Lease buyout dealer insanity - please explain

[392DCGC]

I just got back from a dealership who talked me out of trying the lease buyout in Ohio. A few of the things they said:
"Nobody would buy a car if lease buyouts worked"
"Lease cash is not the same as a rebate... they use it to work the numbers in different ways"
"XXX's son leased a GT2 Stinger 10 months ago - look how large his payoff still is"
"You'll end up paying a lot more doing the lease. I don't want to sell you the car if that's the route you want to take."
"We pay the invoice price and can't discount below that on a lease"
"You have a high value trade & lots of equity... buying is better for you" (maybe this is true?)

They are giving me $47K trade allowance on which I owe $19,342. If anyone can please tell me what my better deal is... if buying is actually better than the lease option, or if this dealer is full of crap, please let me know. I tried posting pictures, but can't at this time.


Lease---
MSRP: $54,435
Invoice: $51,679 (selling price of car - they seemed firm on this, not going below invoice)
$10,200 lease cash + $400 military cash
Cap cost: $41,079
MF .00263, 24mo./12k mi., residual: $28,850/70.25%
$2,657.33 down
$708.02/mo lease payment
Buyout info they used detailed further down


Purchasing instead of leasing---
$49,935 selling price (maybe more wiggle room as they offered me maybe $15K or $16K OTD before I left)
$2,750 KMF rebate, $2,000 loyalty rebate, $400 military rebate: $5,150 total rebates
Vehicle total after rebates: $45,283 incl. the little bit of fees & tax
($3,173 in tax savings from the trade worth mentioning)
Balance due: $17,626 (but again, they may go down to $15K or $16K)



Their explanation for why this is a bad idea---
They used an example of making 3 payments! before buying out the lease. Fine, whatever.
~$2,100 in payments + ~$2,700 down = ~$4,800 paid before buyout (their math)
$28,850.55 (residual value) + $300 buyout fee = $29,150.55
$29,150+$14,175 (21 months of $670 payments - apparently he thinks each payment is only ~$30 savings in rent/interest) - this is probably where they went wrong.
=$43,325 + taxes = $46,249 (they said Ohio doesn't tax credit trade for lease, but the Ohio tax website mentions they do, just not how?)
$46,249 + ~$4,800 (from earlier, paid before the buyout as payments & money down)
Grand lease buyout total of $51,049 vs $45,283 to purchase outright... but let's assume their "rent" savings was off. I'm not sure how this figure should be calculated, but using $44,000 as the rough "loan" amount over 24 months at 5.664% amounts to $2,643 in interest... so let's subtract $2,400 to account for 1 payment? Lease buyout around $48,649... maybe a bit less if my assumption of "rent" calculation is off. But this still doesn't beat outright purchasing?




They then tried showing me an employee's son who leased a GT2 Stinger. Here's his lease stats and current payoff, and they tried saying this was a good example of how it doesn't make sense.
Contract date: 12/16/18
MSRP: $54,280, selling price $50,461
Rebate: $6,500
Net cap cost: $44,546
Money down: $3,000
Residual: $28,207
Monthly payment: $595
Buyout as of today?: $40,078 (plus 6.75% tax)... does their argument make any sense? Did he pay $5,355 in payments + $3,000 down on a $44,546 deal, but would have to pay nearly $43,000 incl. tax to pay off the lease? I'm sure it's different because he got worse lease cash, but is that all?

 

[MerlintheMad]

What a mess. They protest too much. I don't know why the discussion had to come up at all, but you pushed somebody's buttons for sure, mentioning buyout. That was where you went wrong, imho. Never talk about buyout when working out a deal. Just keep that under your hat. If you have a good way of making the buyout work, e.g. pay cash or get a really good loan to do the buyout at a much lower interest rate than the lease, then just dicker over OTD; not monthly payment size or anything else: just OTD. And when it fits in with your idea of a reasonable deal, then lease. And do the buyout as quickly as possible. There is no way that the huge Kia incentive/rebate for leasing is going to turn and somehow bite you in the rear. You may not get the full value of the rebate, because dealers will put "dealers fees and costs" (etc.) back in; watch for that; and of course bloated pricing for "extras": anything they can to increase their profit margin.

 

[Tytus]

I am curious on this as well. I'm looking at trying to get a GT rwd for the cheapest possible price. If that means lease than buyout so be it. I already have a bank that will do 2.49%. what kind of OTD prices can be done?

 

[Jay B.]

@392DCGC The dealer you went to told you a lot of incorrect things. The biggest is that the lease buyout is based on the residual value. The buyout is based on the cap cost number. That is what you want to bargain down as much as possible and really the only thing that matters in the end.

The other thing as merlin mentioned is they should not care if you lease or buy as far as what they would discount off of MSRP for. now the rebates will matter, but not the dealer discount. I would go to a different dealer, they are not offering you anything special or even a decent deal.

 

[MerlintheMad]

I am curious on this as well. I'm looking at trying to get a GT rwd for the cheapest possible price. If that means lease than buyout so be it. I already have a bank that will do 2.49%. what kind of OTD prices can be done?

All over the map, apparently. One of the hottest topics on here is "what did you pay for your Stinger"? I've never opened that pinned thread, not a single time in my forum experience. Why? Because comparing what you pay with someone else will vitiate your Joy. Comparing does that.

What you see as MSRP is of course the starting point. Make sure you know what the trim you want is set at. Then you'll know what kind of dealer discount (or perish the thought, markup!?) you are getting up front. If the price of this car is what you are prepared to pay, and the dealer is happy, you'll get your car for a reasonable amount. I believe that "you get what you pay for" applies most importantly to a good dealer. The good ones are savvy and won't be talked down to make a sale. They already know that their dealer discount is fair. They know that comparatively they are charging what the other savvy dealers are: and they will stay in business in the coming years because they are savvy business people. You pay for that by finding one, paying what they ask, and coming back to get your service at this savvy place. Don't worry about making the best killer deal and then being able to brag about it. "You have your reward". And going forward, it will be worth less than finding and sticking with a good dealer who won't worry about being undersold by cutthroat competition that comes and goes.

 

[Peeso33]

I don't want to sell you the car if that's the route you want to take.

Anything else he says after that statement should be taken with a grain of salt.

BTW, that MF he quoted is very high in terms of APR ~6.3% APR, make sure you can buy-out the lease very quickly if you decide to lease. (better double check if they added anything on top Kia's base MF)

That residual value is wrong. MSRP x residual %(dealership can't change this %)
$54435 x 70.25% = $38240, not $28850. So either a typo, or I would go somewhere else.

 

[Paul32]

Anything else he says after that statement should be taken with a grain of salt.

BTW, that MF he quoted is very high in terms of APR ~6.3% APR, make sure you can buy-out the lease very quickly if you decide to lease. (better double check if they added anything on top Kia's base MF)

That residual value is wrong. MSRP x residual %(dealership can't change this %)
$54435 x 70.25% = $38240, not $28850. So either a typo, or I would go somewhere else.

It looks like a 36mth lease residual? I would not trust this dealer.

 

[392DCGC]

@392DCGC The dealer you went to told you a lot of incorrect things. The biggest is that the lease buyout is based on the residual value. The buyout is based on the cap cost number. That is what you want to bargain down as much as possible and really the only thing that matters in the end.

The other thing as merlin mentioned is they should not care if you lease or buy as far as what they would discount off of MSRP for. now the rebates will matter, but not the dealer discount. I would go to a different dealer, they are not offering you anything special or even a decent deal.

Good to know about the cap cost being number for buyout... they were telling me residual + payments - rent would be the buyout price. If I go back, I'll let them know they're wrong.

Anything else he says after that statement should be taken with a grain of salt.

BTW, that MF he quoted is very high in terms of APR ~6.3% APR, make sure you can buy-out the lease very quickly if you decide to lease. (better double check if they added anything on top Kia's base MF)

That residual value is wrong. MSRP x residual %(dealership can't change this %)
$54435 x 70.25% = $38240, not $28850. So either a typo, or I would go somewhere else.

It looks like a 36mth lease residual? I would not trust this dealer.

Sorry, typo for MF - should be .00236, and the 70% was my number that I calculated based on the selling price of the car. Wasn't aware it sticks with MSRP for residual value.

But if I'm doing an immediate buyout, aren't the MF and residual meaningless anyway? Unfortunately I'm basically stuck with this dealer. Not many Stingers in my area, and they happen to have 4 GT2s configured how I'd want them as far as color choices go, and they all have 18" wheels & remote start (useful being in the snow belt).

Given my high trade value, purchasing my work out about the same anyway. If they dealer discount as deeply for the lease as they do the purchase (which they say they can't do - lack of kickback from Kia on a lease?), my total lease & buyout costs with tax would be around $43,000, and that's assuming I only pay tax 1 time... (in Ohio, it states we pay tax upfront on the lease, then again on the buyout. It does mention a tax credit for trading towards a lease, but the dealer is telling me there are no tax credits for leasing.) A purchase would OTD total $42,500-$43,500 depending on how good of a final offer they make me tomorrow. The tax credit for my trade is worth about $3,200 on the purchase.

 

[Peeso33]

Sorry, typo for MF - should be .00236, and the 70% was my number that I calculated based on the selling price of the car. Wasn't aware it sticks with MSRP for residual value.

If you have tier 1 credit, then he's marking up the MF. For a GT2 AWD, zip 01887, 24mo/12K mile, Kia's base MF is 0.00196, residual 53%. MF is credit and location dependent. Residual is a set % that can't be changed, and calculated off the msrp.
2019 Kia Stinger Lease Deals and Prices - Page 31

"Immediate" buyout probably won't happen until month 2-3 or later, of course YMMV.
There's a entire thread dedicated to lease buy explained here some where. Go find it. Good luck.