The latest wrinkle in the leasing of cars comes hidden tricks in the form of the BUY-OUT fees, far away from the residual amount and waxing of the latest in gouging, not from the car dealerships but from the BANK, namely one: ALLY, formerly the government-bailout entity: GMAC AUTO FINANCE. This same, GMAC Auto Finance once cleverly created the BALLOON payment finance contract, which clients mis-took for a regular “car loan”, i.e. pay until the term was up, only to find out there was a chunk of money due at the end of the loan period, SURPRISE! After Regulation M passed in the late ’90s, this type of car loan went away and lease contracts were created to look like finance contracts with four boxes across the top, showing all the rebates, cash down and money spent to acquire the car. The new contracts also CLEARLY spelled out in BIG BOLD PRINT: “EARLY LEASE TERMINATION FEES” and possible”LEASE PENALTIES” in the way of additional payments due and any negative equity the car owed because the lease wasn’t completed. There is also a section marked LEASE PURCHASE OPTION, which showed the residual value plus a small fee of between $250.00-$500.00 and was clearly spelled out as such. The client was also shown where the remaining tax liability wold be on the residual balance plus buy-out fee plus any dealer fees required to purchase the loan. ALLY LEASE PURCHASE OPTION FEE version 20.11* Welcome to the latest ALLY game, a whopping $2500.00 buyout fee, on top of the residual, which is non-negotiable. Dealerships have chosen to explain away this gigantic whack as everything from a “negotiable buy-out cost if the car isn’t worth it in the end”, to “don’t worry about it, you’ll never buy the car at the end of the lease, anyways.” SO what’s the problem with this if it’s clearly marked in black and white on the auto lease contract, you ask? 1. What if you go over the miles and suddenly MUST buy the lease out at the end to avoid mileage charges? You’ll be stuck with the $2500.00 or the cost of XXX miles at .20 a mile do the math. 2. Many long time lessees have always operated on the belief the RESIDUAL is a fair market value of the car, considering miles and depreciation, at lease-end term, set by the bank. Hence you are in partnership with the bank on the ownership of the car, sharing equally… NOT SO according to this contract. HOW IS THIS A VALUED-partner relationship? 3. How is a company, bailed-out by US taxpayer money, allowed to recreate the term residual value with this fee? NO OTHER AUTO LEASE BANKS: US BANK, CHASE, MERCEDES-BENZ, BMW, HONDA, TOYOTA, NISSAN, INFINITI, FORD, SUBARU, VW, AUDI or WELLS FARGO are doing this type of back-door grab. 4. WHY ALLY? Ally is now the financial arm for auto loans and leases to Chevrolet, GMC, Jeep, Cadillac, Buick, Chrysler, Dodge dealerships and offers banking services to many other dealerships. Ally shows dealerships a very aggressive residual value, low money factor and profit potential, which excites the dealership personnel to make the effort to push the Ally contract, in many cases, sliding over the $2500.00 PURCHASE BUYOUT OPTION FEE. It is a way to get those customers with less than 700 AUTO CREDIT SCORES into a nicer car at a lower payment, where some other AUTO LEASING BANKS would not take this client on. AT this juncture many ALLY leasing clients have written to say they were told something less than full disclosure about the $2500.00 fee, and it came to my notice when a savvy client of mine caught it while READING THE CONTRACT in the finance office. When questioned, in front of ME, the client was told, “it’s not a big deal, you can negotiate it if you want the car at the end of the lease,” to which the dealership REFUSED TO PUT IN WRITING that the client could negotiate the $2500.00 fee at the end of the lease, so the client made the dealer re-write the contract for US BANK, at the same terms.
