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Car-leasing has been lauded as a more attractive alternative to buying, offering in the process the flexibility to drive a new car for less. The reality, however, is that leasing is an option that is fraught with many pitfalls for the average customer. Leasing regulation does not require as much disclosure as buying a vehicle. This has given rise to many leasing scams that trick the customer into believing they are into a good deal when, in effect, all he is getting is a rough deal on the dealer’s terms.

Here we look at some of these common scams and how to avoid them

Artificially low interest rates:

Some dealers quote a lower interest rate when in reality it’s much higher. They do this by either purposefully quoting the money factor as the interest rate or calculating the loan without amortizing some closing fees, like the security deposit, into the loan lease. Take the money factor for example: this is typically expressed as a four decimal digit, something like 0.004. Some dealers quote this as a 4% interest rate when in fact you need to multiply it by 24 to get a rough idea of the interest rate on your loan. In this example, the interest rate is a much higher 9.6% than the “quoted” rate of 4%. Make sure you crunch the numbers and understand the formula they use to calculate their interest rate. Look out for any fees not factored into the calculation. If you are not satisfied, do not enter into the lease agreement.

Terminate your lease early for a low penalty

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To lease, you have two possible choices: either lease through a dealer’s finance source or through an independent lease company.

A conventional dealer has a captive finance source, which can be the car manufacturer’s financial company, such as BMW Financial Services, Honda Motor Credit or General Motors Acceptance Corporation (GMAC), or a major national bank such as Chase Manhattan.

Independent lease companies are no financial obligation to any single one manufacturer financing source, but work with dealers anywhere in the country.

So which one is better?

Conventional dealers provide better lease-deals on limited-time promotions.

Factory-subsidized cars that have subvented money factors and residuals are

very attractive lease deals and can be very hard to beat anywhere else.

Independent lease companies can offer you unbiased and professional advice

on vehicle selection regardless of make and model. This is because they are not tied to a single manufacturer or financing source, unlike conventional

dealers who have to sell specific models. They can also be more flexible regarding negotiating lease terms like residual value and mileage.

Ultimately, if you prefer a more personal and customer-oriented relationship with your leasing agent, then you will do well with an independent leasing company.

Hybrid vehicles’ popularity has sharply grown from a couple of thousands in early 2000 to close to 300, 000 by the end of 2005. The trend is  rapidly catching with the auto-leasing industry with generous tax credits and incentives on offer if you go green.

Beginning in 2006, businesses and taxpayers who lease, or purchase, an  environmentally-friendly and fuel-efficient vehicle will be eligible to  claim federal income tax credits worth thousands of dollars. Individual  states also offer generous incentives, including hybrid state tax credits,  new High-Occupancy Vehicle (HOV) lanes access and discounted thruway tolls for alternative-fuelled vehicles.

And that’s not all you can save from going green! You can now save on your  parking fees at a number of universities and some auto-insurance companies are offering insurance discounts for hybrid-vehicle owners nationwide.

If you want to take advantage of these incentives and contribute to energy  conservation then visit HybridCenter.org and complete a personal profile about your driving needs and habits. You will get in-depth advice on hybrid models that would make economic sense to you and local, state and federal  incentives available where you live.

$250 to dispose of your vehicle, $1000 for extra miles you put on the clock and $200 to replace the light bulb and the worn tyres—lease agents constantly nickel-and-dime consumers when their lease runs out. Here’s a rundown of what can trigger those fees, and some steps to take in self-defense.

Disposition fee: leasing companies charge you if you choose not to buy the vehicle at the end of your lease. This fee is set as compensation for the expenses of selling, or otherwise disposing of the vehicle. It typically includes administrative charges; the dealer’s cost to prepare the car for resale and any other penalties. Make sure this fee is stated clearly in the  contract and is agreeable by you before signing on the dotted line. At lease-end, you are left in no position to negotiate as the dealer can apply your refundable security deposit towards this fee.

Excess mileage charges: Almost all leasing companies will charge a premium  for each mile over the agreed upon mileage stated in your contract. This penalty can be as high as 25 cents per mile and can add up quickly. To avoid the risk of running thousands of dollars in excess mileage penalties at the end of your lease, always check the “per mile” charges in your contract and be realistic about your mileage before you sign any contract.

If you think the limit is unrealistic given your commutation needs, then  negotiate with the dealer to get a higher mileage or contract for  additional miles.

Excess tear-and-wear charges: Another potential cost at the end of the lease is any incidental damage done to the car during the lease. This is deemed any excessive damage done to the normal tear and wear of the vehicle. Notice the use of the terms “deemed”, “excessive” and “normal”. There is no standard formula to define what’s “excessive” and “normal” and it’s up to the leasing company to assess – or deem – the damage and determine what they are going to charge. This leaves you at the mercy of unscrupulous

leasing agents who set stringent tear-and-wear standards. Make sure you read the description of these standards, understand them and agree to them. If your leased vehicle is damaged prior to the end of the lease, you may find it cheaper to repair the damage yourself than pay the excessive charges of the leasing agent. In the event of a dispute over the charges at the end of your lease, get an independent third party to do a professional appraisal detailing the amount required to repair any damaged parts or the amount by which tear-and-wear reduces the value of the vehicle.