deathwish

My lease is up in december and I'm a bit confused about what I should do with the car. My residual value is $12.5k and I've got very low miles, so the trade in value is about $14k and the private selling value is about $15.8k. If I turn it in, I'm basically giving money to the bank. But what are my options? I'm ready for a new car, so if I buy it out, I'd have to finance it. I'm assuming if I did this, I'd be financing the a higher cost than the residual? Or even if not, the interest on the loan would mean that I couldn't sell it for a profit. What else can I do? I'd like to either trade it in and use the positive equity as a down payment on a new car, or try to sell it to a private seller, but I'd have to buy the car to do that, right? I'm not quite sure what the deal is...

Green 2kSE

Can you provide some details about the car? Options, tranny, color, miles, any paintwork?

Maximamike

You're alive? Holy ****! Hit me up on AIM, bro!

Sprint

iTrader: (10)

chad.. i missed you

Frank Fontaine

I think the most important fact is it's not your car, it's the property of the leasing co. You've given them alot of money by virtue of the lease, that doesn't stop upon termination. Maybe a way to look at is say you rented an apartment for 3 years, and you took good care of it while you were a tenant. You decide to contact a realtor and you find out apartments are going for 250,000, and you've paid 54 grand to live in it. You tell the landlord you want to buy the apartment. How much does he sell it to you for? 250 minus 54? Of course not, he sells it to you for 250. Why would he give you any credit for rent when the agreement was that you would rent the apartment and vacate it at a later date? The weirdest thing the numbers people have come up with is called a dumb I mean "Smart Lease." Boy do they really take advantage of people.

Green 2kSE

Frank, your analogy does not hold any water. He has a set residual value at the end of the lease, unlike an apartment lease. He has the option at the end to pay a disposition fee and walk away, or to pay the residual price and own the car. However, in the late 90s Nissan and other auto companies had enormous car surplus and were doing amazing lease deals left and right. For example, we leased a brand new Nissan truck with no downpayment for only $99 a month. We spent $3600 for 3 years of use of a brand new vehicle. The only way they could offer such a deal was to inflate the residual value, so for us it wasn't worth buying the truck (although it was immaculate). In deathwish's case, however, it may make sense to buy the vehicle and turn around and sell it for profit. His problem is taking a chance that he may not be able to get his money plus interest and taxes after the sale. Never go by kbb or any other "paper" value, current market conditions dictate the prices.

Sprint

iTrader: (10)

chad.. i say sell it privately ..

the car that most suits you is an S4.. some what sofisticated.. with a touch of luxury.. speed and power on tap.. and great handling.. not to mention nicely solid built interior for a nice sound system..

you will take a hit on an older one.. but i think thats what you should get

Mikes2K2SE

You have a couple of options you can do at the end of your lease: buy it ( for the residual value, not the going rate as Frank stated) or turn it in. You can not sell it because you dont own it.

Frank Fontaine

Without getting too specific, one can lease a Volvo S60 for $369. A Jaguar X-Type for $399. A Porsche Boxster for $499. Any idea how much any of these cars would be if financed? Being a lessee and thinking that you're in a position of power is a joke. The residual is basically what the lessor has figured out in advance that it can get when disposing of the vehicle 3 years or sometimes 4, down the road. Yes, that's agreed upon in advance, in, no, the lessor's favor? You think?

deathwish

Not always Look at it this way, my car is four years old, fully loaded, in good shape, and only has 38,000 miles. My residual is $12,500, which means I can buy the car for...$12,500. A 99 Maxima SE with the same options and same mileage is retailing at a dealer for about $18k. That means that selling it privately, or even trading it in, I'm going to get more for the car than I can purchase it for.
<p>
The tricky part is, if I finance the $12,500 to buy it, the loan amount will be for significantly more than that due to interest charges, so there goes my profit. What I'm wondering if there's any way to do something about that. Is there any way to get open ended financing (say like a credit card, where rather than taking out a 3 year loan for the purchase price plus interest charges, I take out a loan for $12,500 and pay interest as I go), or can I trade it into a dealer, have them pay off the $12,500 and use the positive equity as a down payment on a new car? Is anything like that possible?

Sprint

iTrader: (10)

As long as you are getting another car from that same dealership .. they are willing to work with you.. i have even seen them eat additional cost such as extra mileage.. just because you are buying from them again..

JMax2K

Yes! You can sell a leased car! A leased car has a payoff just as a financed car does. I sold my leased Z3 privately after 2 years of the 3 year lease because I was already at my milage limit. Most people just dont know anything about leases or how they work.
Also, most people dont know that the residual value at the end of your lease is negotiable if you want to buy the car at the end.

kushane

I fail to see any difference. The Loan amount (i.e. amount financed) will be the same - $12,500. Now them amount you payback over the term of the loan will be higher. Interest accumulates over time. It is NOT slapped on at the beginning of a loan. Eg: If you financed $12,500 to purchase your car and two months later decided to payoff the loan, you will only have to pay $12,500 less amount of principal paid back. It works the same way as a Credit Card and with most dealers and such, they will work with you and get the lien paid off.

The bottom line is, if you only need the financing for lets say - two months - you'll only pay interest for two months. At a hypothetical rate of 8% that's just $164.61.

maximachad

What he said above! You can purchase the car through your bank or credit union (most banks/CUs offer simple interest loans on vehicles) and then turn around and sell it. You'll only pay interest on the months that you actually own it. I did this with an Altima that I had a couple of years ago. I bought out the lease, turned around and sold the car and bought a Maxima. Didn't even own the car for one month or even make a payment. Good luck buddy!
-Chad

maximachad

One more thing...I would buy out the lease for 12.5K and enjoy a nice low car payment over the next couple/few years... Why buy a new one when yours is basically still new?? That car has a LONG way to go, and you know it's been taken care of. If you're dying to get a new car, that's another story I guess...

Myrv

Be careful. This depends on what kind of loan you get. A fixed term loan will give you a lower interest rate but you may have to pay a penalty (usually an extra monthly payment or two) if you pay it off early (the bank gives you a lower rate because they intend to make their money over the long term). Check with your particular bank before you try this (not all banks are this picky on car loans).

Now a line of credit doesn't have this problem and is infinitely more flexible. I would suggest Deathwish take this route if wants to buy out the car. A line of credit is essentially a low interest credit card from the bank. Your only obligation is to pay a certain percentage of the outstanding credit each month. In my case it's 3%.

kushane

Most Auto loans that I know of do not carry significant (if any) pre-payment penalties. It might even be possible (with a willing buyer) to structure the deal where the buyer cuts a check to the lessor directly and get the title released and cut a second check to you for the extra amount above the $12,500. I sold my motorcycle this way. Just write a promissory note to the buyer saying that you will reassign the title to the buyer once it is released.

Since Deathwish is only looking to finance short-term, the extra interest won't be that much more even if it is a significantly higher rate loan. Eg:

I will use my 2 month "finance" hypothesis

At 8% APR, 2 months = 164.61
At 13% APR, 2 months = 267.74

I agree that a Line of Credit (or a credit card) is defineatly the easiest solution since there is no issue with a title lien and getting it released etc. But qualifying for an unsecured line of credit with that high of a credit limit unless you have flawless credit history is going to be pretty hard.