By on March 21, 2016

2014 Toyota Camry SE

A wave of older vehicles is poised to flood Toyota dealer lots, but the automaker is confident it has just the plan to deal with it — pre-owned leasing.

Toyota is certain that adding a leasing option to its certified pre-owned inventory would boost CPO sales and clear lots in the face of a growing compliment of three-year-old product, Automotive News reports.

The plan has already been quietly rolled out in the U.S. Northeast, but a national strategy should be in place by the end of April, dependent on training in each dealer region. The option would allow a reduced commitment for buyers who don’t want to finance the full cost of a pre-owned vehicle.

“We’ve got a record number of off-lease returns this year — about 275,000 — and I think the industry also does,” stated Toyota Division general manager Bill Fay. “It’s important for all of the industry to have a plan to absorb those lease returns and have a good process to reintegrate them back into the marketplace.”

The move towards leasing, which is supported by the automaker’s financial services division, would push CPO sales up eight percent in the U.S. to a total of about 400,000 vehicles this year.

Eligible vehicles must be no older than three years and have less than 65,000 miles on the odometer. Lexus products aren’t included in the CPO leasing plan.

Toyota sales, which sank to less than 1.4 million in the U.S. in the wake of the recession, rose to nearly 2.1 million in 2015. Not surprisingly, the amount of car buyers opting to lease also rose post-recession, especially for those purchasing subcompact, compact and crossover vehicles.

[Sources: GoodCarBadCar, Edmunds]

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105 Comments on “Toyota to Offer Pre-Owned Leasing; Sensible Dreamers Rejoice...”


  • avatar
    mmreeses

    my inner old man says it’s bad enough that many people should are perpetual serfs w/their mortgages.

    Now people are going to be permanent car renters.

    • 0 avatar
      30-mile fetch

      The aesthetics of it are off-putting, but if you are going to be a permanent car renter, why not rent the same vehicle for less?

      • 0 avatar
        highdesertcat

        For SOME people, especially old people, being a permanent car renter is the solution to a number of problems and obstacles.

        If that number of SOME people in an official population count of 330-million is only 1-million, then every one of those lease-end cars will be scooped up and recycled into daily use. Especially if they can keep the price down and the dealers don’t get too greedy.

        I think it is an excellent idea for SOME. Just not me.

        • 0 avatar
          FreedMike

          With my driving style (working out of the house I drive maybe 10,000 miles a year), I might be tempted if the terms were right.

          • 0 avatar
            highdesertcat

            IIRC, my former son-in-law in CA, an unemployed attorney who works out of his mom’s house in Bel-Air, started leasing used Lexii after his Hyundai Santa Fe gave up the ghost.

            It works for him.

    • 0 avatar
      FreedMike

      Thirty year mortgages have been around since the ’60s, so the whole “perpetual serfdom” thing is nothing new (and a silly idea, since financing an appreciating asset makes sense and the interest is deductible).

      • 0 avatar
        krhodes1

        At least you HOPE it is an appreciating asset. That is not the foregone conclusion it once was.

        • 0 avatar
          CoreyDL

          Just gotta make sure all the yards near you are mowed and don’t have cars on them before you sign the dotted line.

          Or have an HOA. Which I sort of do, though I don’t pay into it.

          • 0 avatar
            Kyree S. Williams

            Yeah, I have one of those, too. I don’t know when the last time I actually paid the dues was.

          • 0 avatar
            CoreyDL

            You’re a bad homeowner/condo-ian, not paying yo HOA!

            My address is on a different street than my driveway. It isn’t part of the HOA, but there are condos behind my house, and my driveway is the only individual entry on their private condo road. They also landscape all along there, which is one entire side of my property, and do snow removal. Last year they sealed my driveway as well.

            Overall I’ve been pleased, lol.

          • 0 avatar
            FreedMike

            Don’t skip the HOA dues. They can slap a lien on your house and you’ll never get it sold or refinanced until it’s paid. I’ve seen it done.

        • 0 avatar
          FreedMike

          It generally is, krhodes. Not as ridiculous as it was, say, 10 years ago, but unless you bought in Vegas, Phoenix or Florida, or some other place that got particularly hard hit by the bubble, if you keep a house long enough you generally end up ahead.

    • 0 avatar
      sportyaccordy

      Anyone who hasn’t paid off whatever note they have- loan or lease- is a car renter.

      Plus for many folks the prospect of owning a car out of warranty is nightmarish. Paying ~$100 a month for a CPO Camry is a slamming deal, I don’t care how far up someone’s butt Dave Ramsey is.

      • 0 avatar
        Kyree S. Williams

        Thank you.

      • 0 avatar
        krhodes1

        Uh, no. Because you should, if you have a brain, have some equity in the car from day 1. That whole “downpayment” thing. I may have a payment on my latest toy, but I could walk away from it with a quick trip to Carmax in an emergency, with a check in hand (a big check if I have time to sell privately). Good luck with that on a lease.

        How anyone finds owning a car out of warranty is “nightmarish” is beyond me. ESPECIALLY a Toyota product. I HATE Camry’s with the passion of a Jihadi, but even I know the damned things are as reliable as sunrise, death, and taxes. I don’t find owning a Range Rover out of warranty even mildly disquieting, but that is me. There should be a big long stretch of time and miles between “paid for” and “decrepit” for just about any car. Years and years of no payments and only occasional repairs.

        • 0 avatar
          sportyaccordy

          A lot to unpack here, but the long and short of it is if your emergency money is tied up in an illiquid depreciating toy that could get totalled at any moment you made a much worse financial decision than leasing a CPO Camry.

          At the 3 yr point on the depreciation curve those lease payments are going to be low low low. For the smart buyer who wants to be in a warranty and doesn’t rack up a ton of miles it seems like a no brainer. I’m genuinely confused as to how this didn’t catch on sooner.

          • 0 avatar
            krhodes1

            When did I say my emergency money was tied up in a toy? I do follow the radio financial guru advice of “pay yourself first”. I have ample liquid reserves, and a fully-financed retirement – which is WHY I can say I can “afford” spending $50K on a car that is absolutely a toy. Plus no kids and a tiny mortgage help immensely with all of the above. I’m not in any way rich, but I try to do stupid things in the most intelligent way possible.

            But if the crap really hit the fan, I can make a $800/mo payment disappear in about an hour plus the time for a Carmax appraisal. Can you do that with a lease without writing a big check? My biggest complaint about any lease is the inflexibility of it – crap happens in life. A lesson I learned the hard way in my younger years.

            And I should be so lucky to have my M235i totaled before May 31 – because I have agreed value insurance, but bought the car at a decent discount plus European delivery, I would actually make a profit of ~$6K if I total it before my policy renews. They base value on US MSRP, of course. Plus I get the sales tax and registration back too. AIG Private Client Group insurance – if they will have you, it is the deal of the century and I cannot recommend them highly enough. $535/yr for this car, ~$1250/yr for all four.

          • 0 avatar
            sportyaccordy

            If you lease smart you should be pocketing the balance in payments and have a good amount of $$$ saved up anyway. Over 36 months the difference between buying and leasing an M235i is a not insignificant $25K. There’s your equity right there as at the end of the lease you are more than free to take ownership of the car if you wish. And breaking a lease is not as difficult as it used to be. There are services that will help you do a transfer that I would bet are no more of a hassle to use than dealing with tire kickers. The diff in $ between buying and selling is irrelevant as your net loss will be depreciation either way.

            For me, if crap hits the fan, the last thing I am touching is anything liquid. I have access to tons of cheap credit with low minimum payments. I’d live off of those and pay them off once things tided over. Don’t forget that in a jam you probably won’t have the resolve or luxury of time to stay on the upside of a sales negotiation. So I personally wouldn’t bank on it. A car is just a sunk cost…. all that can be done is minimizing the bleeding

    • 0 avatar
      dal20402

      We are all “car renters” whether we own free and clear or not. That’s the nature of a depreciating asset.

      Leasing is a perfectly fine model for car ownership. You pay for the depreciation, and (assuming you’re properly insured) allow the car’s owner to shoulder most of the risk. You gain convenience and give up the ability to customize (or trash) your car. The issue is that many people get fleeced and sign up for leases with bad terms.

      • 0 avatar
        krhodes1

        The car’s owner shoulders very little of the risk. The biggest risk is that your situation changes. You need a bigger car. You need a more efficient car. You need a lower payment. You want a different car for whatever reason. Your commute that fits with a 12K mile a year lease suddenly doubles due to a relocation or a better opportunity. Life happens.

        Leasing removes a TON of flexibility that you have when you make a sensible decision to buy a car you can actually afford with a down payment big enough that you never have to worry about being underwater. If you want a new car every three years, so be it, you will have equity in every new car as well at that point. Especially on cheap cars, the difference in payments between buying and leasing simply is not that dramatic, assuming a loan of a *reasonable* length, i.e. one that will pay off the car in about the warranty term. It’s not even that dramatic on a BMW.

        And maybe you hit the jackpot and buy a car that you like enough to keep for a good number of years once it is paid for. It’s all gravy at that point.

        I think there are situations where leasing makes perfect sense. But I also think they are a small fraction of the number of leases written every year. All most people see are the smaller payments.

    • 0 avatar
      DeadWeight

      See my comments below.

      Ford just announced likely credit rating downgrade precisely because of # of off-lease vehicles BEGINNING to flood dealer lots, putting downward pressure on used AND new vehicle pricing.

      Just wait another year or two! The tsunami hasn’t even begun yet.

      • 0 avatar
        28-Cars-Later

        Ford will have to come with a solution to better move excess remarketing product direct to the debtserfs.

        GM will allow you [the perception] to “shop” the “auction”.

        Toyota will lease you a used car somehow.

        What say you Dearborn?

        • 0 avatar
          28-Cars-Later

          *up

        • 0 avatar
          DeadWeight

          Used vehicle AND new vehicle buyers are going to be a$$ deep in choice pricing soon. It s already begun, actually, with auction prices dropping just PRIOR TO TAX REFUND TIME (a very bad precursor).

          I know a 2,500 parking space lot (all dirt & gravel topcoat) owner who typically rents sites to RVs, boats and campers for storage, and he’s 100% full with new cars at a price per vehicle per day he won’t disclose to me (I may have to waterboard him).

          • 0 avatar
            28-Cars-Later

            Buyers aren’t going to see those choice prices for a long time, dealers will have to offload existing overpriced inventory to buyers or lose the difference on the block as prices fall due to increased supply.

            Unload your midrange to crappy stuff now gentleman, sell it all as the deflation wave arrives. I figure this will hit by the end of Q2.

          • 0 avatar
            DeadWeight

            Problem is that these are “perishable’ goods in pricing terms even if not used.

            IOW, that 2015 leftover new car value is going to drop precipitously until sold.Same will be the case with 2016s being produced (over-produced) now that end up unsold in 8 months.

          • 0 avatar
            28-Cars-Later

            There are many variables in play. I can’t predict what will happen but what may happen is through a combination of storage and export many of these use and some new models will be kept from the public in order to keep prices artificially high for as long as they can. Just think of all the leases from last year calculated on last year’s residual estimates. If prices fall even 5% across the board, that’s a lot of money for leasing companies to be out on turn in time.

  • avatar
    CoreyDL

    The appeal would seem limited here, unless it ends up being like 1/2 the payment. You can currently lease something new at $179/mo for a Camry SE, straight from the Toyota site.

    What’s that work out to at 3 years old, $75?

    • 0 avatar
      eggsalad

      In my ZIP code, a 36-month lease on a new Camry SE costs $8500 ($2k down, $179/month) or an effective $235/month.

      If I could get into a 2013 Camry with 36k on the clock for around $150/month, that’s a pretty cheap way to drive a decent car for 3 years.

      • 0 avatar
        FreedMike

        Who the hell puts money down on a lease?

        • 0 avatar
          VoGo

          Eggsalad,
          Let’s say you can save $50/month on a CPO lease vs. new. Then you need new brakes. Then a battery. Then tires. Oops, O2 sensor. Transmission flush.

          Then you discover that the CarFax didn’t mention that fender-bender, but now it’s obvious the paint doesn’t match.

          Where is your $50 savings now?

          • 0 avatar
            eggsalad

            Nope. That used-car lease better include new tires and a new battery. Otherwise, I don’t think a Toyota needs much repair from 36k-72k. CPO warranty lasts that long anyhow.

          • 0 avatar
            highdesertcat

            eggsalad, “don’t think a Toyota needs much repair from 36k-72k. CPO warranty lasts that long anyhow.”

            There’s a way around the angst. The reseller/dealer can package an extended warranty in the lease price as a matter of course, not option.

          • 0 avatar
            VoGo

            HDC is right – dealers can package a warranty in with a lease on a used car. However, no warranty covers maintenance items like brake pads, batteries and tires. If you lease a 3 year old car, you are pretty much guaranteed to need those items over the next 3 years.

        • 0 avatar
          28-Cars-Later

          Many people do, Freed.

          • 0 avatar
            FreedMike

            Many FOOLISH people do, I guess…I’ve never leased and I’m still not stupid enough to do that. And this is coming from someone who actually bought a Mercury Tracer at one point, so I’ve been known to be mentally challenged.

          • 0 avatar
            Arthur Dailey

            Leasing is not always the most expensive or the choice that makes the least financial sense.

            Assume that I am the average consumer with the average number of miles driven per year, based on the average new car purchase price and who will not be ‘wrenching’ on their own car.

            I can purchase a vehicle for a transaction price of $25,000. Or lease the same vehicle for just over $300 per month on a 48 month lease with a 24kms per year allowance.

            If I purchase the vehicle and keep it for 8 years and just over 190,000kms and follow a reasonable maintenance schedule, then I will have to pay to have the plugs changed, probably 2 brake jobs, flush the coolant twice and the ATF 3 to 4 times, put on 2 additional sets of tires (winter and good weather), a new battery, change multiple bulbs and filters and have it rustproofed every year. Add in some car rentals when the car is in the shop. Total cost of over $5k, so a $30k transaction and that is not counting any interest charges if I finance it. At the end of the 8 years, I can probably get about $2,500 to $3,000 for it as a trade in. Total cost of a minimum of $27,500. Financing costs or one major repair could add thousands to this total.

            If I lease 2 different vehicles on consecutive 4 year, 24kms per year leases, let’s say that the average monthly lease rate increases to $330 per month. I can forego all of the above costs. Total cost $31,600.

            We will not count the cost of routine maintenance like oil changes, wiper blades, washes, etc.

            So for a difference of around $4k or $41.67 per month, I can be assured of driving a nearly new or new car, with little to no worries about its condition. Or I can end up driving an older car, with all the inherent issues and worries and declining comfort and amenities. And this is assuming that the purchased car does not suffer a major failure requiring extended or expensive repairs.

          • 0 avatar
            28-Cars-Later

            I agree, its foolish because of the fact you don’t get your deposit back alone.

          • 0 avatar
            FreedMike

            Well, there’s the deposit, and in theory you get it back (I know a lot of folks who didn’t), but your cap cost money is gone baby gone.

          • 0 avatar
            krhodes1

            @Arthur Dailey

            I think you are wildly overestimating the costs of keeping something like a Camry over that time period, even taking it exclusively to the dealer. Reality is most people will buy a new Camry, keep it for 150K or so, and do not much more than change the oil, a few sets of cheap tires, brakes a few times and what little actually breaks. It will be crap at 150K with that treatment, but it won’t be worth much less than the full ramped and stamped cream puff either.

        • 0 avatar
          sportyaccordy

          Why is it any worse than leasing in the first place or putting money down on a loan?

          • 0 avatar
            28-Cars-Later

            AFAIK you can’t get your deposit back in the event the car is wrecked (unless gap insurance writes you a check for the difference?).

          • 0 avatar
            Arthur Dailey

            @krhodes1; Agree with the sentiment of your statement. However the average price Ontario for the following at a garage/repair/service chain of shops would be: tires at least $600 per set (so $1,200), 2 brake jobs (all 4 wheels) figure $1,000, battery at $150, coolant flush fill and ATF (once only) for about $300. So minimum of $2,500. Plus having to fix anything that breaks due to inadequate maintenance. And after 8 years without rustproofing and running on old plugs, a much depreciated trade in value.

            So the difference could be almost a wash and if the repairs were over $1k then probably a loss for the non-attentive owner. Demonstrating the probable benefits of actually properly maintaining a vehicle that you have purchased.

          • 0 avatar
            krhodes1

            In my experience, the typical Camry (or any other beigemobile) driver is not going to EVER change the coolant or the flush the transmission, they are going to go to Jiffy Lube for oil changes, the cheapest chain brake place for brakes, cheap Chinese tires, etc. You and I will spend money maintaining a car correctly, Joe Sixpack, not a chance. And the car will still make it to 150K+ without a quibble. Plus Ontario might as well be New York City for costs. Things are massively cheaper in most of the US.

            The fact that cheap modern cars last like they do with the sort of treatment they get is a miracle of the modern industrial age.

      • 0 avatar
        CoreyDL

        You’d drive a used car for three years just to save $1044 dollars?

        • 0 avatar
          Arthur Dailey

          @krhodes1: I would postulate that the average new Accord/Camry etc buyer purchases such a car because of the warranty coverage and belief that they can keep it for a long time without worries. This usually translates into dealer service for the warranty period. Much like the demographic of Buick’s target market in previous decades?

          If they were not concerned about getting a warranty, they would not buy new.

          You are correct regarding costs in Ontario.. At the transaction costs I mentioned you are actually more in Corolla/Civic territory.

          And an 8 year old Corolla with 200,000kms will probably have an asking price of just under $5 on a ‘reputable’ lot.

    • 0 avatar
      krhodes1

      To my mind, this is mostly a way for Toyota to charge more for their CPO cars, and hide it in a lower monthly payment. Because math is hard…

      I can barely see any rational reason to lease a new car, I see no reason at all to lease a used car. I already think nearly new cars are not enough cheaper than new cars. Buy new, or buy REALLY used.

      • 0 avatar
        28-Cars-Later

        Possibly, it depends on what they fix the price as and the associated fees and terms of the deal.

        I still think they have a glut of inventory they can’t remarket for whatever reason. Perhaps they can better sell leases to buyers with 500 FICO as opposed to actual buys? I’d love to hear an F&I perspective as a financing expert I am not.

      • 0 avatar
        87 Morgan

        Krhodes1..you are correct. A used 2013 Camry with decent credit should run about 18k in my mind tops. That keeps the payment in the 60 month realm around $300-$325 and $275-$300 at 72.

        This program makes no sense. If the purchase price is 18k and a 3 year lease is 50% residual of purchase price you have 9k at the end and 9k on 3 years, which at zero percent is $250, which we know won’t be the case. So for fun add $25 per month for interest. Now you are $275.
        If your sales tax rate is 8.25% like mine than you have to add tax to the payment as well of 20.63, so now you are $250 + $20.63 tax + $25 VIG and voila you have $295.63
        It gets even more problematic if you add an extended service contract (extended warranty). If it costs $1500 that equates to $41.67 per month on 36 + interest on top. Call it $45. So now you have a $345 rent payment for a used Camry with no factory warranty and hopefully a Toyota service contract or worst case some after market VSC that may or may not be worth the paper it is written on.

  • avatar
    DeadWeight

    “A tsunami of slightly used, 2 to 3 year off-lease vehicles is poised to flood all dealer lots, putting massive downward pressure on both new and used vehicles for at least the next 5 years.”

    FIFY.

    The time to go long new & used vehicle retail sales was 2010.

    The cycle is now complete, production is at oversupply levels, and a huge % of pent-of demand has already been met.

    Now it is time to go short new & used vehicle retail sales (watch the auction/wholesale prices drop like a rock, also).

  • avatar
    28-Cars-Later

    Ingenious remarketing plan, to me the tell will be at what interest rate and what is the warranty status.

    “65,000 miles on the odometer.”

    These miles are much to high, I would offer nothing more than 30-35K. I’m guessing Toyota has a whole glut of high mileage models hence this wide berth. I’d also like to know what the warranty will cover (i.e. 60K is coming up on shocks/struts are these already replaced for me?).

    • 0 avatar
      DeadWeight

      If Toyota is resorting to this now, imagine how big the pressure is for other manufacturers who have less reliable vehicles and worse customer loyalty (i.e. 90% of the other manufacturer).

      We’re near parallel with 2006 or 2007 here in terms of production and sales, and far more ominously, the amount of auto purchase debt obligations is way higher (1 trillion USD in auto loans currently) than it was in 2006 or 2007.

      Manufacturers will either have to pump up the new car incentives to their dealership clients in a fairly historic way, or slow production of many models (even idling factories or particular lines), in order to delay having to do so.

      In the former case, margins will suffer. In the latter, revenue will suffer.

      In either case, many dealerships (particularly new, expensive ones built in the last 3 years – land and construction costs have skyrocketed), are going to be screwed.

      • 0 avatar
        28-Cars-Later

        I think production is higher now across the industry, hence the lease glut.

        I’m just speculating, but I think what is happening is Toyota’s remarketing arm can’t unload the product they have because there are not enough buyers on the block (because suggesting a bad economy is peddling fiction). Hence they pay storage fees and suffer depreciation every single day those used models are in Toyota’s possession. So what’s the solution? Lease them used to the proles and try not to lose money doing so. Either that or just export them, but if there are no buyers there either…

        • 0 avatar
          DeadWeight

          It’s eerie & uncanny as to how the U.S. economy has been running on 7 to 8 year debt-fueled expansionary cycles, with concomitant busts, since approximately 1992.

          Blowing & getting people to chase debt-fueled bubbles; The Mechanics of Modern Monetary Economics.

          • 0 avatar
            VoGo

            DW,
            You’ve probably noticed that the current expansion is the longest in modern US history. This could be because the recession was so deep, or it could be because the expansion itself has been pretty weak. It sure doesn’t feel like a boom to most people.

            But whatever the reason, we are in unchartered territory for the duration of this expansion, which should make some people nervous. I just saw “The Big Short” which I recommend as a good movie and great way to understand the financial shenanigans that helped precipitate the 2008 crisis.

          • 0 avatar
            28-Cars-Later

            I read somewhere essentially Maestro Greenspan’s policies recreated the Roaring Twenties over a slightly longer period followed by a big bust (dot com and/or 2008, depending on what you want to believe). So now we’re somewhere in the 1930s and we’ve got two to three dictators to “choose” from. This won’t end well.

            youtube.com/watch?v=UneKBzXx7pk

    • 0 avatar
      SCE to AUX

      Agreed on the miles and the warranty question.

      After 6 years, most of these vehicles will have exceeded their OEM mileage warranty.

      Toyota can get away with this, but not Audi or Fiat.

      • 0 avatar
        Richard Chen

        Good for Toyota, and another way to stick it to their competition. However, it’s yet another sign of how Americans’ buying power has eroded.

        Thanks to inflation, the 2002 Camry LE we bought for $21K would cost $27.7K in today’s dollars (via the BLS CPI calculator). And guess how much a similarly-equipped 2016 Camry LE goes for at the same dealer? $21K. And people have to resort to CPO leases and 84 month loans? Yikes.

        • 0 avatar
          VoGo

          You wrote that buying power has eroded, but then you demonstrated the opposite with your example. Which is it?

          • 0 avatar
            Richard Chen

            You’re right, that didn’t come out correctly. With more buying power, why are these measures necessary?

          • 0 avatar
            Pch101

            For most people, the monthly payment determines the budget.

            Find a way to reduce the required payment, and they’ll end up buying more expensive stuff than they would have otherwise.

          • 0 avatar
            CoreyDL

            I didn’t understand his comment either.

        • 0 avatar
          krhodes1

          The long loans just mean that people who used to buy used cars now can buy new cars instead. And why not, cars last forever today compared to 20-30 years ago? You can buy new and keep 8 years, or buy used and keep 5 years – does it matter?

          But leasing a used car seems hilarious to me. But whatever, I freely admit I am far from “normal” in many respects.

          • 0 avatar
            VoGo

            I don’t think there is such a thing as a long loan. Yes, of course, there are lots of people who sign up for 84 month loans, but I don’t think very many people make that 84th payment.

            I suspect that what happens is that around payment 53, the combination of worn brakes, bald tires, and a few other problems borne of poor maintenance conspire to force trade-in. Because the buyer who had to stretch out payments for 7 years is the same person who can’t afford to pay $500 for new tires.

            So they are back at the dealership – this time underwater – looking to fix their problems with a new car. Will they lend for 96 months now?

          • 0 avatar
            28-Cars-Later

            “Will they lend for 96 months now?”

            http://www.marketwatch.com/story/96-month-car-loans-wreck-your-wallet-2013-04-12

            https://www.safeamerica.com/?Cabinet=Main&Drawer=Rates&Folder=Loan+Rates&SubFolder=Auto+Loan+Rates

            Get with the “recovery”, old boy.

          • 0 avatar
            krhodes1

            *I* would never take a 96-month loan on anything I can’t live in, but if you can only afford X a month, you do what you gotta do. Best be buying that gap insurance though. And a Camry or a Corolla.

            I’d rather buy a $5K used car that I can actually afford to buy and can afford to fix. Which oddly enough, was what I did when I couldn’t afford decent new cars. Yeah, I could have swung a shiny new Cobalt or something equally dreadful, but I much preferred my used VWs, Saabs, Volvos, BMWs, Mercedes, and Peugeots. And they mostly treated me extremely well. I could have saved some money with a well-used Corolla, but I happen to enjoy driving.

  • avatar
    nickoo

    This isnt that bad of an idea depending on terms. I would gladly pay no money down and 99 bucks a month for 12k/36 month lease on a 3 year old off lease with less than 40k on a camry.

    • 0 avatar
      VoGo

      Given the resale values of 3 year old Camrys, this is never going to happen. A leased 3 year old Camry will cost you about as much as a new one, especially when you figure that the used car will require new tires, brakes and battery.

      The person looking for a cheap, steady monthly payment is going to be challenged when these bills come in.

      • 0 avatar
        nickoo

        Doesnt the dealership take care of those items for a lease? Also. You’d be paying the 3 to 6 year depreciation curve plus money factor…I have no idea what that is, but plenty of lease whizzes on here could figure it out fairly easily.

        • 0 avatar
          FreedMike

          Leases don’t cover wear items anyway.

          • 0 avatar
            nickoo

            I wouldnt sign a leasr on a car with worn tired and brakes. Theyd have to refresh them or no deal.

          • 0 avatar
            ajla

            But you are more likely to encounter wear-related expenses during years 3-6 than in 1-3.

          • 0 avatar
            FreedMike

            I’m betting Toyota would replace some obvious wear items prior to lease incept, and probably would inspect the car to make sure it’s in good shape. Repairs are major expenses for consumers, but they get a lot cheaper when they’re being done at cost.

          • 0 avatar
            28-Cars-Later

            @Freed

            Reconditioning costs are another variable which remains unaccounted for in this plan.

            I heard the craziest thing on the radio in Las Vegas. Buy here, pay here… tires. Just $29 a week including mounts! What about your kids, you can’t afford not too!

            Seriously, just damn.

          • 0 avatar
            highdesertcat

            There is a checklist that dealers taking in “program” cars use to check for road-worthiness and safety that included measuring the tread on all tires with a micrometer, tension/slack in the serpentine or acc drive belts, squeezing all hoses to check for leaks, operation of AC, windows and locks, check all lights and horn.

            I saw that checklist several times and it included an oil and filters change, also check fluid levels, because most of those program cars did not have any scheduled maintenance done for the duration of service, ~2 years.

            I have not known a case where they put new tires on a car before release because the majority were from the rental fleets.

            But in the case of unlimited mileage leases to traveling sales people, the person or company leasing the vehicle was responsible for all maintenance, tires, etc.

            The insurance requirement was also excessive IMO, and a supplemental was required.

        • 0 avatar
          VoGo

          Dealer does not cover maintenance items like brakes, tires or battery. A CPO will have them replaced if they are near end of life, but otherwise, it’s on you.

          A 3 year old Camry LE from a dealer will cost you $14,300. A 6 year old Camry $8,300. So leasing a 3 year old will cost you $6K depreciation plus interest, or ~$200/month. You will likely pay $229/month for a new Camry LE (zero down).

          So you save $30/month, but are on the hook for all the maintenance items that pop up in year 5 of a car, which will exceed your savings.

          The math does not work.

          • 0 avatar
            nickoo

            No way are you getting a 2010 camery for 8k with 70k miles. True car shows a 2010 camery se around 12k for great price.

          • 0 avatar
            VoGo

            That was the Private Party price on KBB. Is TrueCar showing you the retail price from a dealer?

            Maybe 28CL will join in and educate us.

          • 0 avatar
            28-Cars-Later

            @Nickoo

            Clean an MY10 Camry LE is worth about 10K, <50K miles. Average condition as mileage breaks 70 the valuation dips to about 8,1-9 (this is nationally). I don't subscribe the Black Book but if I had to guess Black Book might be slightly higher (say 5-10%) depending on region.

            If you have the previous year’s sales data one can make projections on future resale, its how the leasing companies operate (plus other factors like estimated inflation, re-marketing demand, etc).

            TrueCar and KBB are generally peddling fiction. Black Book is the industry standard with Manheim offering a free tool which I use in posting. I imagine CarMax has data available as well to dealers who use their auctions, but I don’t have access to it.

          • 0 avatar
            28-Cars-Later

            Additional. So the msrp of the MY10 Camry LE started at $19,395. Examples worth buying trade around 10 with more worn examples 7,6-8ish, and rough at 5,1.

            Sale Price $10,080 $7,615 $5,150
            Odometer 48,504 97,008 145,512

            We don’t know what incentives Toyota offered so I will stick with msrp figures. Thus a desirable example is still about 50% of msrp and a rough example at 25%. So if the MY15 was 23 msrp and today the 15 is:

            Sale Price $15,789 $14,799 $13,809
            Odometer 10,040 20,080 30,120

            Then rebates aside the extra clean examples are sitting at 68% of msrp with average examples at 64.3% of msrp (despite double the mileage on average). We can see, the first year hit is the hardest. Thus it is a safe bet for Toyota to lease these at average miles (I stress 25-35K otc, no more) and predictably only lose 18-20% in depreciation costs as the cars hit years two to five. Depending on the terms, this could even be attractive for the buyer. I imagine all the fees and packs they will put on the lease contract will make it a profitable venture for Toyota Financial.

  • avatar
    smartascii

    Wage growth has only recently jumped up a little bit, so that we’re back at 1979 levels. People don’t have any more money than they used to, but businesses operate on the notion that year-over-year increases are the measure of success.

    It’s pretty basic math to say that if Americans are buying more than they used to without an increase in income, it’s either coming from reduced savings or increased borrowing. The late 90s and early 2000s were fueled by an explosion in credit card and home equity debt, and when they ran out of qualified borrowers, they just lent money to unqualified ones to keep the party going.

    The same thing seems to be happening with auto sales, and no matter what new and inventive financing you create to turn a 5-figure commodity into an impulse buy, someone’s going to have to actually pay for the car, and it won’t be the people who lease a used Camry for $99/mo because the $179/mo for a new one was too much.

    Those people also are much less likely to pony up for maintenance and repairs, so when Toyota’s left with 275,000 6-year old, neglected units with 70k+ miles worth a fraction of their new price, then what? $179/mo for the first 3 years and $99/mo for the next three means that, even if the original purchaser put $2000 down beyond TT&L, they’ve only collected a total of $12,000, minus lending costs. A basic Camry with no options is more than $24,000, and currently, a 6-year-old Camry LE has an auction value of about $7,500. This model just cannot work.

  • avatar
    FreedMike

    I’ll say it ain’t such a bad idea, as long as the lease terms are attractive.

    • 0 avatar
      28-Cars-Later

      I’m genuinely curious, but there’s about 25% or more margin to work with after one model year, let alone three. I imagine Toyota will sell off the extra clean ones to actual wholesale buyers and simply recondition the average ones for prole sales. This is similar to GM’s odd new policy where ordinary buyers can buy their factory used models “before” they “run at auction”. Remember that BS scam they were floating? Both stories point to a glut of new used cars on the books of OEMs or their captive finance arms.

      2016 – Toyota Avalon Limited

      $40,450
      starting msrp1

      2016 Toyota Camry LE (I4)

      $23,070
      starting msrp1

      both from Toyota.com

      But remember nobody is paying sticker for Camry, whereas they *are* for Avalon.

      MY15 Toyota Avalon Limited V6 (extra clean/clean)

      03/15/16 DETROIT Factory $30,100 1,368 Avg GREY 6G O Yes
      03/16/16 MINNEAP Regular $29,750 3,400 Avg TAN 6G A Yes
      03/16/16 PA Factory $28,700 6,090 Avg BLACK 6G P Yes
      03/02/16 SF BAY Regular $28,250 8,269 Avg WHITE 6G A Yes
      02/29/16 TX HOBBY Lease $27,100 17,123 Avg BLUE 6G A Yes
      03/03/16 FRDKBURG Regular $28,000 18,722 Avg BURGANDY 6G A No
      03/07/16 NASHVILL Lease $26,700 24,325 Avg BLACK 6G A No

      MY15 Toyota Camry LE I4 (extra clean)

      03/17/16 TX HOBBY Lease $16,800 4,710 Above SILVER 4G A No
      03/15/16 ORLANDO Lease $15,900 8,399 Above BLACK 4G A Yes
      03/14/16 PA Factory $16,600 9,230 Above GREY 4G A No
      03/15/16 ORLANDO Lease $16,300 9,368 Above GRAY 4G A Yes
      03/17/16 ATLANTA Lease $15,800 9,487 Above WHITE 4G A Yes
      03/14/16 SEATTLE Factory $14,900 10,468 Avg SILVER 4G A Yes
      03/17/16 TAMPA Lease $14,700 10,646 Avg SILVER 4G A Yes
      03/16/16 NEWORLNS Lease $14,700 10,781 Avg GRAY 4G A Yes

  • avatar
    CincyDavid

    If they’re not afraid to chase slow-pays, they could use this as their subprime leasing weapon in the arsenal…we can’t lease you this new one for $199, but for the low, low price of $150 we’ll put you in a 3 year old one that looks vaguely like the new one.

    I know that I maintain my “keepers” more thoroughly than leases that will be departing at the end of 3 years…imagine how much deferred maintenance a leased car will have at the end of 6 years and 72 thousand miles…transmission never serviced, original shocks and other suspension parts, the whole thing makes me cringe.

    EDIT: smartascii beat me to the punch with these thoughts…guess I was typing too slow.

  • avatar
    Yesac13

    This is very exciting for me.

    I’ve identified years 3 to 6 to be the sweet spot for buying used cars and getting rid of them before problems abound.

    If Toyota is leasing them, they are obligated to repair problems just like brand new leases, I think? This is the important part. Brake pads and tires are just normal consumables. Suspension? Not for year 3-6 so perhaps under warranty? The details are important.

    If the cost is reasonable, I may go this route. Leasing brand new is just too expensive for me… Believe it or not, it’s not depreciation. It’s actually insurance and excise taxes for me. I’m from Maine which has horrific excise taxes on brand new cars. Much less at year 3. I own a 8 year old Honda Civic that I bought new. I did the calculations and leasing cost the same as buying new… before I remembered the excise taxes and the insurance. Factoring in these two factors, leasing is a bad deal for me in Maine. Might be different in other states, tho.

  • avatar
    Davekaybsc

    This sort of thing is likely to only make sense on VERY reliable brands like Toyota, and some Honda models. Like all mainstream brands, Toyota’s CPO warranty covers *powertrain only*. They do give you a year of full coverage which is better than a lot of other CPO programs from mainstream brands, but still, on years two and three of your lease, anything not directly related to the engine or transmission that breaks on the car will be coming out of your pocket to fix, for a car you DON’T OWN. You could of course buy it out at the end of the term, but otherwise you’re paying to fix Toyota’s car. Not smart.

  • avatar
    APaGttH

    Toyota’s increasing footprint in rental fleets (upwards of 65K Camrii a year for several years now as one example – in total numbers the leading rental fodder out there) is going to start catching up with them.

    Also with consumers having less disposable income, and the barrier to entry for a new car being huge, they have to do something to keep the iron moving.

  • avatar
    ThirdOwner

    “Sensible Dreamers”? More like the people who are approaching the end of their lease and realize that they can not buy the car out for the residual, and neither can they afford leasing a brand new equivalent one.

    So now they have an option of continuing to lease their old car on reduced payment terms. The fact that it’s a nation-wide program is telling. This is going to end well, yeah…

    • 0 avatar
      FreedMike

      Unless it’s a lease I’ve never heard of, it will include a guaranteed buyout value at the end of the term. So you won’t be upside down. You just chuck the old car in on a new leased vehicle.

      • 0 avatar
        VoGo

        If the target market is people who are currently leasing the vehicle, then their best move is probably to buy the car at the end of 3 years and pay it off over 4 or 5 years. Especially if they like it and have cared for it. After year 5, they will start building equity, which is a smart thing to do.

  • avatar
    CincyDavid

    In the case of the Hondas we have been leasing, they are SO cheap to lease that I can’t justify buying…’14 Accord LX for $235/mo with no money down, ’16 CRV EX $265/mo, no money down…after 3 years walk away and get another new shiny one. No CVT worries because they are never out of warranty…it’s a beautiful thing.

    • 0 avatar
      RideHeight

      But would you pay nearly the same monthly for one that has been abused by Derp Q. Public for the past three years?

      The same inadequate discount I always find with CPOs for outright purchase would likely apply to leases, no?

      • 0 avatar
        28-Cars-Later

        I’m really not sure how this will work competing with new car leases but here is the math:

        Based on calculations above, on an extra clean MY15 Camry, the owner stands to lose about 20% in the next four model years assuming avg miles and example is kept in decent condition as the current value is about 68% of msrp.

        So 20% of 23000 is $4600.

        $4600 / 36 mo = $127.7/mo excluding interest. If we hit them over the head at 6% in today’s zirp, its still only $139.94. You figure the finance co will shake you down with an $800 origination fee (because frack you) so rolling that into the lease jumps it to $164/mo/36.

        If Honda is putting out brand new ones at say $239/36mo, I’m not seeing the appeal unless that +/- $100/mo really means something to someone.

        • 0 avatar
          VoGo

          28CL,

          You’re the expert, but I don’t think any car sold today is giving a residual value of 80% after 3 years. Even Honda would love to be at 70%.

          • 0 avatar
            28-Cars-Later

            Lexus used to be about 70ish after two years but just crunching these numbers its tough to tell what if any additional options may have been selected.

            MY15 Lex ES350 – National figures aggregate for week ending 16 Mar

            Sale Price $30,740 $28,070 $25,400
            Odometer 6,003 12,005 18,008

            The Manufacturer’s Suggested Retail Price (MSRP) for a 2015 Lexus ES 350 is right around $38,500, including the $925 destination charge.

            http://www.kbb.com/lexus/es/2015/

            $30,740 is 79.8% of 38,500.
            $28,070 is 72.9% of 38,500.
            $25,400 is 65.9% of 38,500 (you don’t want a new Lex in rough condition though, its bound to be fracked up in some way).

            So in year one and a half were in the low to mid 70% range for clean to extra clean. if we look at MY14 for the same model is:

            $27,987 $25,161 $22,335

            or roughly 71% / 65% / 58% for ’14.

            Tough to buy most Lexi used, LS460 might be the only example and it only makes sense new-used.

      • 0 avatar
        CincyDavid

        Nope…wouldn’t want one that I had done the minimum of maintenance on either…one of my kids consistently gets measurably worse fuel economy than anyone else in the household, which means she drives like a maniac…I don’t want anything to do with a car that she has been driving.

        I would have to save about half to justify getting into something used…by me or anyone else.

  • avatar
    CincyDavid

    The edit function wouldn’t work, so here’s a new comment…

    If the math changed dramatically, and leasing became less attractive, I’m not opposed to buying and keeping cars until they fall apart. Convincing my wife of that might be a problem…

  • avatar
    seth1065

    Like regular leasing this will work for a fairly small % of people, some who do not want a CPO buy maybe but like regular leasing it will not work for most people.

  • avatar
    Vulpine

    Pre-owned leasing tells me that they over-valued the trade-in value of the car from the original lease and don’t want to lose that money. It tells me that the Camry specifically isn’t as popular a car as it used to be WITHOUT the benefit of those low leasing rates. It’s no more now than a long-term rental and has no better aftermarket value than any other rental from the popular rental agencies.

    • 0 avatar
      RideHeight

      I don’t think you can blame any one make or model for the consequences of lease mania coming home to roost. I think it’s more that Americans are generally and steadily poorer, therefore less certain of their status any three years down the road that has driven this shaky world even the finest automakers are now facing.

      I wonder if Akio is wishing great-grandpa had stuck with making looms.

  • avatar
    Jim Broniec

    In an environment of increased reliability I’m consistently amazed by how prevalent leases or extended payment plans have become.

    I would think that a lease on a used car from Toyota would be the most antithetical offering a company could make, but then I also realize a disturbing number of people are comfortable enough to have elevated a billionaire reality tv star to potentially become the leader of the free world.

    So in that light, this makes perfect sense.

    I’m probably getting to be an old man faster than previously thought.

  • avatar
    John

    New car “sales” after the Great Recession peaked in fall 2015 – and a record number of them were leases, mostly for three years. That means 2018 will be prime time for buying a CPO vehicle according to my calculations.

  • avatar
    87 Morgan

    For fun I ran some figures on this using a 2015 Camry w/ 29k miles I found on TrueCar for 17,889. To come up a with a residual, I searched 2011 Camry and came up with one with 76k miles and a retail price of 12, 491 for fun we need to ‘assume’ the selling dealer has $1500 profit in the 2011 so call it a W/S cost of $10,991 after reconditioning new tires and such.

    So, let’s work a lease shall we?
    10,991 / 17,889 = .62 (residual percent or 38% depreciation)

    17,889 * 62% = 11,091

    17,889 – 11,091= 6798 (depreciation)

    6798 / 36 (assume a 3 yr lease) = $188.84

    Now for the Vig: Let’s use a .0015 money factor or 3.5% (it is a used car, so the rate will be higher than for new I would presume)

    (17889 + 11,091) * .0015 = 43.47 (monthly interest)

    Finally sales tax, in my area it is 8.25%

    188.43 * 8.25% = 15.55

    The total monthly payment on a 3 year lease would be 188.43 + 43.47 + 15.55 =
    $247.45 with no money out of pocket

    Now, this does not figure an acquisition fee, disposition fee, dealer handling or any sort of extended warranty. Figure the warranty would run $30 a month best case.

    So, for some this will be a decent deal I suppose. About $50 to $60 less than a 60 month purchase and $40 or so less than 72 month purchase. Again with no money down.

    Less payment and they can walk from it in three years.


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