PDA

View Full Version : Question for lease experts regarding early buyout price:



M3 4ME
10-09-2011, 04:45 PM
Is the early lease buyout price based on MSRP or based on the negotiated sale price?

For example, I'm getting ready to lease an M3 Monday. MSRP is 75,425, Sale Price is 68k. Say something comes up, and I need to get out of the lease in a month (extreme thinking) is my buyout price based on the 68k figure or the MSRP figure. I know they determine the residual at lease end, based on MSRP, so is my buyout anytime before that ALSO basee on MSRP?

If based on MSRP, and if I like the idea of more readily being able to unload the lease for the smallest amount. I should finance the car, sure the payment is slightly higher per month on a 72 month term at 3.9% apr: ($1,061/month) lease price with also zero down is 889/month. BUT with the finance, I think I'm coming out ahead if I need to try and sell in a year or so. Thoughts?

Thanks!

ysgi
10-10-2011, 10:05 AM
Its based on the sale price of the car.

But I got to tell you. Those are some aweful numbers. If your lease payment is $889 and the finance price is only $170 more per month - BUY IT - DONT LEASE.

I lease my cars because I own a business, but I always ALWAYS negotiate a far better lease payment than financed price. And I hope That $889 includes tax, if not you are just a few bux away from breaking even.

Go back in and tell them the deal is off unless they knock off another $170 per month off the lease price.

You are getting hosed.

-ysgi

M3 4ME
10-10-2011, 01:45 PM
Thx,
But that finance is spread over 6 years. Compared to a 3 year lease. If the finance where over 3 years payment would be 1900/months 4 year finance is 1400/month. Still think 889 is a bad deal?

Matt Cramer
10-10-2011, 04:09 PM
Thx,
But that finance is spread over 6 years. Compared to a 3 year lease. If the finance where over 3 years payment would be 1900/months 4 year finance is 1400/month. Still think 889 is a bad deal?

Without running the exact math, in your scenario (buy a brand new car, sell it 1 year later, take massive depreciation hit), here's the usual rule of thumb.

Lease = Seriously hosed; you're hit with the buyout price.

6 year loan = Moderately hosed; unless you came up with a big down payment, you probably owe more on the car than it's worth.

3 year loan = You've probably paid it down enough that the buyer will pay you more than you owe.

Bought outright, no loan = You only get the depreciation hit and no interest / financing charges.

The total difference in how much money you've spent to own an M3 for one year between the 6 and 3 year loan will depend on the interest rate, although it'll be a little less for the 3 year loan. The longer you keep the car, the better deal things will be if you make the loan as short as you can.

M3 4ME
10-10-2011, 04:44 PM
Thanks, good perspective. The other factor is the time value of money I don't have to tie up. So for a lease, I'm tying up only the 889. Anything else, including the large down payment finance ties up more. Then again, could I make much more in this market that would have otherwise gone to avoid interest on the finance?

Here's how another member explained the amount of equity I'd be bulding in a lease, in sasy 1.5 or 2 years etc. Looks like around 600 bucks of my payment goes toward the buyout. Any other thoughts? With this in mind, the lease seems to cost the least up front, while still building SOME equity?


The lease is based on .00175 moneyfactor, 3 year lease 15k miles/year.
MSRP=75,425
Sale price: 68,060
Lease quote 889.00/month (taxes already paid up front, max South Carolina tax is 300 dollars per vehicle)
I’m told the following, is this accurate?
How much of my monthly payment goes toward reducing the buyout price each month 654 dollars?

"You DO NOT pay the interest portion (money factor) of the remaining payments if you pay off early. $68060(sale price) - $44500 (residual) / 36 = $654 depreciation portion of payment each month. Your payment of $889 includes interest, but you don't pay that interest portion for early pay off.
So, your payoff is $44,500 + 654*remaining payments.... meaning your payoff after 1 month is approximately $67,390."