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Cash Car Convert
Today, I will go through articles I found on the web to help listeners determine the best way to get out of an auto lease.
US News and World Report: Buying vs. Leasing
Benefits of Leasing a Car
Leasing a car is similar to financing the purchase of the car in many ways, but there are some key differences. You might be able to get more car for less money by leasing. That’s because a car loan is based on the full price of a new car, while a lease is based on only a percentage of the car’s price. For example, on a $30,000 car, you’d finance the entire $30,000 purchase price with a car loan. With a car lease, you only pay the difference between the car’s price and what it’s expected to be worth at the end of the lease, which is a car’s residual value. So if the car’s residual value is 55 percent after three years, for example, that means the $30,000 car would be worth $16,500 at the end of the lease. You’d make lease payments on the remaining $13,500 and not the full $30,000.
New York Times: Auto Leases Entice, but They’re Still Costly
Which is best new purchase, new lease, or used?
So let’s start with the hard numbers. Mr. Reed looked at three ways you could acquire a four-door Honda Accord EX: buying a new 2014 model, leasing the same 2014 car, or buying a used 2011 Accord with 36,000 miles. (Many people in the New York area are paying about $28,211 for the new car, including tax, title and registration.)
The analysis looked at the cost over six years, since the average person owns a car for that long, and it incorporated typical buying patterns: the new Accord is purchased with a five-year loan, the used car is financed with a four-year loan, and the person who is leasing must take out two consecutive 36-month leases. (The rest of the assumptions are detailed on the accompanying chart.
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Leasing initially seems to be the cheapest route when you look at total out-of-pocket expenses: It costs $5,244 less than buying new. (Buying a used car is still the most economical. You save $5,277 compared with leasing, and it’s about a whopping $10,500 less than buying new.)
But when you account for the teensy fact that you don’t own anything at the end of those six years, the calculus changes. If you had bought the car new, it would still be worth about $11,000, according to Edmunds.com’s calculators. The used Accord would be worth around $5,000.
So after you factor in that equity, leasing costs $5,756 more than buying a new car and $10,277 more than buying used. (Buying new costs $4,521 more than buying used.) Leasing is the loser across the board.
Leases Most Costly?
“If you asked me what is the most expensive way to get a car, the answer would be: You only want to own it during its period of greatest depreciation and then move to another new vehicle,” said Jeff Bartlett, deputy automotive editor at Consumer Reports. “Well, that’s what leasing is.”
Auto Finance News: Average Auto Loans and Leasing on the Rise in 3Q, Experian Says
How Popular is leasing in Q3 2014?
Experian also found that leasing accounted for 29.1% of all new vehicle financing in 3Q, up 7.1% from a year ago, while 73-to-84 month new vehicle loans grew by 23.7% last quarter, compared with 3Q 2013. Used loans in the same range also grew, up 18% from a year ago.
51.8% of all new auto sales
JD Power: How To End Your Lease Early
1) Return the vehicle to the dealership.
This is a traditional lease termination, and it is an expensive option. When you return the vehicle to the dealership, you will be required to pay all penalties. In some cases, you may be required to make all outstanding payments, and pay additional penalties on top of any other fees. This should be a last-resort option.
2) Trade in your vehicle for another vehicle.
It may be possible to lease another vehicle at the same dealership. The penalties and fees from your original lease will be rolled in (included) with the new vehicle contract, making your payments higher. This option is also expensive, but it allows you to absorb the penalties from the old lease over an extended period.
3) Find someone to take over your lease.
You may be able to find a family member, friend, or co-worker to assume the balance of your lease payments. Several online companies offer this type of service for customers looking to sell their leases. Each leasing company has its own set of requirements, which often include a credit check and transfer fees, and there may be out-of-state restrictions to consider. Use caution when exercising this option: though you are no longer responsible for monthly payments, many leasing companies hold the original lessee liable in the event of a default.
4) Purchase the vehicle from the leasing company.
Every lease has a buyout or payoff. This is the amount due to the leasing company if you wish to purchase the vehicle outright at any point during the lease. Depending on the resale value of the vehicle, the payoff may be at or above market value, potentially requiring you to pay more for the vehicle than it is actually worth.
5) Sell the vehicle.
Using the payoff amount from the leasing company as a guide, sell the vehicle to another private party. Again, if your vehicle has a high payoff it may be very difficult to sell without incurring a loss. Even if you are forced to take a financial loss, it may be a less expensive option than continuing the outstanding monthly payments on the lease contract. Selling the vehicle is also an excellent option if you want to avoid penalties for excess wear and tear and having exceeded the allocated lease mileage.
edmunds.com: How to Get Out of Your Car Lease the Cheap and Easy Way
Can Everyone Swap Leases?
According to Swapalease's executive vice president, Scot Hall, it is possible to transfer about 80 percent of leases with no strings attached. But even after a person transfers the lease, approximately 20 percent of leasing companies require the original leaseholder to retain some "post-transfer liability " for the vehicle, said Hall. This means that the name of the person who originated the lease remains on the contract and the original lease holder can be held financially responsible for unpaid balances. These could result from excess mileage charges or lease-end fees.
The person who signed the original lease is essentially a co-signer on a loan, Hall noted. If the second person defaults, the bank will try to recover the money from anyone else named on the contract.
Nissan , Infiniti and BMW are manufacturers that require post-transfer liability, Hall said. Acura and Honda sometimes require it depending on the state in which you live. However, Hall said that the trend in the secondary leasing market is moving away from post-transfer liability.
A small percentage of leasing companies don't permit transfers at all. These are usually banks such as Chase Auto Finance and Huntington Bank Leasing, or credit unions . Before signing a new lease, consider this important factor. If your leasing company allows transfers, you will have more flexibility if you need to end the lease early.
Swap a Lease: http://www.swapalease.com
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