By on October 30, 2019
As I look at all of the questions I’ve received via the Ask Bark inbox over the years, I find that a disproportionate number of them are on the topic of leasing. In all honesty, leasing isn’t that hard to understand. You’re paying the cost of depreciation over the time you use the car, plus interest. Of course, there are other factors involved, and one of those is what happens when a leased car is returned to the dealership. Our friend, Brian, a longtime TTAC reader, turned in his Buick Regal recently and was a little compuzzled (that’s a word my son made up, but I think it fits perfectly here) about what happened. Let’s read.
Hi Bark:
I had previously asked this to a certain Jalopnik car sales expert and got a bit of a glib, didn’t really read my question answer so I thought I would take another stab and reach out to an actual expert.
Back in May I turned in a leased 2016 Buick Regal GS (FWD – auto – black) and I got stuck with the $495 disposition fee. I took over the lease from someone else and I got a pretty darn good deal so I really can’t complain too much.
I took the car to several GM/Buick dealers toward the end of the term to see if they wanted to buy it. It was in good shape and it was almost 10k miles under the maximum. The residual was $19k and change plus taxes and fees. I knew I wasn’t going to make money on it, I really just wanted them to take it at residual and relieve me of the disposition fee obligation. The closest offer I got was $18k with most around $16k. One dealer told me they would pay the leasing company the residual themselves in order to keep it on the lot if they wanted to sell it.
Is this true? The dealership I turned it in to wouldn’t buy it from me but they kept it and sold it on their used lot. Did they actually pay the leasing company the residual to keep it and if so, why not buy it from me at the same price?
Can you enlighten me?
Thanks,
Brian
Can I? You bet I can.

First of all, let’s look at some auction results for the 2016 Buick Regal GS. The average Manheim auction value looks to be about $16,000 — hence your typical offer from the dealers. Nobody is going to pay$19k for your car when they can go and get one just like it for $3,000 less at the auction. Of course, you don’t have access to Manheim auction results (and if Cox Automotive would ever get around to cleaning up logins, neither would I), but MMR (or Manheim Market Report) value is one of the more common ways that dealers value cars. So mystery number one is solved.

Now, as far as the other question — no, the dealers don’t necessarily have to pay residual value to keep the car, and they likely didn’t. Lease auctions don’t work the same way as regular auctions. The captive finance companies have their own lanes. They’re typically restricted to dealers from that make, so only Buick dealers would have the right to bid on your Regal, for example, when GM Financial runs it through their lane. If it doesn’t sell there, then the leasing company would likely run it through a regular auction lane.

Your Regal isn’t exactly a hot seller, so GM Financial may have offered your dealer the car at a significant discount from residual in order to avoid having to take it to the auction and paying the transportation and auction fees to Manheim to sell it. Your dealer probably pulled the MMR, offered GM Financial something in the range of that, and they took it. It’s a win-win — the dealership gets a good piece of inventory at a low price, and the leasing company is free of the albatross that is a used Buick. (Hi Stu!)

Another option in this case, if you wanted to avoid paying the fees, would have been a private sale. KBB estimates a Private Party value of $18,500 for a 2016 Regal GS with 36,000 miles (I guessed), so you still might have come up a bit short of the payoff.

You also could have asked the dealer to eat some value on a trade-in, if there was another new, deeply discounted Buick that you were interested in. There’s alllll sorts of ways that the dealer could have hidden that negative equity on your car to make a new car deal happen.

But perhaps the best option, if you actually liked the Regal, would have been to offer to buy the car at, say, $16,500 from the dealer. They pay GM Financial $16,000 for it, they make $500 on you, and you’re now the proud owner of a nice, lightly owned Buick.

That being said, all of this is, of course, hindsight at this point. But now you (and other readers) know your options when you go to return a lease.


Send your questions to the Ask Bark inbox at [email protected] and wait patiently for a very, very average response. 

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110 Comments on “Ask Bark: Why Won’t They Buy Back My Lease?...”


  • avatar
    davewg

    Or just pay the $495 disposition fee (which is standard fee on a lease) and walk away? That’s the whole point of the lease, no?

    It would be a lucky situation where a car was worth more than the lease contracted residual at the end of the term where the leasee might make some money on selling it privately (or trading).

    I bet Buick would eat the disposition fee if you’d financed or leased another Buick.

    • 0 avatar
      ToddAtlasF1

      There was a time when cars would sometimes be worth considerably more than their lease residuals, but it only benefitted the customer in the rare cases where they leased a great car in a soft market and the lease ran its course in a strong market. When that happened, a lessee with excellent credit could get an aggressively discounted deal and then take advantage of selling a car that was worth more than anticipated as a three year old used car.

      Suppose you leased a CR-V in 2008 and then CFC reduced the used car supply in ways still felt strongly in 2011. You probably paid a reasonable amount for your lease with a traditional residual value only to find that your off-lease CR-V was now in the sights of someone who would have bought a new car before they destroyed their credit in the housing crisis. Suddenly your three years of CR-V use were very cheap indeed.

      Most of the time a lower expected residual than the car is worth just means you paid too much for your lease though.

    • 0 avatar
      thegamper

      I leased a 2014 Enclave and went waaaaaaaaay over miles. I think it was to the tune of 15K miles over in the course of 36 months. At 25 cents per mile wasnt really looking to writing a big check to cover the overage and disposition fee. I found a dealer that was willing to buy it, lease me another better equipped Enclave (for even less than the first incidentally). I paid nothing out of pocket and was looking at $4000 in lease end fees.

      The more recent Enclave lease had such a pie in the sky residual, there was no way I was going to get a dealer to buy it out. So I sucked up the last few payments, got rid of it before the end of the lease before I incurred extra charges and walked away…..because I wasnt willing to get another Buick this time around.

  • avatar
    chrishs2000

    Enjoy reading your articles but some clarifications need to be made here. GM vehicles very rarely have positive equity at lease end as their residuals are typically artificially propped up by the captive (GMF) to support leasing. Otherwise, you’d be leasing a Terrain for $450 a month instead of $250 a month. Keep in mind that RV is set by the captive and often times is not reflective of any reality. See, also: BMW.

    “Another option in this case, if you wanted to avoid paying the fees, would have been a private sale. KBB estimates a Private Party value of $18,500 for a 2016 Regal GS with 36,000 miles (I guessed), so you still might have come up a bit short of the payoff.”

    You’re forgetting that he would have owed state sales tax on the payoff amount, which likely would have wiped out any possibility of a positive return. And trying to buy out and then sell a Buick private party to “save” a couple hundred bucks in dispo fees sounds like a game you’d have to be pretty desperate/crazy to play.

    “You also could have asked the dealer to eat some value on a trade-in, if there was another new, deeply discounted Buick that you were interested in. There’s alllll sorts of ways that the dealer could have hidden that negative equity on your car to make a new car deal happen.”

    I don’t really understand how “hiding” thousands of dollars of negative equity is a good suggestion compared to paying a $495 dispo fee. You’re also paying tax and rent charge on that negative if you roll it into a new lease. Not a good financial idea! TINSTAAFL – the dealer will be happy to make money on both your new car purchase AND your trade, and will not be doing you any favors.

    The correct answer here is;
    1) The entire purpose of leasing is to stick the captive with the risk of excess depreciation. You should be happy that you leased the Buick instead of purchased it.
    2) GM lease loyalty waives the disposition fee when you lease another GM product. Sometimes they also run a promo where they also waive $500 in damage/mileage but AFAIK they aren’t currently running that.

    Should probably just direct lease questions to Leasehackr :-)

    • 0 avatar
      thalter

      This answer is 100% correct.

      While Bark might be willing to play these trade-in/private sale/whatever games, I’d be willing to bet most Leasees are not. That is why they got into leasing in the first place.

    • 0 avatar
      pinkslip

      I totally agree with everything you said here.

      “Your ideas are intriguing to me and I wish to subscribe to your newsletter.”

    • 0 avatar

      You’ll notice that I just said these were options. I said the best option was to offer to buy the car outright at actual market value.

      • 0 avatar
        chrishs2000

        As long as we’re discussing terrible options, another option would be dumping gasoline in it and lighting it on fire…

        I still don’t understand “offer to buy the car outright at actual market value”.

        1) The dealer doesn’t own the vehicle, GMF does. So the dealer can only purchase it at the residual value, or the current dealer payoff if it’s not at lease-end.
        1a) The dealer will not buy the vehicle for the residual value if the MRM is $3k upside down. Clearly the lessee in question already tried to get a trade-in of $19k or above and was only able to get $18k as his best offer.
        2) GMF will not negotiate residual value with either the lessee OR the dealer.
        3) The vehicle must be grounded (TURNED IN) before GMF can release it for sale. Dealer gets the first shot – if the dealer buys the vehicle, they get a rebate from GMF to make up for the difference in residual (varies by vehicle, not public info). If they turn it down, it goes to dealer auction.

        • 0 avatar

          Yes, those were terrible options IN THIS SCENARIO. Keep in mind, I don’t write these things for just one person. These articles are clicked on months and years after the fact by people looking for advice. So, in other cases, they aren’t always terrible options—in fact, they can be the best option. I’ve personally privately sold two leased vehicles, and bought another one from the dealer after turn in at far below residual.

          • 0 avatar
            28-Cars-Later

            “bought another one from the dealer after turn in at far below residual.”

            So, who eats the difference in the ambitious residual?

          • 0 avatar
            chrishs2000

            Since I am also writing comments correcting your article in an attempt to help others in the future, I would suggest actually reading what I’ve written instead of just responding to it and putting some caveats in the original post. Such as buying the vehicle out only makes sense if the actual value > residual value, and clarifying that residual CANNOT be negotiated with the captive or the dealer. That comment about ‘hiding negative equity’ was really rough but I think I already beat on that enough.

            There are only 4 options with a lease;
            1) Turn the vehicle in, pay the dispo fee
            2) Turn in and then lease the same brand, many captives will waive the dispo fee.
            3) You/dealer purchase the vehicle for the contracted residual value at lease-end or payoff if not at lease-end. This only makes sense to do if the actual value > RV or payoff.
            4) Transfer the lease, for example with GMF you can swap it >6 months from turn in. Fees vary. Some captives do not allow transfers at all, and some will hold the original lessee liable even if it’s transferred.

            Das it. There is no negotiation that you can do with the dealership or the captive to modify your contractual obligations.

          • 0 avatar

            It appears we may have different understandings of what GM will and won’t do at the end of a lease.

            For example, while GM states that the original customer can only purchase at the residual price, there is nothing to prevent the dealer from reselling that same car to the customer’s wife, son, grandmother, etc. This happens all the time, and is how I managed to buy out and re-sell my VW Jetta about 23 years ago :) Original lease was in my dad’s name, I bought the car from the dealer under mine. But you’re correct in that I should be clearer about that loophole. I’ll see if I can edit.

            GM absolutely does NOT sell the vehicle to the dealership based on the residual value given to the customer at the origination of the lease. The residual number given to the dealer is based 100% on the average auction prices—and I confirmed that with a contact of mine at GM Financial.They get the number from ALG, and the dealer has no idea what it is until they call. Just for good measure, I confirmed that FCA and Ford have similar practices with dealer friends.

            THAT is why no dealer is willing to touch the car at the residual number given to the customer, because their number is completely different.

          • 0 avatar
            chrishs2000

            Mr. Baruth,

            With all due respect you are either creating a straw man argument or still do not understand what I posted above. I never stated or implied things that contradict what you have posted. However I am happy to see that you are finally doing proper research on the subject!

            “there is nothing to prevent the dealer from reselling that same car to the customer’s wife, son, grandmother, etc.”

            This is obviously correct. Nowhere did I assert that a GM dealer could not resell the vehicle to anyone they chose to *AFTER* the dealer had purchased it from GMF which happens *AFTER* the vehicle is grounded and the lease is ended.

            “GM absolutely does NOT sell the vehicle to the dealership based on the residual value given to the customer at the origination of the lease.”

            This is absolutely correct, but again, is not what I said or implied. I stated that the dealer cannot negotiate the residual value on behalf of the lessee on a vehicle that is under contract, and that the vehicle must first be GROUNDED (TURNED IN) before the dealer can purchase it.

            Since your original post was on a current lessee, this is completely irrelevant information.

            Again, your recommendation was: “offer to buy the car outright at actual market value”. This is NOT possible when a vehicle is under contract! The lease has to be grounded (the lease contract ended) before the dealer can purchase the car for the ALG value, or the vehicle goes to auction. As I mentioned GM dealers typically will also get a rebate to incentivize them to purchase lease returns.

            With leasing it is important to understand the intricacies and the terminology because they make all the difference.

            “THAT is why no dealer is willing to touch the car at the residual number given to the customer, because their number is completely different.”

            Not really. It’s simply because the residual value was higher than the actual market value. Had the car been worth $25k, the dealer would have happily paid GMF $18k for it. It’s rare, but positive equity in a lease isn’t all that uncommon. It’s just not typical for GM because GMF props up the RV to subsidize leasing.

          • 0 avatar

            The lessee, in this case, did turn in the vehicle, so he could have purchased it after it had been returned. These are the conditions under which this advice was given. I feel this is clearly understood.

            Perhaps I misunderstood when you said that the dealer had to buy the car at residual value—I believed you were referring to the contractual residual value in the original lease, as I think nearly anybody would, since you neglected to state that the residual price offered to the dealer in a situation like this would have been substantially less than what the customer would have paid.

            So, in other words, I think you’re creating a strawman argument, and you think I am. I won’t lose sleep over it :)

          • 0 avatar
            chrishs2000

            Now you’re arguing semantics and your own misunderstandings. This site is sadly not what it used to be which is why I have gone from checking it on a daily basis and having an RSS feed to once every week or so.

            The question was HOW DO I AVOID PAYING THE DISPOSITION FEE.

            It had absolutely nothing to do with buying the vehicle AFTER it was grounded and AFTER the disposition fee was due.

            Since the vehicle was under contract, the dealer could only buy the vehicle from GMF for the residual value/dealer payoff.

            But I’m super happy for you that in the end, after providing a completely incorrect answer, you were able to make up your own question and finally provide a correct answer to that.

          • 0 avatar

            The question was, and I quote:

            “Is this true? The dealership I turned it in to wouldn’t buy it from me but they kept it and sold it on their used lot. Did they actually pay the leasing company the residual to keep it and if so, why not buy it from me at the same price?
            Can you enlighten me?”

          • 0 avatar
            28-Cars-Later

            “GM absolutely does NOT sell the vehicle to the dealership based on the residual value given to the customer at the origination of the lease. The residual number given to the dealer is based 100% on the average auction prices—and I confirmed that with a contact of mine at GM Financial.They get the number from ALG, and the dealer has no idea what it is until they call. ”

            Just so I understand Mark, the residual value determined at the beginning of a customer lease on a new car which he agrees too, is backed by some kind of Black Book/Manheim/Carmax data or am I mistaken? You know I knew/know wholesale but I never worked the new car end of it and don’t understand it as well.

            The reason I ask is because around 2016ish when the ’14ish ATS was starting to hit the block I remember posting the block results which were nowhere near residuals other posters gave for their leases and thus, someone took a nice bath. Just curious as to who gets the rubber ducky… rubber ducky you’re the one; who makes bathtime so much fun

            Thanks

            …rubber ducky you’re the one; who makes bathtime so much fun… man I need sleep.

        • 0 avatar
          stevelovescars

          Re #3, there are also costs to GMF involved in taking the vehicle through a wholesale auction (auction fees, transportation, and time) which I imagine could also factor into an incentive for the dealer holding the car to buy it first, no?

          If I really wanted to buy out my car lease (say I was well under or over the miles or just really loved the car) it couldn’t hurt to ask the dealer to see if they would broker the sale through the captive and pass some of the savings on to me… maybe even sell it as a CPO?

          I’m just not really sure what the incentive is to the dealer. On one hand it’s a quick sale with a positive margin. On the other hand, I’ve rarely known dealers even remotely interested in doing this… is it just too much trouble? Do they get a service fee just for taking back the car and holding it for the captive to pick up for auction?

    • 0 avatar
      davewg

      How is there any hiding of negative equity? If the lease is over just pay the dispo fee and wave good-bye.

      • 0 avatar
        Mnemic

        Thanks for stating the truth chris – I read the article just shaking my head at all the BS in it. You cannot negotiate residual value upon taking your leased car back. Article should be deleted.

    • 0 avatar
      ktm

      “You’re forgetting that he would have owed state sales tax on the payoff amount, which likely would have wiped out any possibility of a positive return.”

      Point of correction. The seller does not pay the sales tax, the buyer does when they go to register the car in their name. This is why some buyers ask for a lower value on the sales receipt.

      • 0 avatar
        pinkslip

        If the lessee is buying out the remainder of the lease, they are on the hook for the balance of the sales tax. On leases, tax is paid on the monthly payment, so only about half the value of the car is taxed. But if the lessee wishes to sell the car to a third party, the lessee must first own the car, which means getting out of the lease term, which means paying the rest of the monies owed to the lender as well as the rest of the tax to the state.

        I’ve heard there MAY be a loophole in some states, wherein the lessee can avoid paying the rest of the sales tax if they can prove the car was re-registered to a new owner who paid taxon the vehicle within 30 days, but I have not personally seen this rumor play out.

        • 0 avatar
          krhodes1

          In some states, you pay sales tax on the entire price of the car, not just the lease payments. Maine was like that until relatively recently – they considered the “sale” to be between the manufacturer and the lessor, not the lessor and the lessee. Made leasing an even MORE boneheaded choice – the other issue in Maine being if you are serial leasing, you are also always paying the sky-high annual excise tax on the first 2-3 years of ownership. And you pay that in cash at city hall, so no hiding it in the monthly payment. Best part of $4K over three years if you are leasing $50K cars.

          Also note that even if you are only paying sales tax on the lease payments, it really makes no difference because had you bought, in most states you would have only had to pay tax on the “net of trade value” when you traded it for your next car. Admittedly, in most cases (but not all) you would have to trade at a dealer to take advantage of this. I paid no sales tax at all to FL when I traded my BMW bought in Maine to a Florida VW dealer, as the BMW was worth more than the VW cost. Every state is different, you should never make blanket statements about taxes.

  • avatar
    Vulpine

    … And people wonder why I refuse to lease…

    • 0 avatar
      chrishs2000

      Why is that? This article demonstrated that the lessee saved potentially thousands of dollars leasing by not being liable for the actual depreciation. That is assuming purchase and lease incentives were the same at time of purchase and rent charge was equivalent to finance charge. As always, one needs to do *THE MATH* on both options on the vehicle that they’re interested in.

      • 0 avatar
        Vulpine

        A) You don’t own it.
        B) You’re restricted on mileage
        C) You’re usually liable for that depreciation, depending on the leasing company.
        D) You’re without, if you want to buy or lease a different brand after turning in the existing vehicle.
        E) You pay extra to buy it after the lease, assuming you want to keep it–especially if the lessor misjudged the depreciation.

        F) I prefer to keep my vehicles for a minimum of 8 years.

        • 0 avatar
          chrishs2000

          So many misconceptions!!

          A) You don’t own it. –> Do you really own a vehicle if you have purchased it and have a loan on it? It’s the same concept. What’s the difference??
          B) You’re restricted on mileage –> Sure, unless you buy it out at the end. You can also add miles up front, or pay for mileage penalties at the end. You pay for actual usage, same as if you finance a car.
          C) You’re usually liable for that depreciation, depending on the leasing company. –> Same as with a purchase/finance.
          D) You’re without, if you want to buy or lease a different brand after turning in the existing vehicle. –> Same as with selling a vehicle you purchase/finance.
          E) You pay extra to buy it after the lease, assuming you want to keep it–especially if the lessor misjudged the depreciation. –> This is absolutely not true. You pay nothing to buy it except the contractual residual value. If the residual is way higher than the actual value, you can simply walk away. You can’t do that on a finance, you’re stuck with the negative equity.
          F) I prefer to keep my vehicles for a minimum of 8 years. –> This is the only argument against leasing, unless it’s something with horrible reliability/maintenance costs :-)

          • 0 avatar
            Vulpine

            A) Put it this way: I own my truck. Period.
            B ) … is the misconception–you’re trying to guesstimate your usage when you have only history to go by. My history had me putting as much as 70K on a car in four years and I put 160K on one car in 6 years.

            Need I go on?

          • 0 avatar
            Art Vandelay

            I lease one vehicle and Purchased another. They were both owned by the same finance company (One is paid off now), but you no more own a financed vehicle than a leased vehicle.

          • 0 avatar
            Vulpine

            I own my truck–Free and Clear

          • 0 avatar
            dal20402

            Vulpine, you’ve got it backward. When you own, you are going to absorb the actual depreciation, whether it’s better or worse than you expected when you bought the car. When you lease, you’re paying a certain amount for depreciation up front, and the lessor absorbs the risk of any additional depreciation. Subsidized leases just involve you paying less for depreciation than the actual amount the manufacturer expects, and they are pretty much the way BMW/Benz/Audi do business at this point.

          • 0 avatar
            MiataReallyIsTheAnswer

            “A) You don’t own it. –> Do you really own a vehicle if you have purchased it and have a loan on it? It’s the same concept. What’s the difference??”

            Huge difference – even if you have a loan on the car, there comes a time that you no longer owe and the vehicle belongs to you 100%. At no point either while making payments or being done making payments will anyone check the vehicle for dents, dings, scratches, low tire tread, cracked glass or curbed wheels (and charge you for whatever they decide these flaws are worth). Nor will anyone care how many miles are on it at any point along the way.

      • 0 avatar
        krhodes1

        He didn’t “save” anything. The smart move is to keep driving that low-mileage car until it is paid for and years afterwards. Instead, he paid lease fees, had to pay sales tax on whatever he bought to replace it, in some states much higher excise tax as well, dealer fees, and all the other expenses of buying a car.

        I’ve done the math for every car I have ever bought, and even in the cases where I got rid of the car after only a couple of years, I have come out ahead buying and selling. I think it is the exception that leasing makes sense. It’s an expensive convenience the majority of the time. I at least try to do dumb things like buying new cars the smartest way possible.

        • 0 avatar
          Vulpine

          Look at it this way; I didn’t pay any interest on a loan OR on a lease. Sure, it was a one-shot but even though I might take a loss on trade-in, the loss will be thousands less because I didn’t waste any money paying the bank for the ‘privilege’ of borrowing their money.

    • 0 avatar
      pinkslip

      You probably refuse to lease because you buy economy brands and hold onto them for more than 3 years. If, however, you compare the depreciation curve of most European luxury brands, leasing is often the same cost of ownership over three years. People with the means and desire to get into a new vehicle every few years have less risk in a lease than a purchase.

      • 0 avatar
        Vulpine

        That depends on your definition of “economy brands.” Since my last purchase was a pickup truck, that was hardly “economy.”

        • 0 avatar
          pinkslip

          Trucks are a particularly good example of a vehicle NOT to lease. Trucks hold resale value very well compared to their original transaction price, so there is often less depreciation (the largest part of cost of ownership) than with a similarly priced sedan.

          But if you’re going to pay for 50% depreciation over 36 months- whether you lease or own that Mercedes/Audi/BMW- might as well enjoy the lower monthly payments in the meantime. In that case it is a matter of spending some of your money on more sales tax (purchase), or on rent charges (lease). At least with a lease, you don’t own any un-planned depreciation (accident, hale, flood, vandalism, etc.), and you don’t have to deal with the re-sale process when you want to get into a new car.

          • 0 avatar
            krhodes1

            Funny, I haven’t had 50% depreciation in *8 years* on my BMW. Buy the right one at the right price…

            If you calculate in the real cost of the lease, the monthly payments really aren’t any lower than buying the car over 5 years in most cases. BMW gets a lot of crap around here about subsidizing leases for that low-low payment, but reality is they don’t do it to nearly the extent that people think they do. What people do is miss that $3-4K due at signing, plus the fat fee due at disposition that may or may not be waived if you stay on that leased new car treadmill.

          • 0 avatar
            chrishs2000

            @krhodes1, I’m guessing that you bought it used then or have something rare/not depreciating like an M2 or E46 M3. Instead of anecdotes, it’s always best to show the math and use context. What did you buy? What have your maintenance costs been for 8 years? You need to focus on total cost of ownership, especially with BMW, since maintenance is covered for 3yrs/36k miles.

            Sooooooo many misconceptions…

            “If you calculate in the real cost of the lease, the monthly payments really aren’t any lower than buying the car over 5 years in most cases.”

            Sure, if you walk into a BMW dealer and sign the first offer that they give you, it likely is more expensive. Not true whatsoever if you actually understand how to calculate/negotiate a lease and can hack one;

            https://forum.leasehackr.com/t/unicorn-signed-2019-bmw-740i-m-sport-566-w-o-584-w-tax-36-15k-95-615-msrp-35-off-no-msd-2464-das-demo-4k-miles/123990

            https://forum.leasehackr.com/t/signed-2018-328d-xdrive-loaner-149-mo-incl-tax-with-81-in-total-drive-off-1050-msd/129796/22

            https://forum.leasehackr.com/t/2019-bmw-440i-gc-demo-24-12k-238-mo-incl-tax-only-7-msd-das/168526/51

            On and on and on and on and on…

            “What people do is miss that $3-4K due at signing, plus the fat fee due at disposition that may or may not be waived if you stay on that leased new car treadmill.”

            Anyone with good credit can do a sign and drive on anything. People don’t understand that a lease can be structured for anywhere from $0 down to complete one pay.

            The BMW dispo fee is $350. That’s, uh, not much.

            We own 3 out of 4 of our vehicles so I’m not blindly pro-lease, but there are so many comments in this thread that are just flat out incorrect/ignorant/uninformed.

    • 0 avatar
      jh26036

      Vulpine, you should just stop talking.

      Your lack of understanding on leasing makes you look like a total fool.

      • 0 avatar
        Vulpine

        You will excuse me then, when I suggest that you’re proving which one is more foolish–and it isn’t me.

        • 0 avatar
          jh26036

          You keep thinking of lease as a “rental”. Do you not realize you can also PAY IT OFF and buy it out?

          It’s not like you pay $xxx a month for 36 months and the leasing arm yanks it back from you with no other options. It’s just an previously agreed on depreciation schedule. If you want it so bad, pay off the rest of the car. Boom, you get the title. If you don’t like it, you turn it in. If you do the same with a financed car, you’re on the hook for the full sales tax. Lease? Only the portion you paid for. Understood?

          Let’s not even mention the other benefits to business owners giving you the ability to deduct the lease payments.

          • 0 avatar
            Vulpine

            @jh26036: Of course I realize that; that’s one of the reasons I don’t like it. Why? Well, you might get lucky if the value of the car when you turn it in is BELOW the previously-calculated residual but there are horror stories out there about how the lessee had to pay that difference on turn-in. And if it’s worth more, you still have to pay the CURRENT residual value to buy it, so you’re certainly not saving any money with the lease–not even considering other expenses added in both during the original lease contract and later purchase–should you choose to keep it. Buying and trading every 5 years or so, the way some people do, offers a savings in taxes and fees that can add up to extra thousands not spent with a purchase. And only rarely have I put any significant amount up front on a car loan–I believe the highest being $2000 and my average only $500 out the door–not counting the outright purchase of my current truck, saving the entirety of any interest on a 3, 5, 6 or especially 8-year loan.

            Sure, I may eat the depreciation of the truck, should I choose to trade for something else within that time period. But since I don’t plan on trading for at least 8 years, the depreciation will have stabilized at a lower overall rate of loss as compared to a 3- or 5-year drop. Oh, and one of my vehicles returned fully 50% of my original purchase price after 9 years on the road… not that I expect that kind of return from my Colorado.

          • 0 avatar
            Vulpine

            Oh, and as I’ve been seeing the lease system operate, it’s the people who LIKE to change cars every 2-3 years who do the leasing, as it’s easier to swap cars and maintain a ‘wealthy’ visible status as a result for about half the monthly outlay of buying over the same period of time. They’re simply trying to avoid the interest APR that adds to their ‘upside-down’ note vs vehicle value at turn-in time. Ergo, it is much more of a long-term rental than it is any kind of money-saving tactic. Even at 2% interest rate, that rate is amortized on a monthly basis, making the actual interest cost much higher. Again, this sounds like a savings on the monthly payment but the residuals can and will bite you on turn in.

          • 0 avatar
            Art Vandelay

            You overlook the fact that most leases are up before you have to do anything to the car. Old cars aren’t free. You look at the Fiesta even…17 inch low profile tires every 20k or so (yes, I got summer tires and drive it hard), brakes…I don’t have to worry about any of that on that car should I turn it in.

            Purchasing may still be cheaper all in, especially on a truck (why I own the F150 and lease the Fiesta ST), but keeping that older car isn’t free either.

            With respect to the residual changing at turn in and lesees getting stuck with owing more…yeah that is BS and didn’t happen. The number is in the contract. The only way you owe more at the end is if you damage the car and turn it in (and there is insurance for that available should you desire)

            I have heard some companies are better than others on the “wear and tear” bit. Ford Red Carpet has never charged my family any damages.

            Interestingly another lease win was my cousin. She leased a Honda Odyssey (during the transmission problem years so she wanted to be sure she could dump it). It was great and she wanted to buy it. But a dude blew a red light and T boned it. It got repaired and turned in to be someone else’s problem.

            Anyway, my trucks are long term propositions so I typically buy, as are my wife’s cars (though I wish I could dump that chump back at my Hyundai dealer), but my fun/commuters get leased. I’m not going to get into a long term deal with an Alfa or BMW or something and I like to change that car up sometimes. Small price to pay to have an interesting driver.

          • 0 avatar
            Vulpine

            @Art Vandalay: While you may not want to admit it, even you’re saying you’d rather take a long-term rental than actually buy certain vehicles.

          • 0 avatar
            Art Vandelay

            Yes @vulpine, I am. I have reached a stage in my life where I can afford a car that has a purpose other than being simply a means to shuttle me back and forth to work income wise. Furthermore I find the thought of being saddled to the same care day in and day out for 6 to 8 years as dreadful…why did I bust my kiester to make money to continue to live like a skinflint. Additionally many of the cars that I desire to drive I would not want to be in a long term deal with. With those cars I am not paying for the car with my lease…I am paying to dump it back on the dealer and let it be a problem for the dude that buys it CPO. I have no desire to have a 7 year old Alfa or BMW in my garage or hear my mechanic tell me about replacing a dual clutch transmission.

            Now go ahead and tell me alllll about smart finanial decisions, blah blah blah…then tell me about YOUR paid off mortgage.

          • 0 avatar
            Vulpine

            @Art: There’s a difference between living like a skinflint and actually enjoying what you drive. If you buy what you like in the first place, you’re not going to WANT to replace it until you must. Most of the cars I have purchased for myself have been quite enjoyable and I have continued to drive them until I could no longer trust them. The rest I got rid of as soon as I could and the majority of THOSE were not purchased by me (only one was purchased more to meet a need than a want and I still kept it four years–and put only 4000 miles on it. That one was a used F-150 shy of 18 years old and it was honestly too big and too ungainly for my wants. Obviously I didn’t enjoy driving it.)

            I will note that the one car I put the most miles onto was a ’96 Chevy Camaro, considered by many to be anything BUT a commuter car. Its advantage was 32+mpg on the highway, fun to drive and remarkably comfortable… at least for me. It was a little tight for my future wife. It was also remarkably utilitarian, what with that huge hatch and a surprising amount of flat load floor behind the front seats. I put 160,000 miles on it in roughly 8 years, including many trips in excess of 800 miles one way on roughly an annual basis (sometimes more often.)

            So, was I being a tightwad or did I truly enjoy what I was driving? I didn’t lease, I haven’t leased and I am not likely to ever lease UNLESS it literally becomes a case simply needing something short term that I can’t find a long-term use for. Even a toy car, for me, is going to be something I want for longer than 2-4 years.

  • avatar
    dal20402

    What is this “disposition fee?” I’ve only ever leased two cars (one Honda and one Ford) but neither one required it. In both cases, I turned the keys in to the dealer and walked away, and some weeks later I got an inspection report that said there was no chargeable damage and I owed $0.

    • 0 avatar
      MiataReallyIsTheAnswer

      The fee is rather common, often 250-500 bucks.

    • 0 avatar
      chrishs2000

      It’ll be in your lease contract. Most captives charge a disposition fee at turn in. Perhaps bank error in your favor?

      Regarding the inspection: Always do a pre-inspection before returning a lease. It’s free and gives you an opportunity to fix any chargeable damages yourself, and/or give you documentation on what you will be charged for. There are many horror stories about people not doing these and then getting bills months later for thousands of dollars which cannot be disputed without a pre inspection report. YMMV.

    • 0 avatar
      dwford

      It’s the latest BS fee they charge. They charge and acquisition fee to start the lease, and a disposition fee to turn the car back in. It’s all profit.

      • 0 avatar
        gasser

        +1.
        Leasing is all about convenience. If you aren’t going to avail yourself of a low down, easy paperwork, walk away at the end and the fun of getting a new car every 3 years, then leasing isn’t for you.

    • 0 avatar
      ToolGuy

      If we build the disposition fee into the lease contract but offer to “waive” it if you re-up on another vehicle, it is another way to retain you as a customer (or hit you up for more profit if you walk).

      In general, loyalty to the make and the dealer is significantly higher for lease transactions than for purchase. (Many customers believe they must turn in the lease vehicle to the originating dealer. Almost no customers are crazy about the prospect of turning in their keys without lining up a replacement vehicle. The path of least resistance is to get another vehicle from the same dealer.)

    • 0 avatar
      bunkie

      It’s often used as a sales tool. When I leased a Tacoma, there was $359 disposal fee. It would have been waived if I leased another Toyota. In the months leading up to the lease end, it seemed as if I got a piece of mail touting this offer either from the dealer directly from Toyota.

      Since I no longer needed the Tacoma, I sold it to Carmax for a bit more than the residual and didn’t have to give Toyota the $359. Of course, the Tacoma was actually worth the residual, which is why it worked.

      • 0 avatar
        tomLU86

        Bunkie,

        So, to be specific:

        You contacted Toyota Lease for the payoff amount X months before lease end

        They gave you the number

        You purchased the Tacoma.

        Did you pay sales taxes? Any other state/local fees?

        You then turned around and sold it to Carmax for more than what you paid to acquire the Tacoma.

        Is that correct?

  • avatar
    MiataReallyIsTheAnswer

    The letter writer mainly wanted to save the $495 turn in fee, and visited several dealers trying to peddle the car – and I am betting many of those dealer visits also included some wait time for the proper person to become available. Plus the time and fuel to get to and from each dealer. Your time is valuable, so really you paid that $495 twice.

    • 0 avatar
      Menar Fromarz

      This^
      For all of my good/bad experiences with dealers over the years, its the sheer time spent at a dealer that keeps me away. We are talking HOURS spent, between the sales and finance office/tru-coat and tacky add ons dept. that drive me nuts the most. I never now just randomly submit to the process, as MRITH mentions.
      TIME is valuable, but never respected by its thief, and likewise rarely guarded by its bearer.

      • 0 avatar
        dal20402

        Yep. I think the fastest transaction I’ve ever had at a dealer was my Subaru Forester purchase (which was also the smoothest transaction in general), and that took about three hours from start to finish. All the others have been longer. It is a major disincentive to even setting foot in a dealership.

        It’s especially bad when you have to go through the performative game of walking out, driving home, and then coming back later when the salesman texts you with a counteroffer he could easily have given the first time. That exact experience has happened to me twice.

        • 0 avatar
          Dave M.

          My last 2 cars I did all negotiations via email with the fleet manager. In both cases signing the papers and driving out took an hour or less. I didn’t have a trade to discuss, so that certainly simplifies the process.

          • 0 avatar
            krhodes1

            That’s how I have mostly done it too. Even for my Fiata purchase where I stupidly did not do that expecting to pay their very low advertised price for the car (haha on me), the majority of the time I spent at the dealership was waiting for them to dig the car out of the middle of their gigantic showroom so I could test drive it, and waiting for the FL dealership to register the car – that took forever for some reason, and they were quite apologetic about it. Some kind of system issue going on. The actual price negotiation took 30 minutes, and finance about 10. 3hrs from showing up for my appointment to driving away in my new car with the top down. For my BMWs I probably spent 40 minutes total for each one, maybe an hour when I bought my VW. Though the VW dealer managed to put the wrong plate on my car and didn’t notice for a few months. Got a very interesting phone call and some free swag as an apology.

            As a Mainer where dealers have zero part of registering a car, that baffles me. I would much rather go to the city/county and do it myself, than pay the dealer a nice fee to do it for me… Another expensive convenience that is pure profit for the dealer. Oh well, the savings on excise tax make eating a little of this more palatable. $77 to register a Fiata for two years vs. $

          • 0 avatar
            krhodes1

            Hit a wrong key…

            To finish – in Maine it would be ~$1500 in reg fees and excise tax for the first two years for that car, and another ~$600 the following two. Which is one of the reasons serial leasing has never made much sense to me. To be honest with yourself you need to include that in your monthly payment calculation.

          • 0 avatar
            JMII

            Same here, all negotiation done via email. I was in and out in an hour. I’d say 1/2 of that time was insurance related, since I had to add the car to my policy and get proof before all the other paper work. Also done deals at CarMax that went down in under 2 hours. As mentioned not have a trade makes things go MUCH faster.

            I leased a car once. Not doing that again. I buy used and keep my cars too long, so it just doesn’t work for me.

  • avatar
    Land Ark

    Thanks Bark!

    For some additional background I had already leased another car prior to turning in the Buick so taking another one on was not possible, and while at one of the dealers I got a quote for leasing a TourX and it wound up being something like $760/mo. The sales guy didn’t even try to convince me that was reasonable.
    It had 22k miles when I turned it in to a Chevy dealer who sold it to someone in June. They had it listed for $24k. I had briefly considered buying it and selling it myself but after I calculated all the taxes and fees there was nothing left on the bone to even think about breaking even. I think it would have been almost $23k by the time I had paid for everything. I knew no one would buy it from me for that. Seeing the dealer listing helped confirm that.

    Originally I was going to walk away from the lease takeover because of the disposition but I figured I would be able to make it go away when the time came. I took a swing at it and it didn’t happen. Not a big deal. The fact that GM Financial never notified the original county that the car had been relocated and charged me double property tax the entire time I was leasing it however, that has turned out to be a big deal.

  • avatar
    DeadWeight

    Awful weather, and boring, slow-work, gloomy Wednesday when, all of a sudden, I randomly check TTAC..

    …to once again see Mark Baruth, on yet another “inside baseball” automotive topic (dealer network-finance arms of manufacturers, al, things, etc.)

    GET TOTALLY SHRED (YET AGAIN) BY chrishs2000 (this time) IN THE MOST SATISFYING WAY POSSIBLE (using actual accurate knowledge and facts, rafher than Baruth’s method of pulling things out of his a$$ and throwing it up in the air).

    GLORIOUS WEDNESDAY!!!

  • avatar
    Art Vandelay

    This is good stuff. My Fiesta ST’s lease is up in 8 months and I am on the fence as to keeping it. I got it with alot of cash on the hood at the time so the purchase price at lease end is like 12,500 dollars. Furthermore as I travel a good bit for work (not with the car) I am well under the mileage. Had I known this I’d have gone with 10k a year vs 12 but it was cheap insurance at the time. It just hit 10k in 16 months of use. So I’ll have the opportunity to buy a very low mileage, well cared for car at what seems to be well below what they are selling for, though admittedly I don’t have access to actual transaction prices.

    I really like the car and there isn’t really anything out there that would replace it with respect to fun commuters and smiles per dollar, certainly not at that price, but even as a long term Ford guy, I have concerns with long term ownership of any Ford that isn’t a fullsized truck among current offerings even if the ST skips most of the Fiesta’s trouble spots (Auto trans and infotainment).

    I suppose it’ll boil down to what is listed on Bring a Trailer at turn in time.

    • 0 avatar
      chrishs2000

      The only thing that really matters when it comes time to decide is the value of the vehicle versus the residual value. In this way, leasing is absolutely no different than purchasing EXCEPT that you have the option to walk away from it completely in 24mos, 36mos, etc.

      “I got it with alot of cash on the hood at the time so the purchase price at lease end is like 12,500 dollars”

      The RV is fixed based on the MSRP which is fixed. It has nothing to do with the selling price(“agreed upon value of vehicle”) or rebates/incentives. If you had paid $20k or $50k for your Fiesta, the RV would still be $12,500.

      • 0 avatar
        Art Vandelay

        So is the buyout price the residual? This was my first lease so I may just be confused on terminology.

        If so, the Residual was fixed and the cash on the hood (5500 IIRC) just lowered the initial price (and thereby the amount of depreciation and as such, the lease payment) then, correct?

        Either way, my purchase price at lease end seems solid given what they are selling for (there is an identical one at my local dealer with similar miles and same year listed at 17,500, and even the KBB trade in is more than the 12,500…but in my experience that number seems to have little to do with any sort of reality and “Listed at” doesn’t equal “Sold for”. Is there a more reliable source to help determine the actual value?

        • 0 avatar
          chrishs2000

          You or a dealer can buy out your lease at any time. The lease payoff will change every month that you are in your lease. Usually the current payoff is the residual + remaining base monthly payments but not the remaining rent charge/tax. You can call the captive to get the payoff, or it may be on their site. Keep in mind your payoff may be different than the dealer payoff. US Bank is notorious for having dealer payoffs much higher than personal payoffs.

          The residual at the end of the lease (RV) is what you would pay to exercise your right to buy the vehicle from the captive finance company.

          Fiesta ST’s and other niche/sporty cars usually have terrible lease residual values and very high money factor (MF) or APR as Ford uses. Why? Because they don’t need to subsidize the leases. Example: A Civic Type-R has a Honda Finance RV of around 60% on a 36/10, which is hilarious considering that 2 year old examples with 10-15k miles are still selling for almost MSRP.

          • 0 avatar
            Art Vandelay

            Ah, makes sense (from their perspective). The low residual ensures there will be lots of depreciation for you to pay and the high money factor means you have to pay alot for the privilege of paying it. This explains why the lease payments on the ST-I and the Golf R were so crazy high compared to the lesser trims…because they could (yes, they were more expensive cars, but relative to purchasing the lease payment was no less). Even the WRX was expensive to lease.

            The cash on the hood of the ST twins and the (Focus RS which I considered) at the time offset this which is why they seemed to be such a deal by comparison. Got it, thanks.

            Either way Adding up the payments and residual I will be in pretty good shape all in if the value I come up with is anywhere close to real world…I don’t know exactly what they are actually going for…only list price.

            Anyway, good to know. I was originally looking to lease because I was looking at European stuff and the thought of an out of Warranty Alfa or BMW wasn’t pleasant to me…the Fiesta ended up just sort of happening so I hadn’t crunched the numbers as carefully as I had on the Giulia for example.

      • 0 avatar
        ToolGuy

        chrishs2000,

        You said “The RV is fixed based on the MSRP which is fixed. It has nothing to do with the selling price(‘agreed upon value of vehicle’) or rebates/incentives.”

        This is potentially misleading.

        Old school example. 36-month lease term through captive finance arm. Automotive Lease Guide (ALG) [third-party company], sets the 36-month standard residual for a Pontiac Sunfire [it’s a low number, but probably relatively accurate]. They base this on all available information. It is a projection. [Following is a series of meetings between Pontiac and ALG where Pontiac argues that this figure is way too low and ALG insists that they have other meetings to attend.]

        Pontiac marketing takes a look at what the lease payment would be using standard rate and standard residual. They realize this is not going to work. [Even though Sunfire is not a big lease vehicle, there are certain markets (Northeast) where they need a more attractive lease offer.] So they decide to apply some lease support.

        There are three ways that GM and GMAC can incentivize (“subvent”) the lease:
        – Rate
        – Residual
        – Capitalized Cost Reduction

        Rate support – GM/GMAC can reduce the interest rate used to calculate the lease payment. [The lessee is not buying the vehicle, but someone is – and the lessee will pay that interest cost as part of the lease payment.]

        Residual – GM/GMAC can artificially inflate the residual value. Say GM (Pontiac) adds 2 points and GMAC matches that with 2 points. The projection (standard residual) plus the subvention gets baked into the lease agreement. More on this in a second.

        Capitalized Cost Reduction – Anything that reduces the “purchase price” or upfront cost of the vehicle. For example, $1,000 lease cash, $2,000 rebate, $500 loyalty offer, $2,000 lease inception fee, trade-in, college grad offer, etc., etc.

        The lease payment is calculated using the new and improved Rate/Residual/CCR.

        Yes, the residual value is calculated as MSRP * residual %.
        Correct, the residual value is not affected by rebates.

        But the residual value *which is figured into the customer’s payment* is *absolutely* affected by residual support. [We changed the second term in the equation.] And this residual support/subvention can be a key driver on some vehicles for why the end-of-term buyout is so much higher than the actual value of the car at that point in time. [We artificially inflated the projected value of the car when calculating the lease payments.]

        • 0 avatar
          chrishs2000

          @ToolGuy really getting into the weeds here, but yes, that is 100% correct. Excellent comment.

          By ‘RV’ I am only talking about the **Residual Value of the vehicle set by the particular captive that you are leasing through**. As you mentioned it is very often subvented.

          A GMC Terrain or a BMW 5 series having an RV in the 60’s is pure delusion, but it’s the only way to make leases on these vehicles attractive. For example, my fiancee’s 2018 Terrain SLT is 9 months and 10k miles into a 36mo lease and the appraised value through several sites is already lower than the 36mo/12k residual value. Given equivalent purchase/lease rebates and similar rent charge/finance charge, who in their right mind would finance one instead of leasing?

          We have a whole community of whackos discussing things like this over at leasehackr if you’d like to join us!

          • 0 avatar
            ToolGuy

            Thanks. For anyone else reading this, when I refer to ‘residual value’ I am talking about what is set in the contract at the time you lease the car. I am not as familiar with how the turn-in works and how that valuation is set.

            On Jalop1991’s comment below, completely agree that you are paying interest on the entire capitalized cost. Minor caveat – capitalized cost is net of any capitalized cost reduction (CCR) – that is, if I put $5,000 down, I don’t have to pay interest on that five grand. (But Jalop1991’s major point I think is that you *are* paying interest on the residual [and the rest of the capitalized cost] – because GMAC or whoever is out that money for as long as you have the vehicle.)

            [If you really want to get into the weeds, we could talk about ‘rate administration,’ where the individual dealer gets to mark up the interest rate on your lease. :-) ]

            For the record, I understand the appeal of leasing but I am not a huge proponent.

          • 0 avatar
            MiataReallyIsTheAnswer

            The real question is what kind of dead inside person would want to drive a toy car Terrain under ANY circumstances?

          • 0 avatar
            chrishs2000

            The real question is why you’d care what my fiancee drives and why any rational human being would judge or insult somebody else based on what they drive? That sounds like a pretty deep personal issue.

    • 0 avatar
      Art Vandelay

      Plus my youngest will need something in a couple of years and he can drive a manual.

      • 0 avatar
        MiataReallyIsTheAnswer

        “The real question is why you’d care what my fiancee drives and why any rational human being would judge or insult somebody else based on what they drive? That sounds like a pretty deep personal issue.”

        (sorry for sticking this here, there was oddly no “reply” button on the post in question)

        CHRISH, I assure you I could not care less what your fiance drives, I’m genuinely curious how a sentient being ends up attached to one of those things (I’ve had them as loaners and rentals, I have hours behind the wheel). Is her Dad a GMC dealer? Or did she simply have no time to test drive any of the competition? Seriously- how’d it happen??

  • avatar
    87 Morgan

    Some other points:

    If you lease a car, you don’t actually own the car. The leasing company does. You can’t ‘sell’ the car to anyone or dealer without some additional fees…ahem sales tax. When you lease, you pay the sales tax on the depreciated amount, not the agreed upon price.
    To avoid paying the $495 the lessor would have to have paid the sales tax on the remaining 18k or whatever, most likely re-registered the car in their own name, not the leasing companies to get a title in their own name, as the leasing company is the owner currently not the person making the lease payments.

    Always better to pay the disposition fee and move on.

    • 0 avatar
      cgjeep

      This might vary by state but you only pay “sales tax” when you register the vehicle not when you by it. It is actually a registration tax and not a sales tax. So if you trade it in to a dealer you don’t pay the sales tax and you will get a sales tax credit on the car you are buying. You can go to a dealer, buy a car and tell them you want to do tag and title work yourself. You wont pat any tax till you register it.

    • 0 avatar
      Land Ark

      The way it worked when we sold a Venza my mom was leasing was the dealer gave us a price to buy it. That amount was divided up between the leasing company based on the residual and the remaining balance went to my mom.
      So you’re right. She didn’t sell it, the dealer bought it out from under her from the leasing company. The sales manager asked what we wanted to walk away with and I said $1000. So he cut her a check for $1000 and sent us on our way free and clear – of course jabbing me with the fact that if I had been a better negotiator he would have given us $2000. That one still burns.

  • avatar
    thelaine

    That used Buick looks like a pretty good deal.

  • avatar
    tomLU86

    For individuals, buying and selling a car is like playing blackjack in a casino–the odds favor the house (if only because individual busts first).

    Perhaps people here have had great luck selling their used car. Then you are all probably more talented than I.

    In my experience, it’s very hard to sell a car for more than $4-5000 for a “good” price.

    “Good” price means significantly more than what you will get in trade.

    The older the car, the lower the price, and the better your car compares to other cars in that price/age range, the better your chances.

    If you need to sell your 1-year old 2019 VW GTI, with 8k miles on it, a very desirable (IMO) vehicle, it will be hard to sell.

    Most people will not have $20,000 in cash. Getting a bank loan can be tedious–does the seller have the knowledge to tee this up for the buyer?

    A car dealer does–and for the weaker customers, the car dealer will offer 1-stop shopping and finance the car. The readers here will not finance—they want cash.

    Those who DO have the money are usually very fiscally conservative and savvy, and will offer some very low amount, like $15k.

    So, even if the original example, this Buick (and it ain’t not GTI brother, even if it had the rare manual trans), was “worth” 22k at the “Manheim auction”, it would take a lot of time and effort to buy it out for $19k, and turn around and sell it and not lose money.

    But it if was worth that much, and dealer felt confident they could profit from this car, then it would serve them to waive the fee, so you don’t go to another dealer that will.

    Hopefully, the Buick Regal lessee returned the car, paid the fee, and didn’t get hit with any OTHER fees months after the end of the lease. THAT, IMO, is one of the biggest drawbacks of leasing.

    If you want a nice car, you’re gonna pay, one way or another. A new GTI, selectively optioned, has an MSRP in the high $20s. What ever a good transaction price is for that, with taxes, it’s a big chunk of cash for most people, for me at least, and/or a big monthly payment. A good lease deal on this car would be $300 a month, but that’s $10,800 for 3 years, and now you need a car.

    Still, this was an interesting article, with great comments.

    • 0 avatar
      Arthur Dailey

      Exactly.

      I am ‘shopping’ for a vehicle.

      I drive about 24,000kms per year so therefore looking to keep the vehicle from 8 to 10 years. At which point it will bring in about $1k as a trade. Don’t even ask me at my stage in life to consider selling privately

      If I want to buy used, then I am looking at about $18k, plus taxes, safety inspection, etc. And I would have to use a line of credit for a significant part of that purchase.

      If I purchase new, it will cost me about $27k for the comparable vehicle. I would finance it either through the bank or dealer or manufacturer. Total cost of about $30k or including the trade in value from $2,900 to $3,600 per year. Plus rust proofing, new tires after about 5 years, and ongoing maintenance (battery, brakes, AT fluid, coolant, serpentine belt, perhaps plugs, water pump, bulbs, etc). And I will not be performing this maintenance myself, except for some filters, wipers, etc.

      If I lease I can currently get the same vehicle for $335 per month, all in. Including a set of winter tires. 4 years and 96,000kms included. My only maintenance costs ‘should’ be oil and filter changes. Total cost of just over $16,000 or $4,000 per year, plus maintenance.

      So which is more financially viable?

      • 0 avatar
        tomLU86

        My thoughts:

        Let’s go with 10 years, 240k kim (15k miles). $30,000 with taxes and finance baked in, less $1,000 is $29,000, or $2,900 year.

        You’re probably looking at 2 sets of tires. In the US, let’s say $800, in Canada $1,000. 1 set winter tires and wheels, another $1,000. So $3,000 in tires.

        So we are at $32,000 or $3,200 per year, or $267 per month

        If you have a 4 yr, 96k km lease, that’s about 60k miles. You’ll have to plan the tires carefully, or you’ll have a $1,000 ‘gotcha’, over 48 months, that’s $21 per month.)

        So leasing will cost you an extra $70 per month, or $840 a year, if you don’t need tires, $91 with tires, $1092 per year.

        If you scratch the car, or a some one scrapes your fascia in the parking lot, you’ll have to pay (whereas on my car, this happened, and I left the scratch).

        On the other hand, your purchase won’t stress you with scratches. But, if the car needs shocks and struts at 70k miles….$1-2k. Typically, just taking your car to the shop for anything these days is $200- $600. And you are stuck with the car…the sooner you try to sell it, the less attractive the economics probably are.

        So, since the difference is about $1000 per year, on a $29,000 commodity, how about this:

        Shop for a lease. Read the contract. Find out the RESIDUAL (aka the cost to buy at the end of the lease).

        If the payments plus residual are $32,000 or less, lease it.

        If you like the car, at lease end, you can buy it for cash, or go to the bank and get a loan (hopefully in 4 years interest on loans will not be over 8%). It really won’t cost you that much more than buying, and you are NOT committed. If the car irks you, you walk away–no hassle of selling a relatively expensive 4-yr old car.

        If inflation rages in years 2 to 4, your buy-out might be a ‘good’ deal, and if you really like the car, you can keep it.

        If life changes and you put 130k km on car, you can buy it and avoid the mileage fees.

        What I’m saying is not so far-fetched. I did this with a leased car. Life changed, my commute quadrupled, and I was $4,000 in mileage and one fascia scratch. I bought the car. Because I was considering other jobs at the time I leased, I looked at the residual, and my total payments cost about $1000 more than what a “good deal” would have cost (3 years lease plus 3-year car note). For less than $15 a month, I had flexibility. I was lucky in that I liked the car.

        So compare your total payments (buy vs sell), and if the numbers are not far apart, lease.

      • 0 avatar
        ToolGuy

        Arthur Dailey,

        I always appreciate your comments and perspective – thank you, sir.

        One potential way to analyze your situation – lay out cost over 9 years of:
        – Used vehicles (say two of them – one for 5 years, then one for 4)
        – New vehicle financed (keep for 9 years)
        – New vehicle leases (three vehicles, each leased for 36 months)

        • 0 avatar
          Arthur Dailey

          @tomLU86 and @Toolguy.
          Thanks for the reasoning, and information.

          Currently in Ontario a number of manufacturers are offering winter tires included with leases. So that means that in a 4 year lease, there would be no need to purchase tires.

          I would be worried about buying the vehicle with the lowest lease cost as it has a CVT, and I am unsure about their longterm (8 to 10 year) durability.

          But am also worried about ‘damage’ issues when returning a lease vehicle. Here in the GTA it is almost impossible to not get stone chips and idiots opening their doors on your vehicle. Even though I park as far away as possible.

    • 0 avatar
      Art Vandelay

      Selling a car privately is a PITA. My Land Cruiser was the easiest…It went to a forum guy. Inevitably in that environment you get all of the guys asking about all of the repairs that get magnified on a Forum. I had a dude argue that I should have done the headgasket on the new long block that I got from Toyota. Still, painless compared to a car I had at 2k. Nice ride, cold AC…good shape. I legitimately had a dude offer 500 bucks, a High Point Arms 9mm and several cartons of Marlboro Reds. Never list a car on Facebook Marketplace.

      Selling my own car isn’t typically worth my time.

      Also, been on the other end…buying from a private seller. Went to look at a Third Gen Camaro (Yeah, I was nostalgic). Literally had a turd in the back seat. Yes, someone or something had taken a dump back there. I passed. Never again.

      • 0 avatar
        28-Cars-Later

        I would have thrown those cartons back at him and said “nothing less than Camels will do”.

      • 0 avatar
        nrd515

        I’ve sold 3 cars privately, and each time it was worse than the last, dealing with the morons who came and looked at them. The first was great actually, I had a friend of mine park it on his lot which is at the corner of two of the busiest streets in the area, and sold it the first day. The next car, a ’79 Trans Am, modded to the point it ran low 13 second 1/4 mile E.T’s was like a moron magnet. I had the friend park it on the same lot as before, but wow, the idiots that called me before 11am, when I put on the for sale sign not to, were endless. My answering machine was loaded with calls every day starting at 630am or so, and would fill up the machine by 11, when I would get up and check them. One guy hounded me for a week asking about the car’s every fault. It’s only fault was it needed to be painted. There was no rust, it had never been driven in the winter, so no salt, and spent it’s first 4 years in Nevada. It had an aftermarket stereo (Which is still in the car and works fine today!), the mods made it a lot of fun to drive, and the trans had recently been rebuilt with a shift kit in it. That guy just couldn’t seem to understand not to call at 630am, even when I told him not to. Another guy came to look at it, whined about the paint, which he already knew about, and then made me a totally ridiculous offer. Finally a sane person called and he eventually bought it, and recently it’s back on the road and is in prep for a paint job now. The third one some guy swore he had the money for it($7500), but couldn’t get more than $5000, hoping I would take that. When I said no, he got all butthurt and said it wasn’t worth more than $5000 anyway. I had been offered $6000 trade in on it at the first dealer I took it to! A second one offered $6500. The car looked and ran like new, had only 17K miles on it, and I wasn’t going to let it go for less than about $7000. Finally a friend of mine took it to church on one Sunday morning, and came over and gave me $500 to hold it for him until Friday, when he got his work bonus check. I got the $7500 I wanted for it, and he loved that car. Since then, all I do is trade stuff in, I don’t have the patience to deal with morons.

    • 0 avatar
      28-Cars-Later

      “was “worth” 22k at the “Manheim auction”, it would take a lot of time and effort to buy it out for $19k,”

      I’m too tired right now to log in but I can tell you if you think its worth 22 its worth 10-12. Nobody has wanted the Opel Regal since it was introduced, and the initial batch was mixed at best in terms of “is my car gonna start today”. I remember seeing an MY11 at *retail* at the BPG dealer for $14,9 in *2014* when I looked at a Verano lease (didn’t look at it so don’t know miles/condition). Like the ATS, there was a small lease following but nothing serious ever came of it for either model and both are rolling jokes on the block. DW had Cadillac down years ago.

    • 0 avatar
      MiataReallyIsTheAnswer

      “Getting a bank loan can be tedious”

      I see this mentioned all the time with articles like this, and I really don’t get the “fright” with simply getting a car loan. I guess I have a CU that is really nice to deal with, but it doesn’t matter if the vehicle is at a dealer or being sold by Joe Shmoe, I simply call them up, they calculate an amount they are willing to loan (always thousands more than I have negotiated for), and offer me the loan at by far the lowest rates anywhere. I then go in to any branch location at a time I choose, often SAME DAY, and walk out with the check in MAYBE five minutes. It’s literally more time consuming to go grocery shopping, and you people aren’t scared of that are you??

      • 0 avatar
        Scoutdude

        With my credit union they have direct lending at many new car dealers. So it is a case of calling up the CU or dropping by the branch and spending 5-10 minutes where they will tell me that they will lend me 2 or 3 times what I’m looking to spend, the rate ect. Then off to the dealer where they complete the paper work at the terms I’ve already got from the CU.

        Now the last one I financed I told them I would do my credit union but hey if they can do better I’d certainly take a look. They came back with another credit union that did beat it by a 1/4 point so I said yes, bring me that paper work. That added another 5-10 minutes though it doesn’t hurt that I do have excellent credit.

        • 0 avatar
          MiataReallyIsTheAnswer

          Yes if I’m buying from a dealer I will certainly give them a shot at beating the excellent CU rate. It’s only happened once or twice, I think BoA one time…

  • avatar
    jalop1991

    “leasing isn’t that hard to understand. You’re paying the cost of depreciation over the time you use the car, plus interest.”

    Please allow me to clarify:

    You’re paying for the cost of depreciation over the time you use the car, plus carrying charges (interest) on THE ENTIRE CAPITALIZED COST.

    That is, you’re paying interest on the entire price of the car.

    All a lease really is, is a loan with cheap monthly payments plus a balloon payment at the end. The car itself will satisfy the balloon payment, or you may pay the balloon payment in cash.

    Either way, you are financing the entire cost of the car.

    People don’t understand that last bit, and that’s what gets them in trouble when they try to do math they don’t understand.

    • 0 avatar
      PandaBear

      No, not exactly.

      In reality a lot of manufacturer use their financing arm to subsidize the car sales and depreciation, without inflicting new car sales’ depreciation until a few years later.

      As seen here in OP’s case, the lease subsidize the depreciation risk and cost, so the initial car sales can happen. Had Buick put cash on the hood, everyone would expect cash on the hood, and had they wrote risky loans there’ll be a lot of repo. Using lease to subsidize the risk and cost makes it easier for GM to pay for it NOW, and sometimes even let their other customers pay for it years down the road in larger than expected depreciation.

    • 0 avatar
      JMII

      “The car itself will satisfy the balloon payment, or you may pay the balloon payment in cash.”

      Nice summary. The way I understand it (and could be wrong) is that balloon payment is an estimated based on the car’s predicted RV and thus can be wrong if the market changes.

      My brother flipped a GTI 337 this way. At the end of the lease he ran the numbers and this limited edition Golf was worth MORE then VW estimated when the lease was written. So he bought the car outright and then sold it the very next day making $6K in the process. He was over the moon and frankly amazed by VW’s miscalculation.

  • avatar
    Jeff S

    That is actually a nice car for the money especially with lower mileage. Understand that this person didn’t want to keep it but that is a good value for someone who would rather buy it at the end of the lease.

  • avatar
    ajla

    I have a friend that **bought** a 2014 535i M-sport. The car cost about $60K new and it started suffering from some BMW-style issues so he traded in last week for $17.5K with 55K miles.

    He probably should have done a lease on that one.

  • avatar
    bodayguy

    One other advantage to leasing (I don’t lease often tho):

    With CarFax these days, if you get into any sort of accident, the value of your car takes a hit, too. But with a lease, so long as you repair the car correctly, you can still return it with no issue. So the leasing company takes the risk, not you.

    I had a Mustang GT that I tried to trade in back in 2014 or something. It had a small fender bender, but because the CarFax listed damage, my trade-in value was dinged. It wasn’t perfect for the dealer to resell! If I had leased, I don’t have to worry about it. And I can still buy the car after the three-year lease, I just did a convoluted finance essentially.

  • avatar
    Mathias

    I’m late to the party but would like to chime in…

    First of all, he disposition fee is common but a weird beast. I’m on my third Cruze lease in a row, though I did not “serially lease” in the sense that I gave up one car and picked up the next one. Probably should have, but never mind that.

    Regarding the advantages of leasing: Those are as stated.
    I probably won’t lease again, I hate driving someone else’s car. And no, it’s not the same as having a loan. With a loan, it’s your car and you can do what you want; you also owe some money. Unless you’ve paid off your mortgage, the concept of “cash” is rather theoretical.

    I look at it this way: When financing, I have to ask if I may buy the car… when I lease, I also have to ask whether I may, pretty please, sell it when I’m tired of it. I don’t like it, but it’s worked for me.

    The first car I turned in, I expect I paid the dispo fee, though I don’t remember. It was two months shy of the 24 months lease period, but I was out of miles. No pre-turnin inspection, no charges. I “think” there was no turn-in fee as part of the contract with the bank. Ally? GMAC? I forget…

    The second car was a strange experience in that it cost me less than nothing. $1040 paid up front for two years, then I got a $500 “bonus cash” check in the mail, essentially paying me back some of my taxes & fees. I LOVE the General.

    I turned that in with nearly half a year left on the lease but again, I was almost out of miles. I waited for the bill to arrive, but was never charged the disposition fee, which was part of the contract.

    Lease #3 is still in the garage; half a year and 4k miles left. We’ll see how this one goes, but I don’t expect I’ll lease again. Just picked up a 220k mile Mazda6 MT for $500, which is much more my speed ;)

    Finally, Bark is right about the mechanics of leasing and dealers buying the lease returns. Chrishs2000 is either trolling, mistaken, or has reading comprehension issues. This business with “There is no negotiation that you can do with the dealership or the captive to modify your contractual obligations” is just silly.

    Taking my lease as an example; I can fulfill my “contractual obligations” by paying the stated residual value of $13,800 + tax/fees and driving “my” car home. That would be stupid, because an ’18 Cruze MT ain’t worth more than $10 to $11 at the auction.

    Or by turning the car in, making any remaining payments + dispo fee + any repair charges.

    AFTER I’VE DONE THAT, there is nothing that keeps the dealer from buying the car for its auction value of ~ $10,500, and me buying it from them for whatever we negotiate. Where in all this did I not live up to my agreements?

    I’ve run into this attitude before, with otherwise sane people. I don’t get where the righteous indignation comes from, but it’s widespread. Let’s hope it’s not contagious.

    We’ll leave the question of “where’s the missing $3,300” as an exercise to the student. It’s not rocket science.

    • 0 avatar
      Art Vandelay

      Yeah but no dealership is going to sell that car back to you at wholesale either. They’ll have costs associated with bringing it to market even if they just take your keys and hand them right back. They aren’t in the business of making zero profit deals either. That 3300 won’t all be missing in the end.

      • 0 avatar
        Mathias

        Who said anything about ‘zero profit?’ The whole point is that after the car is turned in, the clock resets and any deal that is acceptable to the two parties involved can now be made.
        And the aforementioned $3,300 are absorbed by the finance company. How they square up with the manufacturer, and I assume they do, can be their secret.
        Some twenty years ago, as SUVs became popular, a lot of retail banks got into the leasing business and had their collective behinds handed to them. Notice that leasing is almost exclusively done by in-house banks. Tough business, cars.

    • 0 avatar

      Thanks for stating all this so neatly and cleanly—better than I did!


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