Car dealers have found a new way to profit from people with money trouble: leasing them hand-me-down vehicles.
'The deals are pitched to customers as the cheapest way to drive a used car off the lot, with the added benefit of an easy escape for those who can't keep up with the payments. Few customers are told about the advantages on the other side of the trade. Leases can allow dealerships to sidestep interest rate caps, and there are fewer financial disclosures rules than with a conventional car loan.' 'As with Buy Here Pay Here, the leasing business caters to the millions of Americans who have been forced by a sour economy to make do with less.'
'The dealers get a tax advantage: They can pay income tax on the sale over time, instead of in a lump sum upfront.
When payments are missed, repossession is a snap because the dealer still owns the car. And lease terms, unlike auto-loan payments, cannot be reduced by a Bankruptcy Court judge.
These benefits have led thousands of used-car dealers, including many in the lucrative in-house financing sector known as Buy Here Pay Here [Previously
], to move into leasing, industry sources say.'
'Michael Yslas of Lakewood, who sells bowling equipment, wound up leasing a 2001 Chevrolet Silverado pickup after being turned down for several new-car loans because of unpaid medical bills that hurt his credit rating.
He came to regret the lease, saying the $1,500 upfront fee and monthly payments of $411.56 were excessive for a truck with 139,000 miles on the odometer.
"My thinking was that if I lose that truck, I lose my job," Yslas, 40, said of his initial decision.
His boss eventually helped him find a better deal on a car, but Yslas said that when he tried to cancel the lease, Coast to Coast Motor Cars in Costa Mesa pressured him to lease a Mercedes-Benz instead and harassed him with threatening phone calls when he declined.
Yslas filed suit in Los Angeles County Superior Court last month over the dealership's practices. The case is pending.'