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Purchasing at the End of Your Lease

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  • sebring95sebring95 Posts: 3,233
    If you're friendly with any dealers they can help out a lot in this case. Especially if you're thinking of buying a new car. If you have a potential buyer, take them with you to the new car dealer and work out where you trade the car and they sell to your buyer for a set price. They make a few easy bucks ($500 would be fair and common), you save on tax and headache/paperwork.
  • dwynnedwynne Posts: 4,018
    I have done this in the past for as little as $300, but not lately. With inventory and business taxes and liability and warranty issues most dealers will not be interested in helping you our or will charge a LOT more. That is the case with ones around here, anyway. Heck, the doc fee most places locally is $300-500 on any purchase...
  • The lease on my 09 VW CC is up in early March. The residual on the car is $17895. The total payoff including taxes and fees is $20,800 (of which $1200 is future scheduled payments to be made).

    I'm seeing the NADA guide pricing for my car (09 CC Lux package with 30K miles) is currently between $22-24K. Carmax is listing it for around $23500.

    Does it make sense to buy the car now for $20,800 (including taxes), as there is still 4 months or 5000 miles on the warranty, then try to flip it to a private seller to make a profit?

    I know Carmax buys leased cars. When they call VW Credit to get a payoff, I'm assuming that payoff amount will not include sales tax for them. Does this mean their payoff would be the residual plus remaining payments plus any fees? If so, that would give me more equity by avoiding the taxe? Does VW Credit even do this?
  • qbrozenqbrozen Posts: 17,664
    Correct, when a dealer buys the car, they don't pay tax. So Carmax or any other dealer would pay roundabout $19k on the car. If you are buying a vehicle from that same dealer, in some states you pay tax on the new vehicle LESS the trade-in value of what you are giving them. In other words, if the trade-in value is indeed $19k and you buy a $19k car from them, you pay zero tax. Again, that's just some states.

    Now, could you buy it and sell it for a profit? Maybe. But are you willing to take the risk? Selling something so expensive private party is very tough because the buyer either has to arrange their own financing (which often carries a higher rate when buying private party) or pay cash. If I could get it from Carmax for $23,500, then I'd most likely be able to get it from a normal dealer for $22k. So I'd be looking to pay no more than $21k private party. That's a whopping $200 for you after all of your hard work.

    '13 Stang GT; '15 Fit; '98 Volvo S70; '14 Town&Country

  • dwynnedwynne Posts: 4,018
    It can depend on which state you live in. For most, sales tax is due when you buy out the car off lease (at any time - now or the end). Some states may not charge this tax (full tax is paid on the lease) and some will rebate the tax to you if you sell the car in xx days - some may not charge sales tax on private party used sales. For most of us, we pay the tax and so would our buyer. This double tax makes it hard or impossible to flip an on lease car for profit. Selling it to or through a dealer means you pay no sales tax. Selling through a dealer is a lot harder than it used to be, so selling to a dealer is perhaps the best option. Carmax or any other licensed dealer can buy your car off of lease now, or any other time, and not pay taxes. There are some lease banks that do not allow this, but most do.

    So at lease end your car would be $17,895 to a dealer (assuming no lease end fees). You need to get a current quote without taxes to compare to see the buyout for a dealer now then decide if you want to hang in and try to sell it later, now, or just turn it in. With some warranty left now and none at lease end, you might be better off to try to sell it now. You will also save the taxes and interest on any remaining payments. Get the buy out, clean up the car and get some quotes to buy it and see where you stand.

    You can also trade it in toward any other car you want, assuming the dealer allows you enough for it to cover the current buy out. Anything over that is discounted on your new car.
  • Thanks very much for the advice and information. You made a lot of good points.

    Sounds like the best thing to do is to sell through a dealer or just let the lease run out and return the car.

    Do you know the the NADA pricing on the internet is a good indication of what kind of pricing a dealer would offer for the car?

    Also, it sounds like it is better to just "sell" the car to a dealer as a leased car instead of purchasing it by paying off the lease and residual.
  • NADA isn't very accurate.

    Post over in "Real World Trade-In Values" and we can give you an idea of actual market value.

    Dealers generally use Black Book or Galves.
  • Brentwood...thanks just posted it.
  • dwynnedwynne Posts: 4,018
    You can check here on edmunds and at kbb for an idea of trade in value. Carmax used to pay KBB trade value when they first opened here, but that was a long time ago and they usually do not pay that much these days. They get a lot of cars at auction so they are not inclined to pay more than auction money to buy one from an individual. Ditto the other car dealers. If you have a wildly desirable or scarce car then you can get more than you might expect (I netted $2k selling them my wife's on lease Pilot 2 years back). If you have something they have a lot of or do not think they can move then you might expect less. You can check their nation-wide inventory online to see what they are selling similar cars for. The 2 I sold them were offered at $2.5k to $3.5k over what I was paid.

    They show 4 2009 C lux cars in inventory with 40k or less miles ranging from $23,599 to $23,998 so I would expect around $20k or maybe a little more.

    Carmax is really set up well to do this and can be a quick and painless way to move a car you now longer want. Most other dealers do not seem as interested or as easy to deal with to sell a car. You can also try the new(er) service autotrader has to solicit offers from local dealers for your car, but I would start with Carmax if there is one around.
  • There's no Carmax stores in my market but I know a bunch of Carmax buyers.

    Basically, if it's a car that they can retail and would otherwise buy for inventory, they will pay market value for it (IE about what they'd pay for it at auction) however, if it's a car that they won't retail they will take it in at a number where they can wholesale it at a profit.

    A clean CC without Paintwork and a clean carfax with good miles is probably a retail car for them.
  • Hi, my lease for 2010 rx350 nav / backup camera is ending in July 2012. The purchase option is at about 28k. It should be about 36k at the lease end. I checked KBB for trade in and it comes out to be 35k for "very good". I realize there's time gap between now and the lease end and the price might depreciate, but I just wanted to give a shot in asking if buying the car might be more beneficial financially.
    Also, I leased it in TX so I did pay the sales tax upfront. If I buy the car, do I have to pay tax again?
  • I would like to know what kind of fees I will be faced with for 2012 cmry lease, I have a 2008 leased camry 4 door. How do I find out the real selling price and fees? thanks
  • My 08 R32 has 2 more payments left so I called VW Credit for a purchase quote if I want to buy the car. As a customer, my purchase price would be my contractual residual value. If your a dealer, they get to purchase the car at FMV.

    The price that VW Credit gave the dealer was about $10K more then this highest wholesale price. The wholesale price was also close to KBB trade in value. It is also about 7K more then my customer buyout price. The car has 76,000 miles on it.

    Any idea why VW Credit whould have such a crazy dealer price? This just kills any trade-in deal since no dealer will pay $10K above wholesale or FMV. Makes no logical sense....

    Thanks
  • dwynnedwynne Posts: 4,018
    The lease bank (VW credit) owns the car and can do whatever they want with it. By contract, they have to sell you the car for the residual, pre-negotiated price - there is nothing that says they have to honor that price for anyone else - like a car dealer.

    Did you have a VW dealer call or another brand / independent ? VW might allow a VW dealer to buy it at that price but may block others.

    In most states sales tax is due when you by your car off of lease, even if this is the case where you live buying + tax may net you a profit when you trade / sell the car. Most states have a tax break for trading in an OWNED car (lease cars do not apply) so you could recoup your tax money plus profit if you BUY a replacement.

    Say your buy out is $10,000 and you live here in high tax land (7%), it would cost you $10,700 to buy the car. Then you trade it in on a new (purchased) replacement and get get say $17,000 for it. You would then save $1,190 in sales tax on the new ride. So your net profit is $7,490 for flipping the car (assuming no property or tag fees).

    They took a chance on future value and if were worth less than residual and you turned it in they would be out that money. The fact that it is worth more means a windfall or profit for them, if you are dumb enough to just return the car and leave thousands on the table...
  • Thanks for the information. Apparently that price is for all dealers. My buyout is $18K, and if I returned to a dealer I would get dinged for close to $7K with miles penalty. I have 76,000 miles and market value for trade in is about 16K. You would be nuts to pay what VW is asking in dealer price, since the market is saying otherwise. Only smart thing is to purchase the car.

    Thanks
  • qbrozenqbrozen Posts: 17,664
    edited January 2012
    Trade-in would be even less than that, I'm afraid. With those miles, that might do $15,500 or so at dealer auction. Dealers would most likely hit it at $14k or so ... unless they are killing you on the car you are buying, that is. You might get more at a place like carmax, if you have access to one. Just don't buy a car from them because they are grossly overpriced!

    If you don't want the car, your best bet, of course, is to try to sell it yourself. You could probably get the $18k you owe for it.

    '13 Stang GT; '15 Fit; '98 Volvo S70; '14 Town&Country

  • dwynnedwynne Posts: 4,018
    Ouch! That is what happens when you go over miles on a lease.

    Does $18k include taxes or not? Often they quote buyout with tax to you, your base amount is the residual from the lease contract.

    qbrozen's suggestion to sell it yourself will not work in most states - title can only pass to you (for your buyout price) or to a dealer (for a higher price you said). It also has to be through a dealer and it is hard to find one to do a buy and bye these days. If you get a tax credit for reselling then you can buy and sell it private.

    Otherwise you may have to just pay the over mile fees or roll the negative equity into the next deal.

    The ideal thing is to not lease if you are a high mile driver or to build those into the lease. Failing that, then save the extra mile fees every month so you will have the money socked away at lease end.
  • qbrozenqbrozen Posts: 17,664
    I meant to buy it out and THEN sell it.

    '13 Stang GT; '15 Fit; '98 Volvo S70; '14 Town&Country

  • dwynnedwynne Posts: 4,018
    Buyout price plus sales tax would likely to be more than retail value. It would be nice if you could sell private off lease, but in most places you have to pay tax. Of course, losing a little reselling it is not bad compared to paying $7k in over mile charges...
  • qbrozenqbrozen Posts: 17,664
    Of course, losing a little reselling it is not bad compared to paying $7k in over mile charges...

    Exactly. It is the path of lowest cost.

    '13 Stang GT; '15 Fit; '98 Volvo S70; '14 Town&Country

  • Hello everyone ,please help! I am half way done with my lease and I'm already at my max mileage. At the end of my lease should I purchase my car to avoid all the mileage overage charges?
  • sebring95sebring95 Posts: 3,233
    Depends. If the difference between the buy-out and market value is less than the mileage charge....then buy it out. Pretty hard to predict that at this point.

    I would recommend you make payments to your savings account equal to your monthly mileage x the overage rate. Then it won't be a scramble on the tail end.
  • dwynnedwynne Posts: 4,018
    I agree with sebring, start saving now to pay the over mile charges at the end. Buy it out only if you want it and it makes sense, otherwise pay the charges.

    You can also try to sell it now to a dealer (like Carmax) if it is worth close to buyout value on the lease. It might cost you to get out of it but that may be cheaper than keeping on driving it and paying the penalty. High mile drivers should not do leases, in general :D
  • Sorry if i repeat anything anyone was talking about but I joined this discussion late.

    So in my scenario I am two months before the end of my lease, my 2008 GMC Acadia is worth about a $1000 more than the ballon payment (per Kelly Blue Book) but I am over mileage to the tune of $5000, if I trade my car towards the purchase of another car other than GMC and they give me what is owed on the car then would I still have to pay that mileage?

    I am just trying to figure out what ways other than purchasing the vehicle to get away from paying the mileage?
  • sebring95sebring95 Posts: 3,233
    As long as you don't return the vehicle at the end of the lease, you won't have to pay the mileage fee. You can trade it anywhere you want (essentially the dealer is buying out your lease) or you can buy it out yourself. I have seen some GM leases (assuming it's GMAC/Ally) that have more favorable buy-out terms if it's being bought-out by a GM dealer.
  • Hi, My lease is up on my Honda and I want to buy it out. Mileage is well below what the lease allowed, very good shape, only about 20K miles on it. I've heard that Honda does not negotiate the residual value currently listed. Is this true, and can anybody offer some insights in negotiating my terms and payments?
  • isellhondasisellhondas Issaquah WashingtonPosts: 17,914
    Coming in late here...

    The residual is set in stone as it should be.

    You can probably finance it through a local bank. If you have the dealer do this for you, you will be charged a fee. Just do this yourself!
  • I just recently had a Chrysler dealer do a payoff on my Rav 4 lease that had low miles on and quite a bit of equity (I know this is rare), I contacted Toyota and they said the dealer would have me sign buyout paperwork which they did but I'm concerned about the check Chrysler is cutting, it was for the exact amount of the car buyout but without tax, when I questioned this because I knew that I would have to pay tax if I bought it from Toyota they said that dealers are exempt from having to pay the tax. I can't get in touch with Toyota until after the holiday weekend but now I'm really questioning this. Does anyone know if a dealer has to pay tax on a lease buyout just like I would if I would have bought it? NY resident.
  • sebring95sebring95 Posts: 3,233
    Since the dealer is buying it out, they would not pay sales tax.
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