Fredintexas

Ford’s method of calculating and quoting interest rates on leases allowed its dealers to deceive their customers into thinking that they were getting lower rates. And since the company did not provide written disclosure of the actual rates, dealers were free to quote any rate that sounded good, without fear of getting caught.
In many cases, the actual interest rates on Ford leases were about 1.5 to 2.0 points higher than those charged by other lenders. Quoting lower rates obviously helped dealers to convince people that their leases were “good deals,” even though the rates may have been deceptive. (Recent quotes obtained from a number of Ford dealers understated the actual interest rates by about $30 a month on one particular vehicle.)
Ford’s “rate discrepancy” is due to a hidden administrative fee that the company adds to its monthly finance charges, but only the “base rate” is used when quoting rates to customers. The undisclosed part of the finance charges causes the real APR to be a lot higher, so if a dealer tells you the “rate” on a lease is 9.0%, it’s probably closer to 10.75%.
The company’s RCL dealer handbook explained this hidden fee in a question-and-answer section: “Q: Is a lease factor like 10.50 the same as a 10.50% APR? A:
No. The lease monthly payment may include local fees, where applicable, and an administrative fee of 1/9 of 1% of the acquisition cost. The implicit rate to the customer is approximately 1.75% point higher than the stated factor.” [emphasis mine]

Some new-car dealers only re-sell the used-car stock near their retail prices. These non-aggressive dealers owner’s don’t require huge profits-margins from their sales managers. In other words, the dealer’s owner is very patient with their sales department and manager. Unfortunately, these new-car dealerships usually don’t discount their used cars enough to interest savvy-buyers. Sales managers who work for non- aggressive dealer would prefer to “safeguard” their in-stack inventory and salesmen’s selling-time, then to sell used-car “cream puffs” at huge discounts to a bunch of bargain hunters! -

By the mid-90’s new-car buying had slowed down, mainly because few families could pre-qualify for their new-car no cash-down and/or extended-loan automobile purchases. Meanwhile, new cars were getting very expensive to buy, outright! Even, new-car trade-ins yielded little or no cash to their previous owners when returned to the dealers.
Since, fewer new-car buyers were capable of buying “entire cars” with their current credit ratings, leasing become their only alternative to “drive” new cars, again. To make leasing attractive, though, auto manufacturers and new-car dealers had to spend millions of advertising-dollars to convince the public leasing was really okay. But for many, leasing wasn’t okay, nor was it any “cure” to their new-car-buying woes. By the time the 90’s arrived, the average financing terms on new-car loans, extended to six and seven years.
With such extended-loan terms, many new-car buyers discovered, too late, that many “make and model” cars don’t last that long on the road. In fact, many consumers are still making their monthly-payments on cars no-longer running. Since, auto manufacturers must sell their new-car products, somehow, leasing became their only alternative to “push” expensive new automobiles back into the marketplace.

Never buy from Used-Car lots! Avoid used-car lots, entirely. The main reason is used-car dealers pay too much for their cars. This is especially true, if they buy from new car dealers, and/or at local auto-auctions. To buy a quality car — near its Loan-value, would be impossible from used- car dealers. Also, it’s too dangerous to buy cars at used-car lots, because you may be buying a “lemon” in disguise or even a “clipped” car — two cars [their better halves] welded together. Don’t waste your valuable searching or buying- time, and don’t even “practice” on their salesmen! Just stay away.

Leasing automobiles to the public is big business for new- car dealerships. Consumers who couldn’t get financed on their new-car purchases, can easily lease even more new-car product for about the same monthly payments, as in the past. Leasing became too “easy” for many consumers. They continue leasing their cars, over the years, not realizing their economical loss — of not owning any car’s equity. Soon after, leasing became more complicated as “aggressive” sales managers realized their profit potential — getting more up- front cash form customer yielded them additional dealership profits. Thousands of excited leasing-customers paid their up-front “new-car-delivery” fees with their credit cards. With even fewer consumers having available credit-card cash on them, car dealers continue to “recycle” their “old” new-car leases with expensive brand new cars. Evidently, this is the “latest” means by manufacturers to “push” more product on previous new-car customers

It’s smart to buy used-cars of quality, especially if the cars have lots of TLC in them. Typically, quality used-cars experience fewer repairs, and “age” much better then “throw-away” cars. Savvy-buyers try to locate and buy only the “best” quality-used cars in their area. They focus on “above” average three years old Q-cars, that still look and drive like brand new cars. Typically, these cars have less than 30,000 miles on them. “Borrowing” cars with much TLC in them, give savvy-buyer’s means of cheap transportation. When savvy-buyers buy and resell cars [cream puffs] over the years they are able to maintain their original used-car investments. This is especially true if buyers get their Q-cars for well below dealer-wholesale.

According to Ford’s RCL dealer handbook, dealers were offered extra money for writing leases with interest rates that were above their standard lease factors: “The dealer shares up front with Ford Credit additional lease income earned over the lease term as follows: Lease Term 24 (Months), Dealer Portion 85%/Lease Term 36 (Months), Dealer Portion 75%/Lease Term 48 (Months), Dealer Portion 65%.”
Since Ford provided no written disclosure of interest rates on its leases, their customers would have had no idea that dealers were increasing their rates. Obviously, dealers would not have mentioned it to their customers when it was being done. So a dealer who secretly raised the rate on a lease by two points would receive additional income of $675 for increasing a customer’s total finance charges by $900.
This practice appears to be illegal, because someone acting as a loan “broker” (i.e., someone who is compensated for arranging and placing loans) must provide disclosure to customers when they are being paid by lenders for placing loans with them. And that’s clearly not being done by Ford Credit or its dealers.
This is a very common practice in the car business; most lenders pay dealers for giving them loan or lease business. (Without disclosure, of course.) Unfortunately for consumers, it often results in customers getting stuck with lenders who offer bigger kickbacks, not lower rates.