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My mother is retired, and is currently considering leasing a new car to replace her current aging vehicle. A dealership near us has been offering a special on a lease for a particular vehicle for $99 a month for 36 months, plus $2000 cash or trade-in value. $99 a month was significantly less than the usual monthly payment on this vehicle at other dealerships seems to be, by nearly $100, while the other lease terms seem to be similar. It seems hard to believe that the dealership could make a profit with these terms.

Of course, such low monthly payments are often only offered "to qualified leasses." Is it possible for a dealership to advertise such a low monthly payment as a "loss-leader", and then actually offer the advertised terms to few buyers (or none at all)? If a lease is provided through the manufacturer's financial services department, does that guarantee that a potential leasse will get that advertised rate if they meet the stated credit requirements, or can the dealer essentially turn the person down arbitrarily?

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Within some limitations, the dealer is allowed to approve or deny lending to anyone that it chooses.

Those constraints are the basics that you'd expect for any regulation in the US:

  • Race

  • Religion

  • Nationality

  • Sex

  • Marital Status

  • Age

  • Source of income

You can read more about them in this leaflet from the FDIC's Fair Lending Laws office. (Link is a pdf download.)

As far as what to do in your mother's case, it sounds like it may be some slightly shady sales tactics, but it isn't entirely illegal... It's just annoying.

One thing you could do to try to head off some of the crazy bait-and-switch sales tactics is to communicate with a handful of dealerships in your area about the specifics of your mother's profile as a purchaser. It's much harder to give someone the run-around if you have already agreed to something in principle by email.

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    fixed link, nice article. "source of income" needs qualification. Can't reject if source is some kind of public assistance. But some sources might not be steady income. That might be legit rejection. – JoeTaxpayer Dec 5 '13 at 18:20
  • Shady or not; this is common. How many commercials do you hear/see directly from Toyota, Honda, Ford for "$XXX leasing ... for well qualified lessees." That "well qualified" part is the "trick." – Joshua Olson Dec 5 '13 at 18:27
  • Eh disagree a bit. I tried to prequalify myself with one of these places that offer rock bottom prices. Sure you can by that car for that price...until it is time to cut the deal. Sigh. – Pete B. Dec 5 '13 at 22:19
  • "Isn't entirely illegal" is pretty much how I would describe anyone who sells cars. – corsiKa Apr 18 '16 at 18:04
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I strongly discourage leasing (or loans, but at least you own the car at the end of it) in any situation. it's just a bad deal, but that doesn't answer your question.

Most new cars are "loss leaders" for dealerships. It's too easy to know what their costs are these days, so they make most of their money though financing. They might make a less than $500 on the sale of a new car, but if it's financed though them then they might get $2,000 - $4,000 commission/sale on the financing contract.

Yes, it is possible and entirely likely that the advertised rate will only go to the best qualified lessees (possibly with a credit score about 750 or 800 or so other high number, for example).

If the lessee meets the requirements then they won't deny you, they really want your business, but it is more likely to start the process and do all the paperwork for them to come back and say, "Well, you don't qualify for the $99/month leasing program, but we can offer you the $199/month lease." (since that's the price you're giving from other dealerships). From there you just need to negotiate again.

Note: Make sure you always do your research and negotiate the price of the car before talking about financing.

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    Why should a retired person have a car payment of any type? Pay cash people! – Pete B. Dec 5 '13 at 22:21
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    I agree; I don't think ANYONE should have a car payment, but at least at the end of a loan you own the car. – Joshua Olson Dec 6 '13 at 5:08
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    If you get a rate low enough to be either in step or very close to inflation (which is not impossible, I've even seen 0% financing advertised) then there's nothing wrong with car payments. – StasM May 23 '14 at 9:17
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    It depends. Financially it's theoretically ok (in practice there are usually other problems like 0% financing has other 'fees'), but it also introduces a new obligation which is a separate kind of burden. – Joshua Olson May 23 '14 at 22:53
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    You're basically saying the same thing as StasM and yes in theory it's fine, but in practice it RARELY works out that well. And then only if you're very good already. The companies ALWAYS makes money on these deals, so when you see a deal like this and you can't see how they're making money, start worrying. – Joshua Olson Nov 17 '14 at 8:24

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