Total Depreciation: Cap Cost - Residual

Net Cap Cost:
________________
minus Residual Value:
________________
Cap Cost - Residual:
________________

C) Determine Depreciation per month:  Total Depreciation / Number of Months

Total Depreciation (B):
________________
Divide by Number of Months:
________________
Depreciation per month:
________________

D) Determine Lease Charges per month: Payment before tax - Depreciation per month

Payment before tax (A):
________________
minus Depreciation per month (C):
________________
Lease Charge per month
________________

E) Add the Cap Cost to the Residual:

Net Cap Cost:
________________
Plus Residual:
________________
Cap Cost + Residual:
________________

F) Determine the Money Factor: (Lease Charge per Month) / (C+R)

Lease Charge Per Month (D):
________________
Divide by Cap Cost + Residual (E):
________________
Money Factor:
________________

G) Determine the Interest Rate: Money Factor x 2400

Money Factor (F):
________________
x 2400:
x 2400 
Interest Rate:
________________

 

5. What To Do If You Think You Were Overcharged

Step 1. The first step is to call the finance manager at the dealership and explain to them what you think the problem is. If you have a good clear case, the dealer may offer restitution in the form of a cash refund, re-writing the lease correctly, or voiding out the lease. If the dealer is not receptive to your complaints, mentioning key words such as "fraud" and "Attorney General" will usually get their attention. One thing is for certain though, the chances of getting restitution from the dealer decrease dramatically after the first two weeks of the lease.

Step 2.  If you fail to get satisfaction from step 1, make two copies of the completed worksheet, your window sticker, and all your lease paper work. Send one copy to your state Attorney General's office attention Consumer Fraud division. Send the second copy to Chart Software, 430 Rio Casa Dr. N., Indialantic, FL 32903. Be sure to enclose a cover letter explaining how you think you were overcharged.