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Purchasing at the End of Your Lease



  • tifightertifighter WAPosts: 1,367
    edited January 2011
    Thing is, you've already paid nearly half the cost of the 08 already.

    The last three years of payments are already a sunk cost, so it is not as easy as $38k for a three year old car. You are not seeing that money again no matter what, so it really is $21k-ish for a 08 vs. $37k for the 11. If you want the 11, buy it because you like it, not for resale, etc. Just my thought.
  • Kirstie_HKirstie_H Posts: 10,810
    edited January 2011
    My thoughts include taking into account the anticipated maintenance & repair costs of the '08 in the coming years. There are some vehicles that I'd personally be more prepared to lease than to buy, and Audis are among those.

    Plus, if a person is considering leasing new instead of turning in, I tend to think they're at least halfway to wanting a new vehicle. If the '08 is purchased, then the OP changes his/her mind and wants to sell it soonish, then the overall cost is likely to be greater than a new purchase or new lease.

    My first question is usually, "are you happy with your current vehicle?" If the answer is "very," then of course the best financial decision is to buy it. But that's not always the only factor.

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  • tifightertifighter WAPosts: 1,367
    Agreed. If the OP wants the 11, buy it. All I'm saying is don't think of the 08 as $38k vs. $37k for the 11. There's no looking back on what you've already spent now; that's the nature of leasing.
  • Thanks to all for your advice. Still not sure what I will do but need to decide ASAP. I have always been a "buy" person and took over my husband's leased car. That's why I keep focusing on bottom line comparisons. You, like my husband, keep saying when leasing, don't look back on what's already spent. That's hard not to do!
  • graphicguygraphicguy SW OhioPosts: 7,092
    I'm not a big fan of leases, for the very reasons you're dealing with now. Because of fees, bank/manufacturer acquisition/disposition costs, etc, leases are rarely the good deal (at least not the kind of deal I expect). I disagree with your husband. If you don't look at what you've already spent, how do you make a decision about what you're going to spend?

    Personally, I'd want to get out of the whole lease "thing". Buy your current A4 if you like it. Finance the residual if you have to. Pay it off over whatever period of time that requires. That way, when you're truly ready to buy another car, you can use the current one as a down payment and start the cycle all over again (if you choose). You're current car has about another 6-7 years of life left before some of the repairs will turn costly.

    Good luck!
  • I have a 08 Escape limited slated to end in April. I am not buying out the lease but my sister's fiance would like to, the car is in great shape and seems to be a good deal. I called Ford and they will not arrange a third party buyout. So I was thinking, he could provide me the cash to purchase the vehicle outright which I would then "sell" to him at the same price, adjusted if we get hit with sales tax twice. I'm not looking to make anything off the transaction, just getting him a good deal. The buyout price is roughly $14880, and the blue book and edmunds used value put it at $18,900. We both live in ny. My question/ concern is there some rule or legal issue that could prevent this? Do I have to own the vehicle for a time period before reselling? If the transactions are done in cash, will our signatures on appropriate froms be suitable? I'm willing to complete whatever dmv paperwork, but concerned for unanticipated hassles.

    P.s. it seems dealerships are unwilling to negotiate buyout price, but any chance paying in full will give a little sway?...the more saved the better.
  • kyfdxkyfdx Posts: 27,613
    I don't have all the answers to your questions, but if it were me.. I'd go to the dealer where I leased the car, and find out what price he could sell the car to your sister's fiancee... It's possible that his price from Ford Credit is less than your residual, and he could make a few hundred dollars, and still sell it to your future brother-in-law for around the residual.. with no chance of paying the sales tax, twice...

    It's worth a shot, before trying to do it the other way... much cleaner..

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  • Thanks, I did go to the dealership originally, before I even knew what a third party buyout was, to see what the early lease end offerings they were contacting me about were and to inquire about this situation. I'll ask again, possibly a manager, but the salesman told me to buy it and sell it just as I described. Having never participated in this type of a transaction I figured a little research would be in order so nothing pops up later. Search engines yeild little specifics, figured a forum to be a good source for any cautions. So if anyone has something to look out for or be aware of, it is appreciated.
  • Made my final payment for 39 month lease on 2007 Lincoln MKX. Inspection report is clean, I owe nothing - mileage 28,000. Cap cost $30,360. Total I paid for 39 payments $403 each = $15,720. Ford credit pre-approved me for never missing a payment. The purchase option price $18,443 incl tax and fees. I've done research and that seems to be a great price. I've always leased but cannot afford anything new, so I'm considering puchasing this car, :confuse: dealer insists on adding $300 doc fee and says that Ford rate is 6%. Should I look elsewhere for loan? if so where?
  • The doc fee is legal, however my understanding is the dealer must charge that fee to all customers or risk exposing themselves to discrimination lawsuits. As for the 6% APR, my experience tells me that rate is primarily determined by the lender, subject to your credit profile. There may be a 1% or so pad in that rate that allows the dealer to make something on the deal since there is no profit in the deal for dealer otherwise. The dealer still has to pay the administrative staff for processing your deal documents. You may be able to get a better rate going through a credit union. If you have a good relationship with your bank I would talk to them about a loan too.
  • Kirstie_HKirstie_H Posts: 10,810
    Thanks for that, and welcome to the Forums!

    Yes, I'd shop that rate around. If it's within the same 30 days for say, a car purchase, it won't hurt your credit rating. Ask your bank or credit union. At least tell them you're doing so... you might find the rate magically decreases if you've got good credit when you're shopping around.

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  • sebring95sebring95 Posts: 3,231
    As mentioned, doc fee is legitimate and reasonable in my book. As for the rate...a lot depends on the length of the loan. It might be a tad high for a 36-48 month term but not by much. It is a used car which will always have a slightly higher rate and there will not be manufacturer support (i.e. incentives). Credit union is best bet for a loan.
  • Would like to ask if it is worh buying out my 2008 328xi with cold weathe pkg? lease is coming to end in couple of month. Lease was $0 down, with $430/- month for 36 months. I will be barely couple of hundreds miles over the limit/30K. Buyout price is $24000+tax+doc fee. I have some damage and It would be $1800 expense to turn it in all.
  • igozoomzoomigozoomzoom Waleska, GeorgiaPosts: 790
    ***Is it a 328xi Coupe or 328xi Sedan? For my answer below, I assumed it is the 4-door Sedan, but if it is the Coupe the current value is higher....

    Edmunds calculates the Retail Value at around $25,200 and KBB is a bit higher at $26,400. If your car has any options other than the Cold Weather Package that you mentioned, the value would be a little higher. I checked AutoTrader listings for 2008 328xi Sedan with similar mileage and the non-CPO listings were in the $24,800-$27,500 range. Based on that, the Edmunds Dealer Retail Value of $25,200 is accurate, maybe even slightly conservative. BMW dealers are advertising CPO examples of this model with 30-35k miles for $29-$31k!

    Purchasing it for $24,000 will actually save you $1800 in fees/excess mileage, so it's actually $22,200 plus tax/doc fee to buy it. If you like the car and want to keep it, this looks like a good deal. If you aren't crazy about the idea of buying it, turning it in and walking away won't be a financial disaster either. Granted, you'll have to pay $1800 just to walk away with nothing, but that may be a small price to pay if you don't want to keep the car!

    About the $1800- I'm assuming part of it is for the miles overage, but you also menitoned 'damages'- what sort of damages? If you decide to turn it in, are there any items you could have repaired beforehand that would be less expensive? Are you comfortable that $1800 is an accurate estimate of what you will actually owe?
  • thanky you for the reply. I am leaning towards buying too. I like the car and 2011 model is almost similar..$1800 includes tires, windshield, - bumper. I could save may be couple of hundred if I get it done outside
  • You didn't mention it but are you also going to purchase the extended maintenance and mechanics warranties? I am/was considering purchasing my 2008 335i at the end of my lease this spring. I have no problem paying for my overage in mileage ahead of time so at the end of the lease, I don't anticipate additional expenses. However, since you are covered, by default, for 4 years/50k miles, once you hit those limits you are completely on your own.

    In speaking to my dealership, I found out that the extended maintenance that runs about $2000.00 or so does not cover a good portion of the major things that could go wrong with your vehicle and that a separate "mechanics warranty" would have to be purchased in addition to the "generic" extended maintenance warranty for a total of close to $6000.00 for both; will cover 6 years/100k miles, or something along those lines. BMWs are pricey to own so don't go into purchasing your 328xi without getting details on extended warranty costs.

    I just had to get something replaced on my vehicle that required some extensive maneuvering just to get to whatever little piece they needed to fix/replace; the price for the new part was minimal but hearing that they spent almost 20 hours working on my car and knowing that the labor rate is $145.00 an hour….................imagine waltzing into your dealership, returning your loaner to pick up your vehicle and being handed a bill for upwards of $3000.00 due on the spot?

    Just keep that in mind as you consider taking on ownership of your vehicle. Talk to your dealer as I think the mechanics warranty may be localized while the “generic” extended maintenance warranties, I've read, can be shopped for at various dealerships for competitive pricing. Ask all the questions and get all of the pricing details in advance so you are fully aware of what happens once that car is officially all yours.
  • I am looking to lease a car (for the first time) and am a little confused abut why the general assumption is that buying more economical.

    The way I see it, you pay the finance charges for the entire loan amount and you pay down a fixed amount of depreciation.

    At the end of the leasing period, the actual value of the car is either more than or less than the residual price.

    If the value is more than the residual price then you simply buy out the lease. In this case, you have lost nothing over buying the the car originally.

    If the value of the value of the car is less than the residual price (and assuming you did not exceed the miles) then you hand over the car to the leasing company.

    The above assumes that the buying and leasing financing rates are the same (which I am finding is not a bad assumption).

    So - if I am doing the lease math correctly (and for the financially inclined) the leasing company is selling a call and a put option to me at a strike (residual price) for a fixed expiration (lease term) and doesn't seem to be charging for it. Leasing always seems to be financially better than buying because I have no option there - I own the asset and am exposed to the upside as well as downside.

    Appreciate any feedback.

  • sebring95sebring95 Posts: 3,231
    edited February 2011
    I've found in the past that anything but a deal with a captive will not be as competitive. The banks tend to charge significantly more for their lease financing. Comparing a current Acura deal on an MDX, the lease rate works out to be about 2.1% vs their .0-9-1.9% finance offers. That doesn't sound like much but it works out to be $500-$1,500 easily over the term. You will also spend more interest with the lease even with identical rates simply because the lease will always have a higher outstanding balance. So from a true cost standpoint, they do charge you more for that fixed residual.

    The rest usually comes down to fees, additional insurance costs, required gap coverages, possible mileage/condition charges. Plus you're required to make a financial decision at the end of the lease. Even if you give it back, you have to guy buy a new/used vehicle. If you go into it planning to buy out at the end (and finance it) you'll end up spending a lot more in interest over the full term. Rarely can you buy it out at the end and make any money on it. There may be some collateral but there's usually quite a few fees completing the buy out and then whatever costs you have to sell it.

    IMHO, the average consumer is far more likely to spend more money on a lease than financing. They either don't understand the terms, get charged too much cap costs, or are only going that route for the cheap payment.
  • The lease on my 2008 Jeep Grand Cherokee Laredo is up at the end of the month. The buyout is $16,000 + taxes. Should I buy the Jeep then immediately turn around and use it as trade in for a new vehicle or is it better to just turn the leased Jeep back in? Or, if there is any implied "equity" (difference between current market value and buyout amount) in the vehicle, is there any way to use that as a down payment on a new lease?

    Jeep has 36K miles and it's in perfect condition.
  • sebring95sebring95 Posts: 3,231
    If there's equity you could trade it before the lease is up. The dealer will just buy-out your lease directly from the bank. If you buy it out yourself you'll pay sales tax and usually by the time you do that the equity is chewed up. You might be able to get the tax savings back on the trade for a new car...but that depends on your state sales tax laws.

    The only way you might come out ahead is if you tried to sell it privately...but obviously you'd have to get at least more than the tax to make it worthwhile.
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