Purchase-Lease Switch Dealer Scam

This scam is committed when a car dealer switches a car buyer unknowingly from a retail purchase to a lease. When you outright purchase a vehicle, after making all the payments, you will own the car free-and-clear.

purchase lease switch car dealer scam 350z on road | AutoCheatSheet.com

When you lease a vehicle you're essentially just renting it for a certain period of time, normally between 12-60 months. You will not own the car at the end of the lease term.

After the initial lease, you'll have a substantial residual balance you're responsible for. You can either write a check to pay the car off, walk away, or trade it in for another vehicle. This can be a big surprise if you're not expecting it.

Anytime during the lease period you decide to pay-off the lease, trade, or return the car early. You will be subject to an early-termination fee and possibly additional fees on top of your current balance.

Difference Between a Retail Purchase and a Lease

The two most common ways to buy a new car at a dealership is a straight retail purchase or a lease. I'm not saying there's anything wrong with leasing a car. What I am saying is leasing a vehicle is not for everyone. There are certain restrictions that may apply to a lease that might not make it the right decision for some people.

Straight retail purchase - When purchasing a car, you will enter into a retail installment contract with a lender. You will be making payments to the lender for the total amount financed, plus interest, for a certain amount of time. Normally this length of these contracts will be anywhere from 12 to 72 months or more.

There are no mileage restrictions or any other rules. Once the contract is satisfied, you will own the vehicle free and clear.

Leasing a Vehicle - Leasing a vehicle is based entirely on the concept of paying for the amount by which a vehicle's value depreciates during the time you're driving it, essentially renting it. Leasing agreements are normally 12 to 48 months but can also be up to 60 months.

There are several restrictions that may apply when leasing a vehicle. Mileage restrictions, insurance coverage and failure to maintain your vehicle during your lease can lead to higher costs at the end.

Once the initial lease term is completed you will not own the vehicle and will still have a remaining balance owed on the vehicle.

How the Purchase-Lease Switch Scam Works

Unlike dealer finance process scams. The purchase-lease scam comes into play when you're negotiating payments with a salesperson. A salesperson will lead you to believe that you're purchasing a vehicle when you're actually being presented with lease payments.

A salesman may also tell you that you'll own the car at the end of the lease term. This is not quite true because at the end of an initial lease term you'll have a huge residual still owed on the vehicle if you choose to keep it.

Use this handy Car Payment Estimator to estimate the payment on any vehicle.

Some salespeople may also tell you that you're building equity in the vehicle as you're making the lease payments, this is also a false statement. You don't own the vehicle, the leasing company owns the car.

How Dealers May Attempt to Manipulate you into a Lease

A car salesman may use the negotiating table to sway you away from a retail purchase, trapping you into an unwanted lease. Leasing is not a bad way to pay for a car, but it's not for everyone.

After presenting you with $500/mo payments, the car salesman will go back to the sales manager and have them write a $350/mo lease payment for the same car. When presented with the lower payment and under the stress of buying a car, all you see is the lower payment and tend to forget about everything else. Keep in mind, leasing is not right for everybody.

After presenting you with such lower payments on the same vehicle. The salesperson may or may not touch on the negatives of leasing a vehicle. When you're presented with car loan payments at a dealership. You should always ask if your being offered, "purchase payments" or "lease payments" before making a decision.

How to Avoid the Purchase-Lease Switch Scam

Now that you know how to recognize and avoid the "Purchase-Lease Switch Scam," familiarize yourself with other ways a other ways a car dealer may try to scam you here.

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