Auto Leasing Arithmetic Confusing to Consumers
25 March 1999
Auto Leasing Arithmetic Confusing to Consumers; Leasers Benefit from Consumer Reports Service
NOTE CORRECTION: This news release was previously distributed with an incorrect phone number. If you have an old copy of this release, titled "Auto Leasing Arithmetic Confusing to Consumers," please discard it. The correct number to reach consumer reports new car price service is 1-800-395-4400.YONKERS, NY--(AutomotiveWire)--March 24, 1999--You don't have to be a rocket scientist to figure out the cost of leasing a car these days -- but it helps. Complicated pricing coupled with unfamiliar terms are stumbling blocks for many prospective auto-lease customers.
In 1999, about one in three new cars will be leased rather than purchased. Prior to signing on that dotted line, however, lease customers face a number of pricing and negotiating challenges. For example, the pricing information provided in newspaper ads and rapid-fire TV commercials is so complex that most consumers will struggle to determine how much a vehicle will actually cost over the full term of the lease.
"Advertisements make leasing more confusing by using odd figures like $279 monthly for 39 months," says Paige Amidon, Director of the Consumer Reports New Car Price Service, which provides information on buying and leasing new cars. "Consumers are not able to do the math off the top of their heads."
According to recent research conducted at Fordham University Graduate School of Business, consumers tend to focus on the monthly payment figure of a lease, giving much less importance to other elements of the lease. In reality, all the elements - including monthly payment, number of payments, and beginning- and end-of-lease payments -- must be carefully considered when comparing dealer lease prices. Most people find this "multi-dimensional pricing" formula for leases to be very difficult to evaluate.
For 80% of the new cars advertised in a recent metropolitan newspaper(1), the price information prominently displayed included terms such as $149 a month/39 months and $3,039 down. Academic research suggests that people's perception of price becomes less accurate as the mental arithmetic becomes more complicated. Difficulty with mental arithmetic combined with multi-dimensional pricing may explain why consumers from all levels of education routinely have trouble determining the best deal.
"Purchasing a new car is a complex decision -- and leasing can be even more daunting," says Amidon. "A Consumer Reports survey of automobile lease customers turned up a number of common problems beyond price confusion, such as unexpected lease-end charges.
"Consumers need to consider all the factors -- not just the monthly payment," Amidon adds. "Consumer Reports New Car Price Service uses the experiences of Consumer Reports' subscribers to develop advice on negotiating the best buying or leasing strategy. For example, the starting point for a leasing negotiation is knowing the dealer's cost for the car and options. This gives you a realistic figure to use as a basis for discussing the cost of the lease. That's why Consumer Reports New Car Price Service offers advice on many leasing considerations, along with a detailed worksheet."
A copy of the leasing worksheet is available at no charge to visitors to the Consumer Reports' web site: www.consumerreports.org/news/autos/. "As an independent, nonprofit testing organization, we've been evaluating cars and the auto industry for more than 60 years," says Amidon. "Unlike other services, our pricing and information is uncompromised by any connection with an auto manufacturing, sales, or dealership organization."
The Consumer Reports New Car Price Service details the baseline pricing information necessary to negotiate the best deal, along with information that is available only from Consumer Reports. There is relevant reliability and safety data, recommendations on optional equipment, alternate model suggestions, and, of course, leasing advice.
A comprehensive report on one automobile is $12, $10 for each additional report. "That $12 report gives you solid information and negotiating advice," explains Amidon. On average, the service's customers save $1,600 on a new-car purchase.
To learn more about the Consumer Reports New Car Price Service, consumers may call 1-800-395-4400 or visit the web site at www.consumerreports.org/Functions/More/Prodserv/newcar.html.
(1) January 24, 1999 edition of the New York Times
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information-gathering organization, serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.