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Hi everyone...

So, I leased a 2011 Kia Soul ! for 3 years, and the lease ends around September.

I know that, if I return the car, I have to pay a $900ish 'disposition fee' Otherwise, I can buy the Soul for the 'residual value' at the time of the lease (somewhere in the $9000 range.

I know last year, folks on the Kia forums were predicting that the Soul would be worth more than the residual value (Kia was too conservative), so I am wondering what my next move will be.

Since the lease, we have moved to the 'burbs, and no longer 'need' a tiny car (we use to live in an urban area where parking was a major concern). We also have a 2 YO who will be going to school in the next 3 years, etc.

Long story short, I am thinking that-dollar wise--buying the Soul might be a 'good deal'... Lifestyle wise, I think we need something a little bigger (like a CRV/Sportage/Rav4, etc)

I have been getting more frequent mailings from Honda dealers, etc, offering to 'buy out your lease'...

Now, I learned a LOT during my initial leasing experience... This 'lease end' phase is new to me. I really am not looking to get into a discussion for or against leasing (I know the pros/cons, I feel).. I am more looking to see if anyone has experience with leasing a new car AND having that dealership buy out your current lease--seems like a lot of options for the dealer to take advantage of the situation...

Thoughts? Should I buy out the Kia then trade it in? Or should I look now, when I dont 'need' to get another car yet...

TIA!
K
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Typically you can get out of the disposition fee if you buy/lease from the dealer you are returning it to. But then you have limited options. But you might as well go test drive some Kia's to see if you like any of them.

Keep in mind that you have to pay sales tax and possibly other fees when you buy the car, so this will cut into any potential "profit". You can however get a quote from some national dealer, I'm drawing a blank on their name, but they have operations in most metro areas and give you a no-commitment (on your part) purchase price.

Also, whether you buy or lease, be sure to use TrueCar.com to make sure you are staying the left hand side of the price curve. Keep in mind that any lease buyout is going to substitute for any discount you might have otherwise been able to negotiate. Be sure to do your homework on incentives (like loyalty or conquest) so you know to negotiate a price a bit above invoice before letting them apply those OEM incentives.
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If I wanted to shift brands, is it 'better' to let the new dealer (honda, for example) 'buy out' the lease, or is it better to

(a) buy it myself, direct from the finance company and
(b) then trade it in at the honda dealership?

or is it 'better' to just do it all in one fell swoop--let the new dealership buy out the lease for me and get a new lease in one transaction?

I guess I am looking at the lesser of the evils, given that I dont have a lot of free time on my hands to maximize value. In my mind, most logical thing would be to buy the Soul direct from finance company, then sell it on the secondary market and THEN lease a new vehicle--but that takes a lot of time
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or, of course, I could pay the 'disposition fee' and just lease a new vehicle :)
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Some hard numbers:

Lease Ends: 8/31/14
Lease pmt: $260/mo (approx 8 more pmts)
Residual Value: $9500

Value today, per Edmunds: 11k (trade in) up to 14k private sale
Buyout quote as of today (direct thru finance co): $12k

Again, disposition fee will be around $900 if I return the car
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Do you have Carmax in your area? usually they will beat the wholsale price by $500 and offer a quick, painless sale. They will give you a no hassle quote for the car. Having that info can help your decission process.

GeeB
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There is NO disposition fee if you buy the car from the leasing company as I usually do for my business' leased vehicles.


How could you...

Oh, nevermind it is pointless anyway
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Some hard numbers:

Lease Ends: 8/31/14
Lease pmt: $260/mo (approx 8 more pmts)
Residual Value: $9500

Value today, per Edmunds: 11k (trade in) up to 14k private sale
Buyout quote as of today (direct thru finance co): $12k

Again, disposition fee will be around $900 if I return the car


Is there a fee built in there? Your remaining lease payment plus RV = $11,580.

Assuming you have a sales tax less than 9.5% and you can buy the car at lease end for $9500, then the sales tax is cheaper is a cheaper "fee" than the dispossession fee. Given the fact there is a large spread between RV and trade-in this seems like a good candidate to buy out.

But since you want this fast an now, let's look at it this way. If another dealer is willing to get you out of your lease, and they end up with the same $12,000 bill for a car they would have taken at $11k in trade-in, then from their position, they've laid out $1,000 to get you into your next car. Meanwhile you've "saved" ~$2,000 in future lease payments on this car you don't want/need/like/whatever-you-have-to-tell-yourself but given up ~$2,000 in hypothetical private party resale value (hypothetical b/c you don't own the car right now and it doesn't sound like you have the time/desire to do private party anyway).

There's some creative accounting in there but it looks like buying out now means you have to go private party, and your max payout is $2,000. Otherwise getting a dealer to take it over seems doable though I would expect for them to make you pay MSRP (minus any OEM incentives)...expect heavier than usual resistance to haggling. This means your next lease will need a great money factor and high RV to be worthwhile since your purchase price is not going to be stellar. Just make sure they aren't rolling fees from your lease buy-out into the new car...I've never done this so I don't know if that is something that happens or not.
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Here are the relevant facts I'm picking up on.
Buyout quote as of today (direct thru finance co): $12k
Residual Value: $9500 +$900 disposition fee = $10.4k
Remaining payments: $2k

In summary:
Buy the car today costs you $12k +tax/reg
Buy the car at end of lease costs you $12.4k + tax/reg

So $400 more to wait. But, you can walk into any dealership today and trade the leased vehicle. I did this once. Negotiate your trade in as $11k and you'll roll the negative equity of $1k into the new deal. The dealership will handle the payoff with the leasing company.
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That's not quite right. The disposition fee only applies if he turns in the leased vehicle. Also, the $2k remaining payments shouldn't be treated the same both now and 8 months from now. Here is the situation as I see it. I make the following assumptions to simplify things.
1) Money has no time-value to him
2) His next lease payments will equal his current lease payments
3) private party sale if off the table

Note that all options are computed for 8 months in the future

Option 1: Lease-end disposition into new lease
Remaining lease pmts: $2k
disposition fee: $900
equity: $0
Summary: Spend $2.9k to drive current car for 8 more months and start over. $900 can be saved if you lease at same dealer.

Option 2: Lease-end Buy-out into new lease
Remaining lease pmts: $2k
disposition fee: $0
buy-out: $9500
trade in value: $11k (should be a bit less 8 mo from now)
equity: $1,500 (less sales tax at buy-out)
Summary: Spend (net) $500+(buyout sales tax) to drive current car for 8 more months and start over in new lease.

Option 3: Dealer bail-out now into new lease now
Remaining lease pmts "saved": $2k
8 months of new lease pmts: $2k
disposition fee: $0
buy-out: $12k (remaining lease payments are actually built in here)
trade in value: $11k
equity: -$1,000
Summary: Rolling $1k debt into new lease and $2k of new lease pmts costs you $3,000 to drive a new car over the next 8 months. Of course since we've kept payments the same and you started $1k in the hole, this new car should be cheaper than the one you are getting rid of. This sounds unrealistic.

Conclusion: Clearly Option 2 is cheapest. Options 1 and 3 are very close, but that assumes the fiction that your next car will be cheaper than your current car was. Option 1 doesn't make much sense. The cost of Option 3 over Option 2 (which will end up being at least a few thousand) can be weighed against the desire to get a "better" car now.
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Option 2: Lease-end Buy-out into new lease
Remaining lease pmts: $2k
disposition fee: $0
buy-out: $9500
trade in value: $11k (should be a bit less 8 mo from now)
equity: $1,500 (less sales tax at buy-out)
Summary: Spend (net) $500+(buyout sales tax) to drive current car for 8 more months and start over in new lease.
---------------------------------------------

This option is such that I would buy the car outright at lease expiration, then use if for trade in on a new lease?

I am assuming the value would be used toward lease initiation costs including paydown (ie, they wouldnt cut me a check, right?)...

This is a fascinating option. Really hadnt considered it. I wonder if there is a way to ensure the new dealer will set up a deal guaranteeing the trade in value...
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This option is such that I would buy the car outright at lease expiration, then use if for trade in on a new lease?

I am assuming the value would be used toward lease initiation costs including paydown (ie, they wouldnt cut me a check, right?)...

This is a fascinating option. Really hadnt considered it. I wonder if there is a way to ensure the new dealer will set up a deal guaranteeing the trade in value...


Yes, you would buy the car (ideally directly from the lender) and turn around to use it as a trade-in. Your sales tax should be less than the disposition fee, so it really seems like a no-brainier.

One thing that should be obvious by now is that there is no "getting out of a lease early." Whether you buy out the lease or you make a dealer do it for you, you end up paying for the full lease term. So any option that involves getting a new car sooner than 8 months from now means you are paying two lease payments for a short period of time. This is another good reason to do the buyout at lease-end. You then have time to shop, otherwise your timing window is very narrow.

In terms of a trade-in...I'm not sure if they can cut you a check. I think by applying it against the car, you end up saving on sales tax (at least in MN you do). I'd use the trade-in against the lease, and try to minimize any cash out-of-pocket.

The best way to guarantee yourself a fair price is to get a quote from Carmax (hopefully there is one near you). If you take the car into a dealer looking for a guaranteed trade-in, they are just going to pressure you into letting them handle everything for you (out of sight, out of mind). Now this is more convenient, but you will certainly pay for this convenience. For some, I'm sure the time saved is worth it, and that's OK just so long as you understand what you are paying for.
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no carmax near me...

NJ has pretty high sales tax... will have to run the numbers, but this is an approach worth considering...
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NJ has pretty high sales tax.

It is true that NJ has a sales tax, but rates have been fairly typical. Not especially high.

And the funny thing about it is that almost everything you buy (food, clothing, drugs) are exempt. Hence, some people say it is mostly a restaurant tax.

You also pay it on furniture, electronics and autos, but it is quite passive compared to what people pay in other states.
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