This is the fourth of nine articles in our Blog Series Is Leasing Really Fleecing?
Most people do not really understand how leases work. The contracts are confusing, and they do not clearly disclose important components such as the cost of the car or truck or the finance charges. Whenever contract documents are difficult to understand, the opportunities for auto dealer fraud increase.
For example, we have seen many instances of car dealerships overcharging for cars on a lease. The vehicle’s cash price is not clearly identified as such on the lease but is instead disclosed as the “capital cost.” Consumers may not realize that the cash price is the most significant factor in determining lease payments, and they may not see where the price is disclosed. Sometimes, dealers will simply lie about the price and, if a consumer asks about the capital cost disclosure, they claim that the disclosed price includes interest or sales tax. It is very easy for a dealership to mislead people about the cost of the vehicle in a lease.
Sometimes dealerships inflate the cash price just to boost their profits. Other times, they are adding back other costs that the consumer thinks the dealership agreed to pay. For example, dealerships frequently offer to to “take care of” the last few payments on an existing lease or to “forgive” overmileage fees or damage to the old car in the hopes of selling or leasing a new car. Consumers think they are getting a deal because they are a repeat customer, unaware that the dealership has simply hidden those costs in the new lease.
Another game played by many dealers in leases is the false down payment. Most leasing companies require that the consumer pay costs such as conveyance fees or the first month’s payment up front. But, many consumers do not want to make an initial payment. Rather than risk losing a sale, some dealers will put a false down payment on the contract. But, don’t think that you’re getting a deal – the dealer has manipulated the lease so that the capital cost of the vehicle has been inflated. This will result in higher monthly payments and, in many cases, a higher cost to purchase the car off-lease.
Many consumers have reported to us that dealerships have misrepresented end of lease costs. For example, a consumers may be told that a lease allows 15,000 miles per year when it permits only 10,000/yr. before additional mileage charges are assessed. We have also seen cases where consumers were told that they had a 3-year lease when they were obligated to make payments for a longer period such as 39-months.
Dealerships that engage in such practices may violate the federal Consumer Leasing Act, and they may also engage in unfair business practices. Victims of this conduct have the right to sue the dealership. We handle many cases of this type.
In our next article, when we discuss the relative cost of buying vs. leasing, we will address another dealership game in which dealerships overcharge consumers who want to purchase their leased car.