10. Phony Lease
One of the reasons car dealers love leasing
is because they know you will be back in a couple of years and you will,
of course, need a new car. Many leasing customers get the itch for a new
vehicle and start the process early. They end up at the dealer asking if
they can "trade-in" their current vehicle for a new one.
"Sure, Mr. Smith. Step into my office and have a seat." In
this scam, the dealer uses this opportunity to roll you into a new
high-profit while hiding all the early termination fees and penalties in
the new lease.
How it Works: Unless your
lease contract specifically mentions trading-in your vehicle for a new one
(we have never seen one that does), there really is no such thing as
"trading-in" with a lease. No matter what the dealer tells you,
your current lease must be terminated early for you to turn-in the
vehicle. All of the early termination fees, penalties, and unpaid
depreciation as spelled out in the contract, are due. A clever salesman
may say, "No problem. We'll take care of all that for you." What
he means is all that expensive, unpleasant stuff will get rolled into the
new lease where you will pay interest on it for the next three years. And
while he's at it, he'll take care of your security deposit on the
first lease by making it mysteriously disappear.
How to Prevent: Just
don't do it. If you think about it, you are combining two complex and
inherently risky processes - terminating a lease early and leasing a new
vehicle - into one step. And you're going to trust a car salesman to
handle all the paperwork for you. You are much better off seeing your
first lease to completion before leasing a new one for the following
- You avoid the early termination fees and
penalties on the current lease. If the dealer says he will pay them
for you, then he's overcharging you on the new lease. Take the fees
out of the picture and the new lease should be that much cheaper.
- You are in a better negotiating position
without the baggage of an existing lease that must be terminated. You
are free to buy or lease any product from any competitor and the
salesman knows this. Make them earn your business all over again with
a sharp deal.
- And finally, terminating early and
leasing a new vehicle makes tracking all the elements of the deal and
accounting for all the money very difficult. This means you are more
likely to get ripped off.
By the way, after making your last lease
payment you should have 30 days to turn in the vehicle. This should give
you plenty of time to acquire a new vehicle.