Ask Jack: And None Of The Miles Are Free
Welcome to our new feature, Ask Jack! I’ll be answering your questions on pretty much any topic that has a vague relationship to cars. Send me your questions and make sure you let us know if you want to be identified!
Our very first question comes from a fellow who wants to know what he should do about lease mileage on his Camry. As fate would have it, I was a Red Carpet Leasing Professional(tm) in another life and I am ready to help!
“Mathew” writes that
I read TTAC every day and am one of those who dream of buying the latest Corvette. Back to reality! I just leased a 2014 Toyota Camry in late June 2014. I am looking for some creative ideas to minimize the cost of this car.
Note: Minimizing cost to me equals the lowest cost per mile; not a $500 beater. I’ve done the fly across the country and drive a $500 beater home stunt so I know how to play that game. I’m too old to play that anymore. If you are wondering I’m an ’81 baby.
Previously I owned (outright) a 2003 Trailblazer with 175k miles. It ran like a top even though I drove it like a POS. Just prior to driving to Seattle an oil change was made. No leaks were had with my car. When I selling it (after leasing a Camry) a gentleman who was looking at it found it was out of oil. I told him I was going to put oil in it and hope for the best. He made a cash offer right there and I took it! I didn’t even have to put oil in it!
At that time I bought this car I was in the middle of moving to Seattle from SLC. I was in no mood to find a used car much less pay for one. Four months later I have burned through half of the 24k miles allotted in my two year lease. The first person to lecture me on leasing a new car only to drive without regard to mileage can go buy my old Trailblazer from that gentleman and tell me how that goes. Here’s the kicker –the overage charge is $0.15 per mile. The lease comes out to about $0.20 per mile (payments + down payment + taxes). So those with some sense of math understanding can see the more I drive it the less (per mile) it costs me to drive this particular car. And like some of you I am still working on getting a second or third or fourth car sitting in the driveway to the home I don’t have yet.
Finally, here is my question:
Would it cost me less to:
(a) Drive it at my current rate until the lease is over and pay the overage costs?
(b) Drive it at my current rate and sell it privately when the lease is over and pay the difference between the buyout ($15,000) and market value?
Alright, this takes me back — way back to 1994, when I leased a new Ford Contour to a friend on a two year/90,000-mile program. He was paying $475 a month to drive a Contour and all his friends laughed at him! But when he walked away from an 87,000-mile car free and clear after two years, he had the last laugh.
You’d be surprised how often lease mileage is cheaper than buy mileage — and even when it’s not cheaper, it’s absolutely predictable. The exceptions to that rule occur when you’re in possession of something that doesn’t become worthless with mileage the way my friend’s Contour did.
Let’s start by figuring out how much you’re going to drive. You say you’ve done 12k in four months, which is 36k a year, which is 72k total, right? 24k of those will be covered in the lease, which leaves you with 48,000 miles at .015 which is… drum roll… $7,200. Another way to look at it is that your payment for the next 20 months just went up by $350 a month or so.
The alternative would be to pay the buyout of $15,000 then sell the car. So let’s take a look at what a two-year-old Camry with 72,000 miles is worth in a private sale, shall we? A quick check of AutoTrader shows 72,000-mile Camrys that are between three and four years old (I couldn’t find any two-year-old ones) selling for between $12,000 and $16,000. The Black Book Retail Calculator thinks a 2012 Camry with 72,000 miles is worth $13,150.
It looks like pricing your car at $13,000 or so in a private sale would ensure a pretty quick turn. Which means that your actual cost will be your state sales tax at your buyout price of $15,000 — let’s say a grand — plus $2,000 worth of depreciation. Which means that you’re looking at a $3000 hit overall. That’s $150 a month, and more importantly it’s about eight cents a mile.
Even if you could sell out of your Camry for what you owe right now, I think you would have a hard time finding a car that was as reliable, safe, and comfortable as a nearly-new Camry for eight cents a mile. The only potentially cheaper scenario would be if you could make your Camry just disappear then buy a decade-old Civic with 100,000 miles on it for $7000 and sell it with 148,000 miles on it for $5000. But will your maintenance costs be as low? Probably not.
The good news is that you don’t have to make the choice now in any event. You can start trying to sell your car as long as 90 days out. If your lease company is feeling exceptionally helpful, they may agree to transfer the title DIRECTLY to the new owner, saving you sales tax. In most states that should be perfectly legal.
The good news in all of this is that you have a Camry — a car that has a devoted high-mileage buyer base. Had you chosen a Malibu, or a Sonata, or a Maserati, you’d be hurtin’ for certain. But I think you’re probably good to go. Just make sure you clean the thing up pretty well. And don’t forget to tell people, “They’re all HIGHWAY miles!”
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