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Never get Fleased!Feb 23 '00 Write an essay on this topic.This is a sore spot for me. About the worse thing you can do when making a new vehicle purchase is to flease, I mean lease it. You may think you are getting more car for the money and that is exactly what the dealer will say, but do not buy that for a minute. Leasing originate in it's earliest form back in the 50's with the balloon payment. This allowed a customer to purchase a new vehicle with little or no money down, make very low payments with the entire balance due as a balloon payment at the end of the term. This was usually about two years. You cannot imagine how many people got in financial trouble getting suckered into balloon payments. They got a bad reputation and went away for a while. Today there are all kinds of leases the most popular being the "closed end" lease. This is designed to let the buyer think they are getting the car for a determined amount of time while adhering to guidelines on mileage and condition of the vehicle. At the end of the term they are told they can just walk away or get into a new lease. Buyers are also told they can get out of their lease anytime by just selling the car,(more on that in a minute). What most people do not understand is that in a lease the dealer holds all the cards. Most times there is no negotiated sales price, that is the lease is calculated from the sticker price. This means all holdbacks, incentives, and dealer markup over invoice stay on the dealers side of the table,(remember after loosing all that as soon as you title the car in your name it becomes a used car and looses about $1500 on average). Another aspect of the lease often misunderstood is that what the consumer is actually paying for is not a short term of financing but the percentage of the vehicles depreciation. This is why almost all buyers who lease find themselves in a negative equity situation,(especially when the lease is calculated from the sticker price), during the entire term of the lease. This means you can never sell the vehicle in order to get out of the lease unless you can pay the three, four, or more thousand dollar difference you have in negative equity. The last two things often overlooked in the excitement of the purchase is the mileage agreement and the condition of the vehicle clause. No-one ever thinks they will go over the allotted mileage and the dealer counts on that. It is a great source of easy revenue for them. Secondly is the condition of vehicle clause. These are written so vaguely that the dealer can basically charge the buyer for any "wear and tear" on the vehicle that occurred during the lease. Notice that in most contracts there is never an amount specified for "wear and tear" or a definition for what unusual "wear and tear" actually constitutes. You will pay for every scratch, ding, chip and stain on the vehicle no exceptions. Leasing is by far the most profitable way for a dealer to sell a vehicle. This is why most dealers today push leasing so hard making it appear so attractive to buy more car for your monthly payment. Stay clear of leasing unless you have the money to throw away.  |
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