Hi all,

My wife just recently completed a lease on her automobile. Halfway through her use of the vehicle, her new job required many many miles. We expected a penalty as a result. We returned the vehicle and the penalty hit. We could not pay the entire balance, but decided to pay them a minimum of $500 per month. We have consistently made those payments each month (and more), and the payments have been accepted.

Fast forward 3 months, I just received a notice in the mail stating that we are severely passed due on our account balance. The lease company is offering a settlement on the account, with a hit to our credit file. I have heard before that you should never accept a settlement.

The lease company has apparently tried to connect with us over the last three months, but without success, until I received this letter.

What course of action should I take that would prevent a major disruption in our good credit standing? Dispute the letter because the company has accepted our payments?

Thanks for your help, CJ

Well first thing lets do, is to move this to the main credit forum.

You are dealing with an original creditor/collection company and credit reporting issues.

more views and responses in the main credit forum.

and

BUMP

Did they agree to a payment plan, or did you just start sending payments? Not quite clear on that part.

We ourselves just started sending them payments to the account. We did not receive prior approval to make payments. The payments have been applied towards the balance.

How much was the penalty?
How much have you paid on it?
How much is left?
How much are they asking you to pay in full?

Penalty - Nearly $5000.00 dollars
Paid - $3400.00 over 4 months
Balance - $1600
They are offering a $1200.00 payoff settlement. Taking this settlement would add a "Defaulted Loan" to our credit report. This is not an acceptable route for me.

They also stated not taking the offer will force them to place our account with a collection agency.

Thanks

Absent a formal agreement between the parties, they retain the right to call the whole thing due since it was originally due and payable in the beginning. And since you are dealing with the OC, settlements should absolutely be something that are considered unless you REALLY want to have to deal with third-party entities...

Have you talked to them directly? Do they understand that, at the rate you're going ($850/mo) without a formal agreement, that you'll have it paid in full in just two more months? It's not like you're nickel-and-diming them here and there. I'd try and point that out to them before we discussed any unnecessary settlements.

Presuming you intend to keep up the pace of payments until paid in full, what they are attempting to do is shoot themselves in the foot by offering two options where both see them lose money, when they'd be better off just shutting the hell up.

Maybe try talking a little higher up and point this out to them and see if they'll back off.

I'd look at rolling the $1600 onto a six-month 0% no fee BT (yes, they still exist).

Pull your CR and see what they're reporting now. They've probably already trashed your credit with at least a bunch of late payment notations, because like Centex said, you're already in default. Any negotiations you do with them should include a demand for favorable credit reporting. If you both agree on a payment plan and make the payments, it is not wrong to report "paid as agreed."

They may not want to let it go past 6 months because then they'd have to list it as charged off, and that will lower the rating of their business.

If this happens in the future it could be better to refinance the car and keep it, or sell or trade the car and cover the difference between trade value and residual value. It may cost less than the penalty you'd be charged for mileage if you return the car.

Thanks for your suggestions. After "showing" Honda that they were receiving large payments, they backed off and are reversing the negative info applied to my wife's credit report. Apparently, no one bothered to look this information up. CJ

LOL. Doesn't really surprise me. Could have been nothing more than the computer put your name on a list of unpaid people and a mindless CSR started chasing after it.

Glad it worked out.

I'm asking this only because there's clearly a lot of people here who know a thing or 2 about leasing....

An uncle told me years ago something like... "Leasing only exists so car companies can get people into cars that they couldn't otherwise afford. The only thing is that they never tell the customer that they still cannot afford them."

And on the flip, an elderly neighbor said "I'm getting a new Buick every 2 years no matter what. I might as well lease it."

Any brief insight?

Replacing your car every two years is expensive no matter how you do it. From a purely money standpoint, it is best to buy a car and keep it until it is worn out. Hopefully it will outlast the end of the loan, so you get some time to drive it with no payments.

I believe there is alot of truth to that, but I don't believe it applies in literally every situation.