gmanusmc

Very good points - these are some the same things I've learned too while leasing many vehicles. Looks like our current IS wont have equity at lease end and we will probably spring for an RX this time. Good discounts on Lexus vehicles are not too hard to get here in CA, so basically we're just biding our time for the money factor to come down and for a possible offer to end the lease early - we also usually get a $1k incentive certificate a few months before lease end - this will be our 5th Lexus.

alir1983

Hi,

I am contemplating about moving forward to buying my lease out. The reason being that I'll be over by 10k in mileage by end of lease term and its .25 cents a mile. My current payoff amount is $45k after having made 18 payments equaling 14k. My residual price is $31k and I have 18 payments remaining.

To get a finance amount. I've added 31K + 18 payments (remaining) + title + fees + registration to be about $2k. Everything to be equal to about $48k - the 7k down payment = 41k. For 60 months that will be about $683 per month.

I also spoke to a dealer today who tried to get me into buying another new car and will eat up some of the payments as part of pull back. He said he would not recommend I buy the lease and suggested I get into a new one for that much amount.

Let me know what you experts think.

Neckbeard

I'm not a recognized expert but I think I can help. What is the difference between your current lease payment and the projected finance payment? If that difference, times the 18 remaining payments, is > $500 then it doesn't make sense to buy it out early given the additional $2k in fees. Remember, you can always buy out the lease at the end of the term for the contracted residual value, regardless of mileage. Then you won't be stuck with the $2,500 additional mileage charge when you turn in the lease.

lesz

If you are going to go over the allotted mileage for the lease, the option that is likely to make the most sense is going to be to buy the car at the end of the lease.

If the residual value of the vehicle, according to the lease terms, is $31,000 and if you are 10,000 miles over what is allowed by the lease terms, the actual value of that vehicle at the end of the lease will be, because of the extra 10,000 miles, around $30,000. So, if you buy the car for $31,000, you will be paying about $1000 more than the car is actually worth, but that is still $1500 less than the $2500 mileage overage charge that you would be paying if you turn the vehicle in at the end of the lease.

In general, your net additional cost of buying a car with excess miles at the end of a lease is going to be about 40% of the cost of turning in the car and paying the excess mileage charge.

Marqevans

I have leased 9 Rx's. Although I have never been over on mileage, my gut reaction is to wait to the end of the term and see what magic a dealer can work on a new lease rolling all fees into the lease. If you are not happy with what they are offering you can always execute the buyout.

alir1983

Thank you. I did not know that they re evaluate the residual value at the end of the lease.

alir1983

Dealer was offering to waive some of the remaining payments if I buy into a new car. Not sure what that is about but I asked him to write that up for me.

alir1983

Thank you. I have yet to figure out the finance payments. But I hear there are allot of hidden finance charges, higher interest rates and fees if I buy out early. I'm not sure how accurate that is but will need to check the contract.

lesz

Perhaps, I wasn't clear. At the end of the lease, the residual value is not re-evaluated. But the actual value of the car, depending on the mileage, may not be the same as the residual value. If you have driven fewer miles than what is called for in the lease terms, the actual value of the car may be higher than the stated residual value, but, if you have driven more miles than what is called for in the lease terms, the actual value of the car may be lower than the stated residual value.

alir1983

So if I wait till the end of contract. I'll be paying less than the residual value of the car if I proceed with buyout?

lesz

No, you will still have to pay the residual value in the lease terms to buy the car. That residual value, if you have driven more than the lease contract's stated mileage, will be more than the car is actually worth, Thus, you will be paying more than the car is worth, but what you lose by paying more for the car than it is actually worth will only be a fraction of what you would lose if you turn in the car at the end of the lease and pay the $.25 per mile excess mileage charge.

alir1983

Oh gotcha. This is for my own calculation at the end to see if it'll be worth it or not. Thanks!!

Cocal

Dealer may wave on paper, but the reality is that YOU will be paying for those remaining payments in the form of a higher selling price.

jim256

Don't get too focused on "buying", when in fact you can do at any point what the salesman is trying to do now--trade the car, the dealer pays off the lease to Lexus, he takes it in his used inventory, and you buy/lease a new car with any over or under value versus the final due to Lexus rolled into the new car financing,or made up in your down payment. I've had a Lexus lease that, because of circumstances, the miles at 30 months into a 36 month term was only 10,000 total, and it actually gave me equity towards the next Lexus and I "traded" early. Leases are just loans with miles..

lesz

There is no doubt about that.

The reason why Lexus dealers and Lexus corporate like doing lease deals is that there are many more factors to consider in a lease deal than there are in a sale deal, and, if the customer neglects to properly evaluate any of those factors, there is likelihood of extra profit for Lexus and for the dealer.

In a lease deal, the customer needs to consider, not only the negotiated price of the vehicle, the money factor, and the residual value, but there it is also important to make an accurate estimate of how many miles need to be included in the lease deal. If the customer chooses a lease that includes more miles than will actually be driven, that customer will be paying more for the lease than he/should be and will be, at the end of the lease, returning a car that is actually worth more than the contract's residual value, which allows for more profit when that vehicle is re-sold. On the other hand, if the number of miles driven is significantly higher than what is called for iin the lease terms, there is extra profit in the $.25/mile excess mileage fee. Then, too, there is extra profit in acquisition fees, surrender fees at the end of the lease, etc.

And, when the dealer offers to roll the remaining portion of a lease into a new lease, even more factors that are difficult for most to evaluate are introduced into the deal, and, thus, there is even more opportunity for profit generation that is not immediately apparent to the person who is doing the lease.