A person with a three year lease wants to buy a new car now, in order to take advantage of all the low interest rates. There is over a year left on the current lease.
The car dealer advertises that they will pay off the current lease.
What they offer is to pile up all the money owed on the lease on top of the new car price, and then roll it all into the new payments.
So here are my questions:
Is this the only way car dealerships handle people with leases?
Is there any advantage at all to this? It seems to me that this person would be better served to just sit the car in their driveway and then turn it in at the end of the lease. At least this way they could use it if they needed it.
What is the best deal a person can reasonably expect when trying to get out of a lease and into a new car?
Just a warning there are many scams about breaking a lease - many broken promises too. check out http://www.troubleshooter.com - i’m sure you will find something there.
General rule of thumb (plenty of exceptions I am sure):
If you are getting the same brand of car (especially from the same dealer) as the original, they tend to be much more lenient about the lease contracts.
I would be leery of anything which an auto dealer promises you. Rule of thumb with auto dealers is that they make money on each transaction, so like to enter into as many transactions as possible with you. In your case, just for starters, here are the transactions.
[list=1][li]Sell you the car - cha-ching![/li][li]Finance your car - cha-ching![/li][li]Buy the leased vehicle? - cha-ching![/li][li]Sell the leased vehicle? - cha-ching![/li][/list=1]
I am assuming the second two, since if you pay out the lease, they can probably buy the car at the residual value, which should theoretically be lower than the current retail, particularly if you have a long time left on the lease. Buy low, sell high, great for them. Plus you are financing the cost of paying off the lease. If all of this is true you are setting up yourself to be truly hosed.
Check out this site, I heard about it a while back but don’t have personal experience with it. It is an electronic marketplace on leases, so that consumers can find others to assume their lease. If you can get someone to do this it should be much better for you financially.
FWIW I heard about this website as a “success story” where a couple of average guys set up a viable e-concern that actually had value for the consumer. (I am not actually certain this is the site, I got a few different hits, please look around for similar sites.)
It also depends on the finance company. For example I lease both a Ford and a GM product through their respective finance companies (Ford Credit and GMAC), and there’s a WORLD of difference in the leases.
The Ford is pretty easy to get out of. You owe the difference between your payoff and the value of the vehicle. Unless you paid %18 interest or $0 down, you’re probably not upside down, or if you are, not too much so. A Ford lease, though, has the concept of “interest” on the “leased-value,” so yes, in the case of Ford, there is interest on a lease.
The GM on the other hand has no such thing as interest specified in the contract. Instead, they have the “use fee” and the “rent fee.” While not exact, the “use fee” pretty much covers the “depreciation” (your usage), and the “rent fee” is a little bit of the usage and the interest that’s not being charged. To get rid of the GM product, you owe the difference between the current value of the vehicle, plus the stated residual value plus all leftover “use fees.” Since the “use fees” are the biggest portion of your monthly payment, this works out to be pretty expensive to walk away from.
So, I could walk away from my Ford at any time without too much out of pocket, but the GM would cost me a fortune.
On the Ford lease, anyway, they bent over backwards to get me into a nicer car. They pretty much said they were agreeable to let me out of the other contract to get me into a new one, and that was that.
In some cases you can simply pay to get the lease torn up. That’s even if the lease does not allow you to get out. Normally you only want to do this if you got stuck with a really high lease payment. You can offer them $1000 and see if they will let you out. It doesn’t hurt to try it and it has worked for some people.
