Tips from an Auto Finance Specialist

I have a lot of auto finance horror stories, both customer horror stories and horror stories for me.

This one just makes me pity the poor lady.

I took a call once from a lady who was at the end of her contract, and she wanted to know how to get the title for the car.

So I did what was normal, I went to go pull the payoff for the vehicle.

At my auto finance company, the payoff was the amount we needed to send the title to the customer. For a loan it would be the remaining balance of the loan and for a lease it would basically be the remaining lease payments plus the purchase price at the end of the lease (it’s more complicated then that, but it’s not important for this story).

I gave her the number, let’s say it was $10K, and she was shocked!

“That’s wrong, I only have 2 payments left!” she said.***

“It looks like the payoff quote I gave you included your remaining 2 payments plus the residual, which is the purchase price of the vehicle at the end of your lease term. It’s a little more complicated than that, but that’s essentially how we calculate a lease payoff quote,” I replied.

“That’s wrong,” the lady said, “I have a loan, I should just owe the last two payments”.

Now, I’m guessing most of you know where this is going….but she didn’t, unfortunately.

So I pulled up the imaged version of the customer’s contract. In over 3 years working in auto finance and talking to over 10k customers, I maybe ran into two-dozen instances where the terms of the contact was set up incorrect in the system, and none of those were a case of confusion a lease with a loan.

But there is a first time for everything, so I had to do my due diligence.

Alas, the document I pulled up, with this lady’s name and signiture said

LEASE AGREEMENT

across the top of the front page, in HUGE letters. It was probably written bigger than you are seeing on your page right now.

I told the customer that I confirmed she did, indeed, have a lease agreement, and I offered to send her a copy for her records.

“You mean I have to give the car back?”

And the lady just burst into tears, telling me she couldn’t afford to get another car or to continue making payments to purchase this one, just paying for four years had stretched her budget so thin for that time and she couldn’t go on.

I don’t even remember how I finished the call. Knowing me, I probably tried to brainstorm solutions, but my recollection is that there was no satisfactory resolution when the call actually ended.

On one hand, part of me can’t believe she missed something that big, both literally big as well as important.

On the other hand, I felt so sorry for her.

She’s an example of people who sign lease agreements not really knowing what they’re getting themselves into.

At my auto finance company, they would only lease new cars. If money was that tight, then maybe she should have looked into financing a used car vs. leasing a new one.

But the dealer probably sucked her in to the shiny new car, and the rest is history.

I’m sure I’ll write more posts on the dangers of not reading your contract, but if you read nothing else, at least read the heading at the top, OK?

Know what kind of contact your entering into so you aren’t this lady or any of the other customers I had to inform they had a lease contract, and not a loan.

***Note: All conversations are paraphrased and written from my admittedly imperfect memory for your enjoyment.