I was overcharged $3,200 by dealership after being hit with ‘phantom fee’ – it happened to others so we fought back
DRIVERS are buying their leased vehicles instead of new or used cars - now dealers are finding ways to charge lessees more, too.
With used car prices averaging nearly $30,000 and a brand new car being close to $50,000, many choose to lease and buy a car.
Two years ago, buying a used car seemed like a financially wise choice, as many came with warranties, payments were less expensive, and cars less than 10 years old were much cheaper than buying new.
However, the cost of used cars has risen dramatically alongside brand-new cars.
ABC affiliate WABC reported that the cost of a used car averages around $29,000, which is a 39 percent increase over last year.
The average cost of a brand-new car hovers around $47,010 according to Kelley Blue Book, leaving many drivers to find a less expensive way to buy a car.
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As the car market becomes increasingly more expensive for a wider range of buyers, many are leasing with the hopes of buying the car at the end of the contract.
The idea behind a lease is after the contract expires, the lessee can buy the vehicle at a lower cost.
Many lease agreements are attractive to drivers as the monthly payment tends to be less than financing, though there are strict parameters like mileage restrictions per year of the contract.
In most circumstances, the price of the vehicle isn't negotiable, as lessees pay the "residual value" of the car.
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As fate would have it, though, many dealerships are finding ways to overcharge lessees buying their cars by hundreds or even thousands.
Anton Shipman and Keri Cromer are two New York drivers who came forward with their stories on how they were overcharged at the end of their contract.
Cromer's son Michael was leasing a Nissan Sentra, and they were eager to buy it as the lease came close to an end.
Cromer didn't notice it until she got home, but she discovered the price of the vehicle somehow jumped up by $3,200.
The charge was listed as a "dealer charge" that wasn't listed on the invoice, and she promptly disputed it with the dealership.
Any fee that wasn't listed on the invoice is considered a "phantom fee."
"He said I understand there's a discrepancy, I said it's not really a discrepancy, it's a rip-off," she told the WABC.
"He said sometimes people notice it, sometimes they catch it, sometimes they don't."
I think really they're just trying to make easy money off people who were uninformed and for me it was my first time dealing with a car dealership.
Michael Cromer, leesee
Michael said he thinks the dealership preyed on them.
"I think really they're just trying to make easy money off people who were uninformed and for me it was my first time dealing with a car dealership," he said.
Shipman said he noticed a $3,000 charge on his invoice disguised as a "processing fee."
"He started at over $2,000 and then he went to $1,600, then he went to $1,000 all because I told him I'm on the phone with corporate," he said.
He too tried to dispute the extra charge and settled on the lowered fee of $1,100.
He's still upset that they got away with overcharging him.
"I was surrendering then, but the war wasn't over," he continued.
Expert Advice on Leasing a Car
Ray and Zach Shefska, the father-son duo making up CarEdge, spoke to The U.S. Sun Motors Reporter Kristen Brown in an exclusive interview on their top tips before signing a lease agreement on a new car.
Leasing a car can be a more viable option for some instead of financing with an auto loan.
Leasing a car for 24 to 36 months can be attractive to many because monthly payments are typically lower than loan payments, though there are some restrictions, like mileage allowances.
At the end of a lease, people can either buy the vehicle out at a reduced price, or they can return the vehicle to the dealership and lease another car.
Before jumping into a lease, Ray gave his top tips to consider, stemming from his 40 years of experience as a sales manager for several dealerships:
- Learn the interest portion of the lease - or the "money factor" - to understand how much interest you'll be paying and how much it equates to overall.
- Negotiate the selling price before discussing the monthly payments - the cheaper the selling price of the car, the cheaper the payments.
- Accept the premise that you will always have to make a payment, so you can either have a nice car for a cheaper payment, or a lesser car for a higher payment.
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Shipman and Cromer contacted WABC reporters for help and quickly got to work.
After contacting the dealership Cromer worked with, the price was quickly cut by $3,219 after an internal audit of their recent lease buyouts.
They also formally apologized to them.
"It's justice, we got justice," said Cromer.
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Shipman's dealership also paid him $1,500 after they were contacted.
Both cases should serve as a warning to buyers to be careful and read the invoice to spot any charges that shouldn't be there.