Car dealers and leasing and gullible parents

The BBQ Pit
1

I know, low-hanging fruit for the Pit, but…

4 years ago, my in-laws leased a car. I know the make and am pretty sure I recall the model. They paid about 3,000 down (judging by the amount we had to give them for the down payment) and the payment has been about 2500 a year (209 a month).

So, that’s 13,000 dollars total.

A new car of the same model starts at about 22,000 dollars right now. Assuming upgrades and inflation, let’s say the original car retailed for about that 4 years ago.

So the dealer builds in some profit. The end-of-lease purchase cost (what it would cost to purchase the car after the lease is up, if you decide to keep it) of the car is certainly not going to be retail - the total of payments - i.e. it won’t be 9,000 (22,000 - 13,000 in payments). No problem there.

What would you expect the residual to be in this scenario? 12,000? 15,000? maybe even 18,000?

How about 30,000? THIRTY THOUSAND DOLLARS???

Yeah, if my mother-in-law was correct, the dealer wants MORE THAN THE ORIGINAL PRICE for the car.

So, after 4 years, they have nothing to show for their (well, our: we paid the down payment and my sister-in-law has been making the monthly payments) money and are 3 months away from having no transportation, at which point the family will again have to step in and rescue them from yet another bad financial decision.

Sigh.

And people wonder why I’m so opposed to leasing.

2

I had been under the impression that the end-of-lease purchase price is typically disclosed in the original lease contract.

3

There’s no requirement to buy the car, though. Turn it in and walk away.

They could probably find a comparable used car for $12k or so. The dealer may even be willing to negotiate on the residual price of the car, given that when it is turned in, they will need to prep it for sale and sell it on the lot, and they certainly are not getting $30k for it.

Leasing is not necessarily a bad deal. You are paying for the use of the car during the first 3-5 years of the car’s life, which is its most valuable time. You should expect to pay 50-70% of the car’s value. If the residual value of the car doesn’t make sense at the end compared to other cars on the used car market, just walk away.

4

The residual value of $30k really doesn’t make sense though, I wouldn’t be surprised if your mother-in-law confused the total of all payments amount disclosed in the agreement with the residual value

5

I’ve seeing something of an opposite experience. I’m leasing a mostly-electric car; one of the plug-in hybrids that the car companies basically have to make to keep their average fleet mileage low even though most people don’t buy them.

The down payment + lease payments + residual purchase amount - loss of the tax break for buying electric (you generally don’t get it on a lease) is on this thing comes out to about seven thousand dollars less than the price of the car if I just bought it.

In other words, it’s actually cheaper to lease it for the first three years even if I intend to buy. Now, it’s a traditional dealer, so there are all sorts of rebates, promotions, negotiations, and such to muddy the waters and hide the real price, so the deal might not be quite that black-and-white, but then, there were a lot of those on the lease, too.

6

Seems this pitting is a little premature seeing as you aren’t sure of the model and most of the relevant details.

7

Dang, I want one of those cars that gets more valuable as soon as you drive it off the lot. I only have the other kind.

Something is not making sense here. Firstly, the lease agreement should have included buyout terms, including an estimated residual, so that should have been clear going in. Secondly, if the lessee has saved no money at all, either to make a new down payment or buy the current car outright, what exactly did they expect to happen when the lease term was up?

8

Missed the edit window. Lastly, on re-reading its seems the lessees actually were paying nothing toward the lease payments. If that’s the case, how come the people actually paying (the OP and Sister in Law) never got to see the lease contract?

9

I’m sure the residual cost was disclosed on the original contact. My mother-in-law claims she specifically checked and it says 30,000 - but to the poster who said "that’s the total of all payments’, you may well be right. I’m hoping so, anyway.

The model of the car: I know the make; I don’t recall which of the two sedan models they got. The pricier of the two is just under 22,000 right now.

As for who pays the costs: the parents kind of dumped this on all the adult kids. They went from lying about their situation when we flat out asked them, to “oh, by the way we’re declaring bankruptcy and coming to live in daughter’s basement” in 18 months. The car acquisition was during this time (they truly needed a car; theirs was 12+ years old and falling apart). They were making the payments for a bit.

When they told us they were going into bankruptcy - and losing their home, which was the result of another bad financial decision - they provided us with budget information which forgot significant expenses and included others they were not paying. We’re currently supporting them housing-wise (they pay their own utilities and that’s all); they have not asked for help with a replacement car but I’m certain the expectation is there. And we’ll have to put our foot down - we desperately need a new car ourselves but can’t afford it, because we’re supporting them.

So, yeah, I’m pitting them as well as the car dealer. I’ll retract the car dealer pitting if we get hold of better details regarding the residual value.

10

Sounds like NOBODY (neither the OP, nor the OP’s parents) bothered to read the lease contract initially, and Nobody has bothered to read the lease contract after 4 years time. Something is very wrong here - the information given in the OP is incomplete.

And this is the car dealer’s fault how?

11

Is the OP sure this car actually exists? This might be the latest wrinkle in a long-running financial scam.

Just saying.

12

Yeah, the notion that after four years, residual on a $20K car is somehow $30K seems highly unlikely. The dealer would never get this amount anyway, as you are (so far as I know) not obligated to buy out the lease and the actual resale value of the vehicle is probably closer to $10K than $30K.

What was the actual plan here? Was the OP’s plan to buy the car outright and give it to the in-laws at the end of the lease?

Sorry to say this, but it sounds a bit like the in-laws are scheming to get a new lease car for free.

13

Er, “lessor”, not “dealer”.

14

Agreed. “Ima wanta nother free car please”

Not too surprised to hear that the parents went into bankruptcy - and lost their home “which was the result of another bad financial decision”

Sounds like the parents don’t have two clues to rub together when it comes to finances.

15

Car definitely exists - I’ve ridden in it.

That’s pretty much it. A lifetime of bad luck and/or bad decisions. Several inheritances including one that was enough to purchase a small condo outright, a disastrous decision re upsizing from THAT, a slight and very costly case of cancer, several near-terminal cases of denial, and refusal to involve the adult children soon enough to prevent some of the disasters. They took on the lease without telling any of us in advance what they were doing or having any of us review the terms and clearly without understanding those terms themselves. “We didn’t know, we’ve never leased a car before” (except they HAVE - 20+ years ago :smack:).

There’s a fair bit of willful cluelessness in MANY aspects of their lives. And after years of denying the adult kids any visibility, it’s suddenly everyone’s problem but theirs.

16

Check eBay - maybe the car is a rare collectible and the dealer WANTS them to return it.

17

Revisiting this after 3 years.

So not long after that last posting, they went and leased ANOTHER car.

With several months left on the lease of the prior car - but that’s OK, the dealer for the new car rolled the remaining payments due into the total price of the new car.

They did this without discussing with the family yet again. They told my husband that “yes, we discussed it with your sister” (which was a lie. They told her about it, after the fact). Oh, and “We can’t afford the insurance on it so we need you to help with that too”.

So, 3 years later, they’re basically still paying for a car they bought 7 years ago (the residual from the original lease). SIL couldn’t make the payments as she lost her job, so BIL has been making them (we helped for a couple months but refused after that - as I won’t buy THEM a car when we still can’t afford one ourselves).

FIL has caused 3 accidents in the past year. 2 were parking lot fender-benders; the 3rd was an unsafe lane change that did not injure anyone but could have. And he’s still driving.

The lease on this one is up in a month or so. I gather there’s often a fee due when you turn it in at the end of a lease. I’m thinking they should just refuse. They have no assets for the dealership to pursue.

On the bright side, they are finally considering going carless. Their community has a bus that goes around the (very large) neighborhood, and it also runs buses to numerous local shops and doctor’s offices. That, plus the occasional taxi, will be a LOT less than 600 a month (their insurance skyrocked this year “for some reason”). And I think their cash flow will improve, as they’ve been paying the insurance lately; it’s unlikely that they will spend 300 a month on taxis.

I feel somewhat bad about that loss of freedom - but with their increasing lack of safety behind the wheel, and the huge financial cost, it simply doesn’t make sense any more.

18

nm

19

Don’t. It may, just may, make them less capable of shitting on the whole family’s finances and nerves.

20

None of this makes a lick of sense and I think either people are very confused or pulling a scam. None of this is how leasing works in my experience, having leased 5 cars now.

Lease payments and buyout are stated up front. There is no surprise. Turning in a lease early is also very common and there is NO residual lease amount rolled into the next lease. They aren’t paying jack shit on the last one. In actuality, turning in a lease early will often get you discounts/incentives on the new lease. Hell, I’ve turned in a lease early, upgraded my accessories package, and wound up paying less a month on a lease. Could uninformed people be screwed over? Absolutely! But this all sounds like a game of telephone with people tweaking the true story until it sounds worse than it is.