Fredintexas

An article in Automotive News told how Ford had been offering cash bonuses to its salespeople for writing Red Carpet Leases. Typical bonus amounts were $75 to $100 per lease, but the bonus was increased if the new lease was a renewal. Some bonuses were as high as $500 per vehicle, and this was in addition to their normal salary and/or commission. The bonus program was started in 1989 and was supposedly discontinued in 1995.
So Ford’s salespeople were presenting themselves to customers as “trusted advisers” and telling them that leasing was the smart thing to do, while they were being paid generous bonuses for convincing people to lease. (And they still got bonuses, and bigger commission checks, if they overcharged customers on leases.) Of course, their customers weren’t told about the bonuses, or the fact that so many of them had been overcharged.

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]

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.

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.