End of Lease Strategy Question - how to get credit for equity with a trade-in

nicholaswayne

I understand the math and logic behind the end of lease purchase dilemma, but I keep running into walls and am starting to think that maybe I don't quite understand. Please help!

2012 VW Golf
Lease ends in September 2015
Residual Value (and end of lease buyout) of $11,080 (plus $350 fee)
Allotted mileage is 36,000 and I only put 23,000 on the car.
Excess wear and tear is minimal - a few dings
TMV is $12,789 trade-in, $14,196 private party, and $15,640 retail

Based on the numbers I clearly have equity in the car, as I should being 13,000 miles under the lease allotment. However, I've had a few dealers look at it and I can't get to an offer of more than $11,000 for a trade-in. I understand they incur expenses to flip it and need room for a profit, so maybe that explains the low valuation. I could buy the car and sell it to a private party or to a used car dealer, but I'd prefer to avoid the hassle and just get a bit of equity with a trade-in towards a new lease.

Any suggestions for how to approach this? Am I missing something?

If a dealer takes it as a trade-in, will they pay my residual value to Volkswagen Credit ($11,080)? I've heard talk of a $13,459 dealer payoff for this vehicle. Is that the amount a dealer would have to pay VW for the car? And which of these number is used to determine my equity towards a new car? The dealer payoff? My residual plus $350 fee? Something else?

Thanks for the help.

Michaell

nicholaswayne said:

I understand the math and logic behind the end of lease purchase dilemma, but I keep running into walls and am starting to think that maybe I don't quite understand. Please help!

2012 VW Golf
Lease ends in September 2015
Residual Value (and end of lease buyout) of $11,080 (plus $350 fee)
Allotted mileage is 36,000 and I only put 23,000 on the car.
Excess wear and tear is minimal - a few dings
TMV is $12,789 trade-in, $14,196 private party, and $15,640 retail

Based on the numbers I clearly have equity in the car, as I should being 13,000 miles under the lease allotment. However, I've had a few dealers look at it and I can't get to an offer of more than $11,000 for a trade-in. I understand they incur expenses to flip it and need room for a profit, so maybe that explains the low valuation. I could buy the car and sell it to a private party or to a used car dealer, but I'd prefer to avoid the hassle and just get a bit of equity with a trade-in towards a new lease.

Any suggestions for how to approach this? Am I missing something?

If a dealer takes it as a trade-in, will they pay my residual value to Volkswagen Credit ($11,080)? I've heard talk of a $13,459 dealer payoff for this vehicle. Is that the amount a dealer would have to pay VW for the car? And which of these number is used to determine my equity towards a new car? The dealer payoff? My residual plus $350 fee? Something else?

Thanks for the help.

The best way to find the payoff is to call VW Credit directly and ask them.

You may also want to post over in the "Real World Trade in Values" discussion to get an expert opinion on what your Golf is worth.

nicholaswayne

Thanks Michael. My payoff is the residual value plus remaining lease payments and the $350 fee. I only have 3 weeks left, so I can buy the car for about $11.5k. Will a third party (dealer, CarMax, etc) be able to buy the car at that same price? Or will they have to pay the "dealer payoff" amount of $13,500? If so, it makes purchasing the car and flipping it myself seem like the obvious choice, no?

Michaell

nicholaswayne said:

Thanks Michael. My payoff is the residual value plus remaining lease payments and the $350 fee. I only have 3 weeks left, so I can buy the car for about $11.5k. Will a third party (dealer, CarMax, etc) be able to buy the car at that same price? Or will they have to pay the "dealer payoff" amount of $13,500? If so, it makes purchasing the car and flipping it myself seem like the obvious choice, no?

I'm not sure what accounts for the $2000 difference between "your" buyout price and what the dealer would have to pay.

Call the bank and ask them what the buyout price is - it shouldn't be any different than what a dealer would have to pay to clear the title.

isellhondas

No such thing as "equity" at lease turn in time. You can buy the car for it's residual or walk away.

Simple as that!

Michaell

isellhondas said:

No such thing as "equity" at lease turn in time. You can buy the car for it's residual or walk away.

Simple as that!

Respectfully disagree. You can trade the car in; if any equity exists, it can be applied to the new transaction.

nicholaswayne

Michael, I spoke w VW Credit today and they told me that the lessee is the only party who has the option to buy the car at end of lease at the stated residual value. Dealers will have to pay a different dealer payoff price of $13,500. A VW dealer would have to pay something between the two prices. Strategic indeed. Makes it financially stupid to move to another brand. Keep this in mind if you're ever considering leasing a VW. 

whats strange is that this continues to be news to the dealers I'm talking to. They're still quoting my trade in equity based on the trade in value they offer me minus MY residual payoff. I wonder if they'd go through with that then call VW and find out they have to pay $13.5k for the car.... 
Still feel like I'm missing something bc this doesn't make any sense to me. 

Michaell

nicholaswayne said:

Michael, I spoke w VW Credit today and they told me that the lessee is the only party who has the option to buy the car at end of lease at the stated residual value. Dealers will have to pay a different dealer payoff price of $13,500. A VW dealer would have to pay something between the two prices. Strategic indeed. Makes it financially stupid to move to another brand. Keep this in mind if you're ever considering leasing a VW. 

whats strange is that this continues to be news to the dealers I'm talking to. They're still quoting my trade in equity based on the trade in value they offer me minus MY residual payoff. I wonder if they'd go through with that then call VW and find out they have to pay $13.5k for the car.... 
Still feel like I'm missing something bc this doesn't make any sense to me. 

I can't say I'm surprised to hear this. I suspect I'll have the same issues with my Hyundai next fall when the lease is up ... I'm not 100% certain that I'll want another Hyundai, but the finances may dictate that I stick with the brand.

isellhondas

Michaell said:

isellhondas said:

No such thing as "equity" at lease turn in time. You can buy the car for it's residual or walk away.

Simple as that!

Respectfully disagree. You can trade the car in; if any equity exists, it can be applied to the new transaction.

Yes, it's possible that if the leased car is being traded in that there could be positive equity, This would be most likely on cars that are very low mileage.

I was talking about the posters who think the manufactures should write them checks if their leased cars are worth more than the residuals at lease end.

Michaell

isellhondas said:

Michaell said:

isellhondas said:

No such thing as "equity" at lease turn in time. You can buy the car for it's residual or walk away.

Simple as that!

Respectfully disagree. You can trade the car in; if any equity exists, it can be applied to the new transaction.

Yes, it's possible that if the leased car is being traded in that there could be positive equity, This would be most likely on cars that are very low mileage.

I was talking about the posters who think the manufactures should write them checks if their leased cars are worth more than the residuals at lease end.

Ah, I see. Yeah, that second scenario is not gonna happen Would the leasors write the bank a check if the car was worth less?

stever

Isn't the trick to buy the car and then flip it, assuming it is worth more than the buy out price (and taxes and fees....)?

Michaell

stever said:

Isn't the trick to buy the car and then flip it, assuming it is worth more than the buy out price (and taxes and fees....)?

Ideally, yes, but it's rare for that to happen on a lease.

kyfdx

stever said:

Isn't the trick to buy the car and then flip it, assuming it is worth more than the buy out price (and taxes and fees....)?

Too much risk.. If you are trading, you have a guaranteed buyer (the dealer), plus no sales tax issues.