Car-leasing is a popular substitute to purchasing, providing the opportunity to drive a new car for less. On a practical level, nevertheless, auto leasing as a car financing choice, involves a lot of downside for the ordinary car buyer. First of all, regulations governing car leasing require much less disclosure than when buying a vehicle. This has resulted in plenty of leasing scams that fox the customer into trusting that they have a got a good bargain when, in reality, it is totally one-sided deal in favour of the auto dealer.

Let us look at some of these common scams and learn how to avoid them -

Unbelievably low rate of interest:

Even if a dealer quotes a very low rate of interest, in reality it is much more than that. It is achieved by either deliberately citing the money factor as the interest rate or computing the loan without amortizing some closing fees, like the security deposit, into the loan lease. Take the money component for example: this is usually denoted as a four decimal digit, something like 0.004. A dealer may quote it as a 4% interest rate when in reality you must multiply it by 24 to get a better idea of the actual interest rate on your loan. In this example, the actual interest rate is a much higher 9.6% than the “quoted” rate of 4%. You must develop the ability to calculate such numbers properly, so that you can quickly comprehend the formula that a dealer uses to work out the interest rate. Look out for any fees not factored into the calculation. If you are not satisfied, do not enter into the lease agreement.

Low penalty for early termination

It can best be described as the mother of all leasing scams. If you request a quote from your dealer for early termination of your lease, usually you will be told something like this - \"You want to get out early? Sure thing, you only pay an early termination fee of $300\". What he is quoting is only the small administrative penalty of early termination, Do not confuse it with the stiffer penalty called early termination fee and it can add up to thousands of dollars. Be alert and know the difference between early termination administrative penalty and the termination fee. You should read the fine print cautiously and understand precisely how much you will be charged if you want to terminate your lease before maturity.

Charges for an extended warranty

This is one more trick to make a quick buck or two at your cost. The dealer offers an extended warranty for the deal when in fact it is already weaved into the EMIs. Another common ploy is to lure the buyer into taking a 36-month warranty on a 24-month lease. Very clearly, you should not pay extra charges for a warranty already included in your payments or for the period which is not part of your lease.

Zero security deposit offer

All those offers of a $0 security deposit for auto leasing are false to say the least. A security deposit is always factored in the lease under the provision for disposition fees.