Leasing a car versus buying

What is the lease buyout (residual) in the car and how much is it worth? That will okay a big part in the decision of you want to look at buying it out.

D-ManPV ✉
Jun '18

There is a buy out price on my original contract with Kia but when I went to talk to a agent he said that was not the correct price but it was more now to buy the car. Seems to me that they should honor the buy out price on the contract???

joyful ✉
Jun '18

Hoping my post doesn't get deleted for having a link ;) The agent sounds like a crook! If you made the mistake of telling him the milage, he was thinking how much $$ he could make.

https://www.nerdwallet.com/blog/loans/auto-loans/5-times-buy-leased-car/

maja2 ✉
Jun '18

They have to honor what ever the contract says. If the buyout was fixed, then that's it. If it was based on some kind of a published book value at the time of the end of the lease it might be different. So read over that contract and don't let them push you around.

Two pieces of information that are absolutely crucial when doing a lease are how long you want it and how many miles you drive. As a second car hardly driven, typical leases are way way too many miles. Particularly a brand new car where the depreciation is so high, that few miles on it makes it a gold mine if turned back in. Chances are you should be able to buy it off the lease at a good price because you already paid for way more miles than used. Then under the circumstances most likely sell that car at a profit and use the money to buy something older but reliable enough for occasional use. I say something older because you don't want to lease again.

The information you need right now to make the best of it is the book value of the car given the enormously low mileage. You can bet a dealer is going to ask top dollar when they sell it. You need to have a good idea of what you can sell it for and compare that with the buy out price. Edmunds.com is one of the places that will give you not only book value, but estimates of what the dealer would try to sell it for, and what you can get in a private sale.

GC ✉
Jun '18

We leased 2 KIAs within 6 months of each other - financially at the time leasing was the best option - knowing that when the lease was up we would purchase the cars due to high mileage. The first time we went through the dealership to buy out the lease...they tacked on fees and did not give us the best interest rate, but we were naïve and thought this was our only option. Dealerships are allowed to raise the interest rates a certain percentage over what the actual bank approves the loan for - this is part of how they make their money along with the ridiculous fees to process it. The next time, we went directly to our bank for the loan and they paid KIA directly - low interest rate and absolutely no fees. Was the easiest process. The bank did everything. The only fee you will have to pay is to motor vehicle. The dealership insisted that if we paid KIA directly that we would still get an invoice for fees - which was a lie - we never heard anything from KIA after they received the payoff. You should be getting information directly from KIA on your options for when the lease is up. If you plan to keep the car - stay out of the dealership - they will rip you off.

Sunshine64
Jun '18

I wouldn't worry about having a scratch on the car . I leased an Acura for three years and had a dent on the front fender from a deer running into it and the guy who looked it over contributed it to normal wear and tear on a 3 year old vehicle - no charge . But I would never lease again , as it felt real bad paying all that money for a car then returning it . I'd buy used before doing that again .

97XBAM ✉
Jun '18

I'm leasing my current car, and my last car was a lease. I understand that, all factors considered, it's supposed to be financially better to buy than to lease. But for me, I find it convenient. I drive less than 10K miles per year, anyway. I don't have to do much maintenance, other than oil changes--I never even wear out the tires. And I don't really worry about it. If I owned it, I would always be worried about things like having a fresh coat of wax on it, but because it's leased, I really don't care if it rusts out, in five years.

I'm always driving a new--or fairly new--car, for what works out to be about $3,000 per year. (Or, I could buy a brand new car that would be worth $2,000 less, the moment I drove it off the lot.) For me, that works. But I wouldn't do it, if I drove a lot, or if I drove only 2,000 miles in three years.

One further bit of advice. The car dealers generally know what they're doing. Very rarely will the payoff figure on a leased vehicle be less than the Blue Book value. If it's close to book value, and you really like the car and want to keep it, then consider buying it. Otherwise, you're better off just turning it in and getting something else.

JerseyWolf ✉
Jun '18

My financing was directly thru Kia - I paid online and was always able to see what the payoff amount was if I wanted to buy it after the lease expired or at any point during the lease term. I went to Sussex Kia because my original salesperson from Mount Olive Kia was working there. Not only did they not discuss the fees associated with buying out the lease, they overcharged me by almost $1000.00. At the time, Hackettstown Hyundai was owned by the same person and the General Manager worked out of both locations. We went to Hackettstown Hyundai to talk to him and he tried to tell me that everything was right with the bill of sale - when I showed him my calculations he changed his tune and said - I see they charged you double tax. He did adjust it but I don't believe it was a mistake - they just didn't expect me to catch it. He was also the one that said if I did the buy out directly thru Kia Financing that I would still receive invoices for the fees - he told me Kia Financing was lying to me that there would be no fees - he was the liar - again - went to my own bank - got a great rate - they paid Kia Financing directly and all I had to pay was the motor vehicle fees to transfer the title. It was as simple as that. Even though Hackettstown Hyundai is not the same owner as Sussex Kia I believe the General Manager is still with Hyundai. Sussex was no better - like I said - I believe they knowingly over charged me and thought they would get away with it. I also went to Mount Olive Kia first and they tried to tell me that the bank was requiring me to purchase the extended warranty on the car in order to get the loan to buy it out because of the high mileage - another lie - I didn't believe that one for a second and he backed off when I called him out on it. I don't know why there is such bs when dealing with car dealerships - we had a great experience when we actually leased the cars from Mount Olive - the manager at the time was a good guy but he is no longer there and after the experiences we had at the end of the lease I would never go back to any of these dealerships.

Sunshine64
Jun '18

If I did not know that "Josh" was not my husband's screenname here on Hackettstown Life Forum...I would swear your post was from him.....Lol!!

joyful ✉
Jun '18

Thanks Sunshine64 ....After weighing all options and suggestions from other HLers and friends...we made the decision to go to our bank and see what they had to say about all of this. I had already made up my mind I was not leasing again. Mostly because it was the first time I ever leased and felt after three years that everything that I put down...(over $4,000) and the $159 payments for 3 years was really money down the drain (well, almost). I am going to buy the car through the bank...they are handling everything. Thanks to everyone for all of your input...

joyful ✉
Jun '18

I have an elderly, but in good health friend. She does minimal driving, but is concerned about mechanical failures while on the road. She currently has a 10 year old vehical and has limited income. I suggested leasing, which she is open to. But her concern is if she were to pass away before the lease is up, will her family or estate be responsible to satisfy the terms of the lease? Does anyone know the answer to this?

Parental Unit ✉
Jun '18

Your welcome Joyful. Glad it worked out for you.

Sunshine64
Jun '18

Parental Unit, you can purchase credit life insurance, as Jdem suggested. You can also inquire at the auto dealer, as to whether such insurance is included in the lease agreement. As far as I know, there is usually an included insurance fee, that will guarantee that the lease is paid off, in the event the car is totaled in a collision, but it may also include life insurance and/or an option to purchase it directly through the dealer.

JerseyWolf ✉
Jun '18

At the end of buying a car - you own a car.

At the end of leasing a car - you own nothing.

Peace out

ru ✉
Jun '18

If the honeymoon starts 3-4 years later, why not just buy a 3-4 year old car? You take a big hit in depreciation those first couple of years. Lots of good bargains out there when the car companies gave aggressive leases where the buyout isn't attractive.

Leases often get tied together with new cars. There's no reason why you can't lease a used car. Buying isn't always so great when you figure you tied up $30-40k on a new car for the same time period your lease might tie up $8-9k. If you don't have that cash and credit is at a premium, it can be a good deal. But a lease requires good planning. It's based on depreciation and usage. If you don't have a good handle on your mileage it can be a disaster in either direction. Use too little and you paid way too much. Use too many and there is a big hit on overage. (kind of like guessing wrong on a cell phone bill - minutes on your contract are cheap, minutes over cost double or more)

New cars aren't always a good idea. Even if you need reliability, the good cars still have it after a few years. But they don't have the huge depreciation loss. You have to pick wisely because not all cars have that reliability. It's all a matter of how well educated you are about the whole process and what your goals are.

GC ✉
Jun '18

When I've had a lease the options that come in the expiration later have always said that. It's not part of the original lease because you would never sign that. The amount of the depreciation is all different and you would never pay the same monthly payment on the older car. So you just have to negotiate a completely new lease with different terms. You can also go into most dealerships and they have any number of cars turned in off the first lease that they will lease to you.

GC ✉
Jun '18

"Almost everyone “leases” whether they know it or not." -Consigliere

So who doesn't lease then if it is "almost everyone" who does?

Joe Friday ✉
Jun '18

I think his point was total cost of ownership and it can end up more expensive in the end

Jdem ✉
Jun '18

Joe Friday, the person who buys the car new and drives it until the cost of repair outweighs the value of the car.

Consigliere
Jun '18

Ian, I’m tripping on acid? You got the wrong guy. And you’re so tied to your house/mortgage idea that you can’t hear what I’m saying.

Cars are depreciating assets. Houses/property are investments. If I buy a typical home and stay in it for 15 years, the house will most likely be worth more money because it’s value increased with inflation. Show me a 15 year old car that was driven daily that is worth the same or more than it was when it was purchased. You lose money with any car you daily. Whether you spend that money buying new, buying used or leasing, you’re paying per mile to drive that car. If you sell the car, turn it back in or give it away, you only payed for the period that you drove the car.

Consigliere
Jun '18

Houses are depreciating assets. Ultimately, it's the land quality and location (and/or capital improvements, which cost money) that increase the value. (That and the increasing population driving up demand.)

In addition, some cars are worth far more, now, than they were when purchased years ago.

Ultimately, whether you buy or lease a car depends on your own usage, economics, and overall happiness. As Aristotle noted, many centuries ago, in the end, all we really want is to be happy. So if you balance out all of the dollars and cents, even if it is financially more advantageous to (for example) buy a car versus leasing one, if the convenience of leasing makes you happier, and you can afford it, then it may be worth it to you.

JerseyWolf ✉
Jun '18