Purchasing at the End of Your Lease

Kirstie_H

Should you purchase or turn it in? What kind of fees can you expect? Here's the place to ask!

teresa72

My husband leased a 1999 Olds Bravada for 5 years and it is about to end. He was wanting to buy it out. The truck has 60,000 miles and is in good condition. Our lease payments were higher than what they should have been, but we were very upside down in our trade. What do you think we should do?

driftracer

is what is your lease end value, and what is the thing really worth?

 

If you post all of the information in Real World Trade Values, we can get pretty close on wholesale and retail - if your lease end value is more than retail, it's not a good decision to keep it. If it's a good buy compared to real world numbers, then it may be a good choice.

Kirstie_H

Since I moved Theresa's post from Ask the Hosts into this discussion, let's try to get the information here - I hate to shuffle her all over the forums, especially as a new member! (we can ask Terry to make a special guest appearance)

driftracer

if she will drop all the info on the Bravada...

stickguy

I look at it this way: at the end of the lease, you need another car, and your off-lease mobile is just another used car (but at least you know the history and how it was treated). So, look at the residual/fees, and determine if you a) want this car, and if so b) what it is worth.

 

If it isn't a good deal, find a different car. If the price is right, buy it.

 

of course, this assumes you want to own an older car. From what I've seen, many lease people prefer to move right on into a new lease.

 

Actually, this raises another point: some manufacturers (I know Honda did at one point) give you a deal if you re-lease (no orig fee or something), just to keep you in the "family".

CarMan@Edmunds

There is an informative article on this very subject in the Advice section of Edmunds.com. Here is a link to it for those of you who are interested: Buying Your Leased Car.

 

Car_man

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michaellno

I've done this before ... a few (more) questions:

 

1) who did you lease through? If GMAC, you might be able to secure pretty good financing terms if you decide to buy. We did that with our '99 New Beetle .. got 5.9% for 36 months, plus they threw in an extended warranty. Can't hurt to ask.

 

2) is there any visible damage? you say the truck is in good condition, but when you go to turn it in, that small crease on the drivers door and the cracked windshield and the almost used up tires will count against you. If you buy it, these things don't matter.

 

3) if you really, really like the truck, no reason to start over. As mentioned above, you might find some loyalty incentives to stay with GM -- or, alternatively, there might be some "conquest" incentives from another manufacturer.

 

Bottom line -- do the research.

 

Let us know how it all turns out.

steve18

I want to purchase my 02Accord which lease is about to end. I decided to work through the dealer from whom I had originally obtained the car. He ran the numbers and after I quizzed him on the monthly payment (which was higher to what I had calculated) it emerged that he had added on $800 to the residual owed to AHFC for "dealer fees" (processing/his time etc--this was in addition to the regular doc fees & licensing and reg fees).If I had not grilled him on his calculations I would never have known about this added charge.Is this normal dealer business practice?. I have decided to work directly with AHFC and obtain financing myself. Is their any risk you are aware of in dealing directly with AHFC to buy out the lease. Thanks

CarMan@Edmunds

Hi steve18. One should always deal directly with the bank that they are leasing through and leave dealers completely out of the equation if they want to purchase their leased vehicle. The bank owns your vehicle, not the dealer. They are the ones that set its selling price. Your dealer, who knows that you are not going to purchase another vehicle from them in the near future because your are purchasing the one that you were leasing, is only going to try to profit somehow from your purchase.

 

Car_man

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isellhondas

The dealer must pay off AHFC. He would then resell the car to the owner as a used car.

 

In order to do that, any smart dealer would do a mechanical inspection to make sure it's in safe condition. If may need brakes, tires etc.

 

And, yeah, after doing all of that that dealer may feel the need for some profit.

 

Or the leasee can deal directly through AHFC and write them a check which is what almost always happens.

steve18

Thanks Car_man. I arranged the finance myself with another bank and will send check to AHFC on Tuesday.

steine13

"The dealer must pay off AHFC. He would then resell the car to the owner as a used car."

  

Craig, we're all dancing around the real issue here.. which is price. As far as I know -- and from what you've told us -- AHFC does not negotiate buyout prices with their customers. This is really dumb when looking at individual deals, and probably really smart in the big picture, as it keeps their perceived value from sliding downhill like Fords... anyway, they will "deal" with someone in the end, 'cuz the car is worth what it's worth.... an I'm guessing they will deal with their dealers.

 

I was thinking really hard about leasing another Vibe, because they have big rebates AND inflated residuals on a good car. The salesman told me that they sometimes negotiate the buyout with GMAC, then add their 'pack' of $300 and resell it to the consumer. This could be a pretty good deal all around, and should work on a Honda as well -- by returning the car, the consumer has fulfilled his obligations, and by buying the car back from the dealer, he doesn't have to buy an unknown quantity.

 

But, like I said, the issue is whether the financial institution will negotiate.

 

BTW, on the Vibe: I can lease the twin to my '04 5speed for 24 months, and they'll give me a residual of $12k with 24k miles... which is hilarious, cuz a similar '03 would be worth in the $9s today... so yeah, they know it, and they'll deal...

 

-Mathias

CarMan@Edmunds

You're welcome, steve18.

 

Car_man

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leasee128

we're at the end of the lease for my daughter's 2002 Jetta GLS... low miles (29k)... Buy out is $11,900... I can't seem to access Edmunds True Market Value but Kelley's retail is $15,355 and private party $11,070... VW Credit says there isn't any "wiggle room" on price -- that closed end lease is just that... Is this true? If it were $10,500 or they extended the warranty, I'd buy it...

isellhondas

This is a lease and you knew what the residual was when you signed up for it. They aren't going to drop the price or give you a warranty.

 

By the same token, if the market happened to go sour for whatever reason on Jettas they couldn't ask you for any more money at lease end.

 

11,900 is what they figured the wholesale value would be at lease end and they will either sell it to you for that amount or take their chances when the auction it. It could bring more or less than that figure.

steine13

"This is a lease and you knew what the residual was when you signed up for it. They aren't going to drop the price or give you a warranty. "

 

Craig,

We've had this argument off and on... and I think you're wrong on this. SURE they're going to drop the price. If they won't do it for the present customer, they'll do it at auction. And they know it.

 

I dunno if VW of A will negotiate, and I DO know that American Honda will not. Plenty of lenders will, and I think there are arguments to be made both ways.

 

Maybe I'm misreading you, but you seem to take a fairly high-falutin' approach to this with "you knew what the residual was." You seem to think that someone who wants to buy the car for less does not live up to what was agreed. But that's baloney; the agreement was, so much a month, and give back the car in ok shape.

 

After that obligation has been met, why not offer a lower buyout price? Heck, if I know the first owner, I'll likely pay more than the bank will get at the auction... especially because banks don't even do "reserve prices" at the auction, so once it goes, it's gone on the first bid (AFAIK).

 

I think offering less is a perfectly honorable thing to do, as is refusing to deal. Honda is shooting themselves in the foot on individual cars, but overall, they are helping to protect their resale value. I respect that, but of course I don't know if it works.

 

With all the rebates, I almost leased an '05 Vibe... price would have been $14, residual $12 after 24 months/24k. That's funny, my identical '04 is currently worth less than $11, with 11k miles. In the end, I would have paid more in interest, taxes, and fees than in depreciation, and it just wasn't worth it. But I certainly would have offered to keep the car, and they certainly would have negotiated -- a $2 spread, easily. And yes, GM is killing resale on their cars -- and on MY car, thank you very much -- in a way that Honda isn't.

 

With too much time on my hands, I remain,

-Mathias

jlawrence01

"This is a lease and you knew what the residual was when you signed up for it. They aren't going to drop the price or give you a warranty. "

 

One of the sales managers comes to me. He has a Chrysler T&C that is coming off lease with a residual of $13.5k. We wants to keep that car BUT does not believe that it is worth that much.

 

I posted. Terry told me that the auction price for the vehicle was about $9k.

 

He got the car for $10.2k.

 

Why shouldn't the leasing company negotiate? If he doesn't buy the car, they'll get maybe $9k less the auction fees and other expenses. Plus, they'll have the vehicle on their books for a minimum of a few weeks tying up their working capital.

 

They lost the money a few years back when they overestimated the residual. Just my 0.02.

michaellno

I've had first hand experience with them, as we leased a '99 New Beetle in December of '98. After the 4 year lease term was up, we were truly on the fence about buying the car. VW Credit offered to take $500 off the residual value, throw in an extended warranty ($1200 value, IIRC) and finance us at 5.9% for 36 months.

 

And, I didn't really ask for any of it!

isellhondas

I didn't mean to portray a "high flautin" attitude but I didn't think VW would do that.

 

Honda will not and I have to deal sometimes with customers who, for some reason, think they should and get upset when they won't.

 

I guess when they get scared after seeing auction results they may decide to concede.

 

So much for a set residual I guess?

audia8q

Don't forget that alot of leasing sources buy residual insurance which makes up any shortfall on the residuals.. If they self insure you might be able to haggle but if they dont self insure they don't have any reason to discount the price.

michaellno

I've seen that with the Fords that we've leased in the past .. Ford Credit uses the "residual insurance" to ensure that they don't lose their shirts on vehicles that depreciate more than they state in the contract.

rroyce10

...... Folks get this confused "all" the time - and lets be honest, dealers prefer it this way ..

 

          For starters, dealers have nothing, zero, less than one, nada to do with the value of any lease vehicle, before, during or at the end of the lease .. those figures are based on the lease companies contract figures and once the paperwork is signed and cashed, it's between the consumer and the lease company, not the dealer ... most lease companies will negotiate, including AHFC, VW, Audi, Bimmer, Ford, Yota, GMAC, etc etc ..

 

         That said, it will depend on the "when" part .. 5/25 months before the lease is up, "matters not" to the lease company, they have the contract and you owe them $$ ... now, 5/6 weeks before the lease will actually expire is when they start to take notice, they probably have alerted the dealer months ago to give them another swing at the bat, it's just good business ...

 

             Then comes the "where" part, depending on where you live can make a big difference on what the lease company will or won't do -- if your living in Michigan and it's January and you have tons of snow and cold, there is a pretty good chance they will be negotiating convertibles, depending on yesterdays auction reports and the residual - and that brings us back to the "when" part .. You need to be speaking with a decision maker about 5/6 weeks before the lease End, Office zone manager/District Lease manager, not the cute little blonde that answers the phone and looks at your account on her monitor, she has no horsepower ~ cute, but she's not a decision maker and only goes by whats on that screen ~ that's her "Yob Mon" ... at this time they have a reference point, yesterdays auction reports .. (example only) the insurance gig is nice, but thats why BMWFS has been very "receptive" lately, thinking $25, insured for $1,500 a unit, but only seeing $21, all those lease vehicles were bound to bite them in the butt sooner or later, here comes the later part ...

 

             Is there wiggle room.? .. it will depend on the time of the year, on what region of the country, what type of vehicle, market conditions and of course, the miles and the condition of the vehicle .................

 

             Not knowing the details on Michaell's VW deal .. it sounds like a dealer thing - "warranty included" is always a dealer thing not a manufacturer thing ..

 

                                Terry.

michaellno

I never talked with the dealer where we leased our Beetle, only VW Credit, when our lease was coming due. The warranty was through a third party (can't remember the name).

 

What's funny is that when I needed to invoke the warranty, the dealer always had to call in and figure out that I had it!

 

Good thing I had it, though -- I ended up using it twice. Once for the A/C, the second time for the steering rack -- between the two, the warranty paid for itself.

rroyce10

.. **only VW Credit, when our lease was coming due. The warranty was through a "third party" (can't remember the name)** ..

 

              Huh ...? VW Credit gave you a 3rd party warranty ..?!? .. makes absolutely no sense, somehow someway the dealer sold you the warranty not VWC ..

 

                              Terry.

michaellno

I bought the car directly from VW Credit.

 

Now, that doesn't mean that the dealer wasn't involved, but I never spoke with any of their employees when I arranged this transaction.

 

VWC quoted me the interest rate, VWC took some money off the residual price and to the best of my knowledge, VWC threw in the extended warranty.

 

But, it's all moot, as we traded the car in a couple of months ago.

solaraman2003

Hello.

 

I signed my lease on my 2003 Toyota Solara SLEv6 in May, 2003. I paid for 18k/year miles expecting to do a lot of driving, which I DO (and I love).

 

I figured out that at this rate I'm doing about 27k/year. I've computed that at about 8 weeks prior to lease end I will have an overage of about 25k miles, which will cost me (at .15/mile) about $3,800 as a penalty.

 

I understand that I should PHONE the leasing company (Chase Auto) about 8 weeks before the end in order to try to negotiate the purchase. But is this mileage going to give me any purchasing power with them, or are they just figuring "the heck with him because if he DOESN'T buy it, he'll still owe us the penalty" ?

 

I mean, from their point of view I'm sure they're not stupid enough to not realize that even if I DON'T purchase it, they're going to pocket the penalty/overage fees.

 

I'm just trying to understand how this excess mileage stuff is going to pan out in the end.

 

I'd also like to point out that I am VERY good at maintaining the car. I believe VERY strongly in preventive maintenance and am really taking care of the car (i.e. oil changes at 2.5/3k, tranny fluid changes frequently, fuel filter changes, tire rotations, premature brake pad replacements, etc. I also use ONLY Toyota parts too.

 

Any input would be appreciated.

rroyce10

... ** understand that I should PHONE the leasing company (Chase Auto) about 8 weeks before the end in order to try to negotiate the purchase. But is this mileage going to give me any purchasing power with them, or are they just figuring "the heck with him because if he DOESN'T buy it, he'll still owe us the penalty" ?** ..

 

           Ok pay attention, because we are going to ask questions later .... 7/8 weeks before the lease is up you can try to negotiate the price, the point is: don't give them the mileage, if you tell them they will have you on the hook .. if worse comes to worse and you don't like the figure, then you pay the difference ..............

 

                              Terry.

zakiman

I am leasing an 02 Accord CP 5 (3yrs/45K) speed manual and my lease will end in May 2005. By the end of the lease I will have an access mileage of 23k miles which comes to $3450. The residual value on the car in $12700. Do you think this is a good price for a car that will have about 66K miles at the end of the lease ? Also, do you think I can negotiate ? and precisely when ? what if they ask how many miles on the car ? am I obligated to give them the correct mileage? am I screwed either way ? I would like to keep the car since I did all the required maintanance on it plus I can't afford to finance or lease another car right now ! any suggestions or comments are highly appreciated.

Kirstie_H

Well gosh, this one seems like an easy call! If you can't afford to finance or lease another car right now, then I'm guessing you can't afford to dish out the $3450 for excess mileage.

 

If you look back over the messages posted in the past couple of weeks, you'll see that some companies will negotiate purchase price and others will not. You can always try. If you do, don't mention the mileage or they'll know you're desperate

 

This is a good vehicle, and it sounds like you're basically looking for reassurance that purchasing it is the right step. Some folks in your position want rid of their vehicles, but can't do it. If you're happy with the car, you're in luck!

stickguy

You will have to finance the $12,700 residual though.

 

But, if you turn it in, you will owe mileage, turn-in fee (if any), plus any excess wear/tear, none of which you will owe if you buy it out.

 

Say it will cost $3,800 to turn it in. Effectively, you can only get a 9K car to replace it (12.7 - 3,800). Or you will be into another lease.

 

If you couldn't get as nice a car, retail, for 9K, might as well keep the one you got.

kyfdx

Honda Finance will usually not negotiate..

Kirstie_H

Thought it was Honda that doesn't negotiate, but couldn't remember for sure. For $12,700, it's hard to buy a used vehicle that you know has been well maintained and that you know you'll be happy with.

zakiman

thanks guys and gal for your input...but what's the deal with Honda that they don't negotiate.. ? any idea on what figure I should start negotiating from ?

Kirstie_H

Well, if they don't negotiate, they don't negotiate. Your purchase price is $12,700. Fair enough, since they stated at the beginning of the lease that that's what it would be. At least you don't have any surprises.

kyfdx

Their side:

 

You signed a contract.. we hold you to those terms...If you want the car, this is the price..

 

  When you call the 800# on your bill, while you are waiting on hold, they have a message saying they don't negotiate..

 

I think, if you really like the car, then buying it is much smarter than paying $3500 in charges and turning it in... Plus, you may be able to get an attractive interest rate from Honda Finance to purchase it, especially if you have made your lease payments on time..

isellhondas

Because they don't NEED to negotiate. They do a pretty good job of setting residuals and Hondas hold their value better than most.

 

I can't even fathom the can of worms a car company must open when they do this!?

 

Yeah, I would try to figure out a way to buy the car rather than pay that horrific mileage hit!

rroyce10

.. **Honda Finance will usually not negotiate** ...

 

             Thats not true .. it depends on the area of the country, right now they are negotiating in the Midwest area -if- properly done ...........

 

                         Terry.

isellhondas

Guess it's possible. Certainly something I've never heard about.

zakiman

Thanks you all for the valuable information you have provided....If they allow me to negotiate ,what's a good number I can start from ? I don't think the car is worth 12.5K . is it ? by the end of the lease it will have around 66K miles on it. I have kept up with all the prev maint.

rodist

I have a lease on 2002 Lexus RX 300.

It was for 3 year 15K. It was done through a bank.

My end of lease purchase option is $21,872

I only have 37K miles on this car and it's very clean.

Edmunds TMV came out $24,240

 

Can I try and trade this in and make a slight profit?

 

If so, how do I go about it?

 

Thanks for your help

stickguy

You can just trade it in like any other car. The dealer would have to pay off the car (basically exercise your residual option). If they give you more than the residual for the trade, you would get credit for the difference.

 

Not really much different than if you traded in a car that you still had a loan out on.

kyfdx

Exactly... but, I doubt you will see a profit..

 

Trade-in values are always lower than you expect them to be... and leases usually aren't set-up to put you in a positive equity situation...

danf1

That is mostly accurate. The only difference is that you cannot receive sales tax credit the same as if it were a trade in. That is because you did not pay sales tax on the entire price of the vehicle, only on your monthly usage.

stickguy

I do know someone that traded in an S10 blazer at the end of her lease, and (theoretically) received some equity to put down on a new truck. of course, it may have been an overallowance they were showing, but at least she thought she made a profit!

 

Good point about the sales tax. I have never traded in a lease (or had a lease for that matter), but it makes sense that you can't take a credit for something you never paid originally.

 

Somewhat like getting equity on a trade, some manufacturers/finance arms will give you an incentive to re-lease (no orig. fee, or something). I know at one point a Honda dealer was touting this as a benefit to leasing a Honda though AHF.

rodist

Incorrect.

In Illinois, you pay the full purchase price of sales tax on a lease. (I know it's robbery)

My Lexus had a cap cost of $34,900, Tax in the county I live in is 7%, $2443 paid up front or you can put it on top of your cap cost.

driftracer

That's well and good, but Dan isn't in Illinois...

 

perhaps it doesn't pay to lease since there's no tax break.

rodist

I am in Illinois and asked about trading in a lease. They told me no tax credit.

kyfdx

Yeah.. leasing sucks in Illinois.. and Texas also.. That is why they have the balloon note programs.... That way, your name is on the title, and you can get credit when turning the car in.

rodist

Does MBWFS offer balloon note leases?

kyfdx

BMWFS... yes... they have a name for it.. let me look it up...