I got fleeced
Okay in april 2003 I leased a saturn nice car but dumb mistake. The amount financed through the lease was $24.000. for 6 years or 72 months at 500.00 per month okay. Now just about thre years later I called them to ask how much is left owning the told me 22.280 plus 4000 at the end of the lease. I asked them how much for an EARLY buy out they told me 20.500. I said huh. They said 20.500 was left of the principle amount of the loan. So in three years I paid only 3500 principle. and now with three years left I will pay the remaining 20.500 in principle. Tell me they are wrong.
Normally, we would not publish this type of question because it is not directly related to the purpose of the blog, but since this is a fairly common experience for people that lease cars we thought we’d answer this one.
Let’s start with the basics:
1) The car was worth $24,000 when you leased it.
2) You signed an agreement to pay $500 for 72 months plus a $4000 lumpsum to “buy” the car at the end of the lease.
Do the math: 72 x $500 + $4000 = $40,000.
You signed a contract to pay $40,000 for a $24,000 car.
You’ve made payments for 3 years, so you’ve paid 36 x $500 = $18,000.
Therefore you still owe $40,000 – $18,000 = $22,000.
Sounds like the leasing company has it about right.
What this example demonstrates is that leasing is a very expensive way to purchase a car. When you sign a lease pay particular attention to the interest rate and the cost of borrowing – the leasing company is required to disclose both of these items to you in their contract. If I had to guess, you probably agreed to a 10% interest rate on your lease.
Before you sign a lease you should also ask the dealer to calculate the cost of “buying the car” via a bank loan or in-house financing. Usually the interest rate is a point or two lower if you shop around.