Do you have any car lease buyout strategies?

[ironhat]

After all my kicking around on cars we've decided to keep the van when our lease runs out in March. Of course, that leaves us a lot of time to change our minds another time or twelve. Now, I have to admit that I'm not the brightest penny in the drawer and I *despise* negotiating. I've walked out of dealerships when they insisted on playing the whole game instead of treating me like I still had half a brain .

OK, the point is I need to do a little research before I see if they will negotiate before lease-end. I have about burned out my retinas searching for a site that gives the strategies for negotiating these contracts. Ninety-nine percent of the search results are for finance companies.

As always, TIA,

[Russianwolf]

wasn't aware you could renegotiate at the end of the lease. I was under the impression that the terms of the lease were spelled out when the lease was signed.

[Jeffrey Schronce]

You can buy out of a lease at anytime. They will be happy to have their way with you forcefully.

99% of early lease terminations are due to trading vehicle or total loss due to accident. In the prior event, you are at the mercy of the car dealer. Your choice to buy out before lease end is viewed identically to early termination. You are much better off to complete the terms of the lease. The pre-defined residual value of the vehicle, as defined by contract is usually a fair amount higher than what you want to pay. Look at your residual value, then look at a used vehicle on the lot that is similar to yours. Notice a big difference? You bet you do.

Leasing has always been a mechanism of the commercial markets, however when people started getting car hungry and cash poor leasing made its way to the individual markets. The average consumer doesn’t stand a chance of understanding residuals, "money factors" (used instead of stated interest . . . you would have a stroke if you saw the conversion!). Finance companies want residuals to be overstated, as it shows less up front profit ie sell car at 20k, have 15k residual = 5k profit (financing, interest, etc excluded). But here is the kicker . . . finance company then sells off the used vehicle for its market value, say 12k. They then write off the difference between the 15k and the 12k as a loss. Nice.

If you understand this gibberish it is likely that you have had a finance class or two. I majored in accounting and finance and it is still hard for me to keep straight!

Bottom line is the best deal is to be had when the finance company has the asset on its hands and needs to get rid of it. THAT is the time to negotiate if you have failed to do so prior to leasing (which is very, very, very common).

The dealer will be MUCH more interested in selling you a used car or new car when you turn in the trade. They stand to earn very little in your conversion from lease to purchase.

BTW, leasing then purchasing is a very expensive way to buy a car.

[ironhat]

You can buy out of a lease at anytime. They will be happy to have their way with you forcefully.

Part of the pain here is that I allowed the son of a good friend talk us into this and...

99% of early lease terminations are due to trading vehicle or total loss due to accident. In the prior event, you are at the mercy of the car dealer. Your choice to buy out before lease end is viewed identically to early termination. You are much better off to complete the terms of the lease.

The pre-defined residual value of the vehicle, as defined by contract is usually a fair amount higher than what you want to pay. Look at your residual value, then look at a used vehicle on the lot that is similar to yours. Notice a big difference? You bet you do.


If you understand this gibberish it is likely that you have had a finance class or two. I majored in accounting and finance and it is still hard for me to keep straight!

Bottom line is the best deal is to be had when the finance company has the asset on its hands and needs to get rid of it. THAT is the time to negotiate if you have failed to do so prior to leasing (which is very, very, very common).

...I didn't know this and our 'buddy' didn't mention it. Of course, why would he. All's fair in war and car dealing and, afterall, I'm the fool who didn't do his homework.

The dealer will be MUCH more interested in selling you a used car or new car when you turn in the trade. They stand to earn very little in your conversion from lease to purchase.

BTW, leasing then purchasing is a very expensive way to buy a car.

Unfortunately, I did follow you and felt sicker by the sentence. I guess I'll be looking to buy a different vehicle than this one. Too bad. At least I know how I treated this one.

Thanks,
Chiz

[cabinetman]

Between my wife and I we have had 5 lease arrangements. The fact that the lease agreement is in favor of the leasing company is undeniable. It's fairly cut and dry. Of the five only one contract was taken to the end of term. The last two were an early termination to lease another vehicle. The dealer involved may or may not be part of the lease arrangement. Both times the balance of the term was used to negotiate a new deal.

If you play their game, you will sit through an array of terms, and many trips the sales rep takes to the managers office. We don't do that game. The last thing they want you to do is to leave and go shopping else where. Many times we did do that. If you follow the numbers closely, and closely, I mean write everything down in front of the rep, so he/she can see that you are really simplifying the calculations. The last thing they want you to know is the price of the vehicle. What they will do is keep on with "What do you want your payment to be".

Our deals went like this. When we finally found the vehicle that we wanted, the balance of the lease was used as a discount (off their markup), like a trade in would be. Keep in mind the window sticker and the MSRP are figures that the dealer and the manufacturer come up with. Those prices are not what the dealer actually pays for the car.

So, ours was not really negotiating, but rather "take-it, or leave-it". We happened to find ones that "took-it". In order to figure out whether you're getting the shaft even with that going for you, you have to write down the numbers in the beginning.

[Jeffrey Schronce]

Cabinetman, the way you outline purchasing is perfect for buying a car. However, for a lease the ONLY thing that matter is monthly payment. When I say monthly payment, I of course include mileage considerations etc. You want to lease the correct amount of miles. No point in having 20,000 miles left at the end of the 3 year lease and definately no point in paying $.20 - $.30 per mile for overage. They can sell you the car for $1,000,000 at an interest rate of 1000% but as long as your payment is $200 per month and you get to walk away in the end (no fancy stuff on the end) who cares what price/trade/interest is on paper? When they ask you what you want your payment to be on a 2008 leased Lexus tell them $200 per month and smile. They come back at $500 per month. You smile and get out your Sharpie and write "$200 per month . . . let's do business" on it and send it back to the sales desk. It can be a lot of fun to get creative in your messages to the sales desk. Man, I love hating car salesmen! Did I mention I paid my way through college by selling cars?

Even if the car is sold to you at $1,000,000 and the residual is $975,000 you can always offer to buy out at a lesser price. They will not likely agree to it and quite honestly who cares?

My in-laws came home with a leased car a few months ago after having traded new cars about 4 times in 5 years. I thought, "hey this makes sense, at least they are financing away all of their negative equity". Then of course they told me they are buying the car after the lease is over. Idiots.

And as far as the buddy thing goes there is an old saying in the car biz . . . . . . "If you can't make money off your friends and family, who can you make money off of?" LOL!

Who is the dealer and who is the finance company? Just curious since I am local to the area as well. I know nothing about the car biz here in PA, except used cars are real cheap due to having the largest auto auction in the US right here in Manheim.

[ironhat]

<snip>
Who is the dealer and who is the finance company? Just curious since I am local to the area as well. I know nothing about the car biz here in PA, except used cars are real cheap due to having the largest auto auction in the US right here in Manheim.

I have a smaller auction - Mason/Dixon - just 6 miles south of me but Manheim is well known. A friend lets some of us at church use his dealers license to buy there although, I've never done it. I have sold there but never bought. Our financing company is Daimler-Chrysler Financial. Incidentally, I have still not been able to sell Dad's Taurus since May. I took it to auction where they said the best we could expect would be $7800 on this '05 sedan. We had them call us directly from the floor (we were out of town) to see if we would accept the top bit at that point. Wanna guess?? $4400!?!?!? This is on a KBB valued car of a bit over $10K. So, you're right, the used market sucks in PA!

[Jeffrey Schronce]

I have a smaller auction - Mason/Dixon - just 6 miles south of me but Manheim is well known. A friend lets some of us at church use his dealers license to buy there although, I've never done it. I have sold there but never bought. Our financing company is Daimler-Chrysler Financial. Incidentally, I have still not been able to sell Dad's Taurus since May. I took it to auction where they said the best we could expect would be $7800 on this '05 sedan. We had them call us directly from the floor (we were out of town) to see if we would accept the top bit at that point. Wanna guess?? $4400!?!?!? This is on a KBB valued car of a bit over $10K. So, you're right, the used market sucks in PA!

Ok, forget about it, move on . . . Daimler-Chrysler is a bear.

Friend lets you use license at Mason or Manheim?

Selling car as individual or as part of small group is tough at auctions. Fleet cars bring a bit more money ie when Ford Motor Credit brings in 100 off lease Taurus they will bring more than your individual Taurus. Odd huh?

Hey, I need a new/used car. I'll give ya $5k for the Taurus with the right miles . . .

[bigangelman]

Car buying

Those online price guides are full of baloney! At best figure they are 20-30% over real market prices. There are some other "black book" prices guides the dealers use that reflect the prices they pay at auctions, those are the number to go buy.

My rule of thumb is never buy a car that you cannot pay for in 3 years. By sticking with this you will never owe more than the current value. It also points out how much a bad deal buying new really is. The last new one we bought we drove for 13 years that is the only way to make it work out. I drive high miles every year and look for vehicles with 70-80K miles. I figfure by that time they have had the brakes, struts and etc. done for the first time. Abuse is also easy to spot with that many miles. I buy then put another 70-80k miles on them and sell again. I usually buy without a trade and sell the old one on my own. I have never been not able to beat the offer the dealer would have given me for my trade.


Tom


PS. my best used car tip is to put up to 1 quart of ATF into the crankcase about 100-200 mile before changing the oil. ATF is still an oil but it also is very high in detergents. The oil rings on a piston have the least amount for spring to them and can get gummed up. Especially when you get someone who forgets to change the oil regularly.
I took an old ford (mid 80's) that the guy sold because the engine was bad. It smoked lots. I did this twice and it stopped smoking and usng oil. I drove it about 3 years. The guy still thinks I changed the motor, but I never did anything other than plugs and oil changes......

[cabinetman]

Cabinetman, the way you outline purchasing is perfect for buying a car. However, for a lease the ONLY thing that matter is monthly payment. When I say monthly payment, I of course include mileage considerations etc. You want to lease the correct amount of miles. No point in having 20,000 miles left at the end of the 3 year lease and definately no point in paying $.20 - $.30 per mile for overage. They can sell you the car for $1,000,000 at an interest rate of 1000% but as long as your payment is $200 per month and you get to walk away in the end (no fancy stuff on the end) who cares what price/trade/interest is on paper? When they ask you what you want your payment to be on a 2008 leased Lexus tell them $200 per month and smile. They come back at $500 per month. You smile and get out your Sharpie and write "$200 per month . . . let's do business" on it and send it back to the sales desk. It can be a lot of fun to get creative in your messages to the sales desk.

Since my wife and I both need vehicles, leasing one of them made sense. Our credit was good enough to get a "sign and drive". For most people, the monthly outlay is less than purchasing, or in other words, you can drive a vehicle that is too expensive to purchase. The onset of "makin' the deal" is usually that monthly payment thing. Well, since it is difficult to get the dealer to tell you the price of the vehicle, what they do is establish the monthly payment and then adjust how much "up front" or "inception" money will be due, and then calculate how many months the contract will be for.

Writing down the numbers in the beginning of lease negotiations, considering the dealer will even do that, lets you know how shafted you are getting. IOW, the manipulation of monthly payment, term of the lease, up front money, all go to the benefit of the dealer. If you don't have a starting place, you are simply going along for the ride.

With today's prices for cars, I told LOML that for the 3-4 year period of either a lease or purchase, there will be monthly payments, a lease made more sense. For this reason. Since there will be monthly payments either way, at the end of the lease, the car gets turned in, and she re-leases and drives out in a new car, with full factory warranty. I don't know about other states, but in Florida, a lease requires a minimum of $100K - $300K insurance. Since my vehicle we own, both vehicles are on the same policy.

On a few of the dealer visits that we "walked out on", their statements as to "what do we have to do to have you sign today", just didn't work out. We still get emails from some of them offering to "work out better details".

[ironhat]

[quote=bigangelman;300014]Those online price guides are full of baloney! At best figure they are 20-30% over real market prices. There are some other "black book" prices guides the dealers use that reflect the prices they pay at auctions, those are the number to go buy.

You're depressing the heck out of me here, bigangelman. I thought that the KBB and other sites at least gave you a leg to stand on in terms of trying to sell the car outright. With trades you can just count on dropping your soap while in the shower, if you get my drift, so I don't put much stock in their trade in price. Auctions are auctions and if the bidders aren't there it's not worth selling some times. I have sold twice auction and they both went well - One for exactly what I had set the reserve price and the other went way over. As I said, with my FIL's car it wasn't even close. I'd gladly pay the estate my asking price for it but my back doesn't agree with the seats.


My rule of thumb is never buy a car that you cannot pay for in 3 years. By sticking with this you will never owe more than the current value. It also points out how much a bad deal buying new really is. The last new one we bought we drove for 13 years that is the only way to make it work out. I drive high miles every year and look for vehicles with 70-80K miles. I figfure by that time they have had the brakes, struts and etc. done for the first time. Abuse is also easy to spot with that many miles. I buy then put another 70-80k miles on them and sell again. I usually buy without a trade and sell the old one on my own. I have never been not able to beat the offer the dealer would have given me for my trade.


Tom

<snip> [quote]


From my standpoint buying a car is just an evil necessity. WHen I buy new I keep 'em for 10 years or better. I have bought used but it's a toss-up on good vs bad outcomes so I lean toward new. The raw feeling of the beating I take at the dealer wears off after the thired or fourth year.

[bigangelman]

get a better seat?

Why not find out if you can get a better seat out of a wreck of the same make & model, maybe one with a higher more deluxe trim package and replace the seat.

Tom

[cgallery]

However, for a lease the ONLY thing that matter is monthly payment.

I've never leased a car, but wouldn't knowing the up-front and residual values be helpful in negotiating that monthly payment?

[ironhat]

Hey, Tom, it's not the seat itself that is the problem. I've got a crummy back and as in most cars your legs go out more than down. The design of vans and truck seats (love my F-150) are more upright like a kitchen chair.

[Jeffrey Schronce]

I've never leased a car, but wouldn't knowing the up-front and residual values be helpful in negotiating that monthly payment?

Just as much as the money factor, however as I noted you can ultimately care less how they get there as long as it meets what you are looking for. Lease payment = ((selling price - residual) * money factor) / payment frequency. Why worry about any or all of those when ultimately, in a lease, you are looking at your true out of pocket expense? Buying into "selling price" and residual values simply serves to complicate the deal.