Getting the Terms of a Lease
As of January 1, 1998, the Federal Consumer Leasing Act
(a.k.a. Regulation M,) requires dealers to disclose in writing the gross cap cost,
residual value, lease payment, and number of months.
Unfortunately, the new rule stops short of requiring
disclosure of the money factor or interest rate. However, with persistence you can obtain
the factor from the dealer or calculate it with a hand calculator given the other terms of
the lease. (Chart Software publishes computer software called Expert Lease Pro that will
perform all of the calculations forward and backwards.).
Leaving the money factor out of the disclosure gives the
dealer a significant loophole allowing him tell you one thing early on (i.e. residual and
cap cost) then fudge the money factor to fatten his profit margin when it comes time to
sign the lease agreement. To avoid this pin down the dealer on ALL of the terms of the
lease including the money factor early in the negotiations.
Even with the new regulations, sales people are often
reluctant to provide the specific terms of the lease or are very vague about the figures.
Their strategy is to wait until the very end of the process when the contract is presented
for your signature to make the required disclosures. At this point you may have invested
many hours in haggling and negotiations and may be willing to sign anything (they hope)
just to be done with it. Don't make this mistake. Insist on disclosure of the terms early
in the process before you have invested so much time and energy that you are unwilling to
walk away. If the sales people plead ignorance be persistent and if necessary, ask to
speak to the finance manager. Also, be sure to take clear, organized notes and always
write down the name of the person providing the information. If possible, get the sales
person or finance manager to write the figures for you on his business card. Having the
figures in their hand writing will avoid any possible confusion in the future over who
said what.
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