Lease then Buyout - Contract Explanation

[SEA Stinger]

FYI -- I went to the dealer today and had my question answered. In short, as I thought, no, you cannot trade a car against a lease payoff and pay tax only on the difference.

You can use a trade-in to prepay part of the lease costs, at the time that you sign the lease (i.e., rather than during the term of the lease). Have you considered doing that?

However, be aware there is a limit on how high the trade-in value can be. I believe the limit is that your trade-in amount can't be so high that it would cause the balance on the lease to fall below the residual value.

Here in Washington State, when you trade-in a car, the value of the car is deducted from the basis used to calculate sales tax. Applies to both purchases and leases.

Doing a trade-in at time of lease does not restrict you from then doing a lease buyout before maturity.

 

[Brian Lewis]

@Brian Lewis,

People put down payments on a lease, because they want as small a monthly payment as possibe. The also want a high residual price of the car, so as to has as little car in their 24/36 month lease.

Neither of these factors is what you are considering, because you will purcahse. So money down is great. Because if you will get a loan for the residual, the lower the loan the better. But if
Thank You. I am having to do this over email with them as they are 3 hours away and they dont want to email lease details. Just a lease payment.

Here is what I was told. Maybe someone can tell me where I am.

MSRP: $52,300
Discount: $7,200 GT2 AWD
Net Price: $45,100
Down-Payment: $5,000
ACQ Fee: $650

Adjusted Cap Cost: $34,750

36 Month Lease at 12,000 miles: $346

When I put it in the KIA Lease Calculator on Kia website, I can get to the $346 monthly cost if I bump the down payment to $11,000. That's $6,000 difference from my $5,000 deposit.

Hope this makes sense. Can anyone tell me if this is a good deal. I just dont know the actual selling price of the car.

THANKS

QUOTE="MarkyMark, post: 33884, member: 1075"]@Brian Lewis,

People put down payments on a lease, because they want as small a monthly payment as possibe. The also want a high residual price of the car, so as to has as little car in their 24/36 month lease.

Neither of these factors is what you are considering, because you will purcahse. So money down is great. Because if you will get a loan for the residual, the lower the loan the better. But if it's all cash front and back end of the lease, and you are just going for taking advantage of the lease cash, then paying down or on the residual shouldn't really make much of a difference if any... I'm assuming conducting the buyout in 4-7 days after doing the paperwork.

Sounds like you are on top of this, but just in case, the big points for you will be negotiating off the MSRP right off the bat as much as possibl (Costco - I like it - $500 off invoice). And then get the lease cash addded to that figure. Get the low Money Factor - the .0004 many dealers try to keep in the percentage.

Other than that you should be good to go! Good luck! Let us know how it goes!

Thank You. I am having to do this over email with them as they are 3 hours away and they dont want to email lease details. Just a lease payment.

Here is what I was told. Maybe someone can tell me where I am.

MSRP: $52,300
Discount: $7,200 GT2 AWD
Net Price: $45,100
Down-Payment: $5,000
ACQ Fee: $650

Adjusted Cap Cost: $34,750

36 Month Lease at 12,000 miles: $346

When I put it in the KIA Lease Calculator on Kia website, I can get to the $346 monthly cost if I bump the down payment to $11,000. That's $6,000 difference from my $5,000 deposit.

Hope this makes sense. Can anyone tell me if this is a good deal. I just dont know the actual selling price of the car.

THANKS

 

[SEA Stinger]

Thank You. I am having to do this over email with them as they are 3 hours away and they dont want to email lease details. Just a lease payment.

Here is what I was told. Maybe someone can tell me where I am.

MSRP: $52,300
Discount: $7,200 GT2 AWD
Net Price: $45,100
Down-Payment: $5,000
ACQ Fee: $650

Adjusted Cap Cost: $34,750

36 Month Lease at 12,000 miles: $346

When I put it in the KIA Lease Calculator on Kia website, I can get to the $346 monthly cost if I bump the down payment to $11,000. That's $6,000 difference from my $5,000 deposit.

Hope this makes sense. Can anyone tell me if this is a good deal. I just dont know the actual selling price of the car.

THANKS

 

[SEA Stinger]

Sorry to bear bad news, but your monthly lease payment for the GT2 with $7,200 lease cash and $5,000 down is likely to end up being quite a bit more than $346 per month.

First off, $52,300 MSRP + $650 acquisition fee - $7,200 lease cash - $5,000 down payment should result in an adjusted capital cost of $40,750. The $34,750 amount you were quoted is $6,000 less than that.

Could be the dealer is including $6,000 for your trade-in, or maybe just made a calculation 'mistake' (that they will then 'correct' later) to get you to bite. In theory, the dealer could actually be giving you a $6,000 discount off MSRP, but I haven't heard about anyone getting that great a deal.

Also, it doesn't look like the dealer has sprung other costs (which can be substantial) on you yet. These can include:
1. State & Local Sales Taxes (if any)
2. License, Registration Fees
3. Documentation Fee (if any)
4. Dealer-installed Options (if any)
5. Other add-on fees

To evaluate the lease, you should get all of the above and also ask the dealer to tell you:

1. Residual Value
2. Money Factor
3. Return Fee at Lease End (typically $400)

Good luck!​

 

[Brian Lewis]

Sorry to bear bad news, but your monthly lease payment for the GT2 with $7,200 lease cash and $5,000 down is likely to be well more than $346 per month.

First off, is the dealer including your trade-in? $52,300 MSRP + $650 acquisition fee - $7,200 lease cash - $5,000 down payment should result in an adjusted capital cost of $40,750. The $34,750 amount you were quoted is $6,000 less than that. Could be they are including the trade-in, or maybe just low-balling you to get you to bite. In theory, the dealer could actually be giving you a $6,000 discount off MSRP, but I haven't heard about anyone getting that great a deal.

Also, it doesn't look like the dealer has sprung other costs (which can be substantial) on you yet. These can include:
1. State & Local Sales Taxes (if any)
2. License, Registration Fees
3. Documentation Fee (if any)
4. Dealer-installed Options (if any)
5. Other add-on fees

To evaluate the lease, you should get all of the above and also ask the dealer to tell you:

1. Residual Value
2. Money Factor
3. Return Fee at Lease End (typically $400)

Good luck!​

I don't think I explained it correctly. I have NO trade-in. All I have information in the following:

KIA Lease option:

36 months:

12k miles per year

$5000 due at signing

Monthly Payment: $346

I was saying that the only way to get the KIA calculator to work out to the $346, was for the Adjusted Cap Cost to be $34,750. That is $6,000 on top of the $5,000 Down-Payment. Seems to be good to be true. MSRP is $52,300

 

[SEA Stinger]

I don't think I explained it correctly. I have NO trade-in. All I have information in the following:

KIA Lease option:

36 months:

12k miles per year

$5000 due at signing

Monthly Payment: $346

I was saying that the only way to get the KIA calculator to work out to the $346, was for the Adjusted Cap Cost to be $34,750. That is $6,000 on top of the $5,000 Down-Payment. Seems to be good to be true. MSRP is $52,300

I smell bait and switch.

Lease payment for that car priced at MSRP less $7,200 lease cash and $5,000 down would be $523 per month. Including sales tax, license, registration, etc. will drive it higher.

 

[Brian Lewis]

Thanks, I felt something was wrong. I have a feeling they used a different vehicle which had a different MSRP even though the email states it's the one I want at $52,300.

I wonder what a great lease payment should be around on a $52,300 GT2 AWD.

 

[SEA Stinger]

Thanks, I felt something was wrong. I have a feeling they used a different vehicle which had a different MSRP even though the email states it's the one I want at $52,300.

I wonder what a great lease payment should be around on a $52,300 GT2 AWD.

What's the sales tax rate where you live? Does it apply just to the lease charges or to the full price of the car (e.g., Texas)?

 

[Brian Lewis]

What's the sales tax rate where you live? Does it apply just to the lease charges or to the full price of the car (e.g., Texas)?

Florida... 7% in my county

 

[SEA Stinger]

Florida... 7% in my county

If the dealer prices at MSRP, the monthly payment (including 7% sales tax, $650 acquisition fee, and net of $7,200 lease cash, $5,000 down) would be roughly $630 per month. License, registration, options, doc fees, dealer junk fees/surcharges would increase that.

Some dealers will discount from MSRP, theoretically by up to about $3,000. A $1,000 discount would lower the monthly payment by about $30 per month.

I believe that one of the forum members who lives in a state with similar sales taxes reported they were able to negotiate a 36-month lease for a GT2 at something not too much over $600 per month, possibly with less than $5,000 down.

EDIT:
Search for posts by @BarryLI in the "How much are you willing to pay? (lease)" thread. (Might be good to use that thread for general questions about leases.)

He reports that in his state he's paying $649 per month for a GT2 with the following:
My down payment was around $890 (one month + $240 DMV fee), 12,000 miles, MSRP was $52,410, $7200 rebate, tax 8.875%.

 

[MarkyMark]

Thanks, I felt something was wrong. I have a feeling they used a different vehicle which had a different MSRP even though the email states it's the one I want at $52,300.

I wonder what a great lease payment should be around on a $52,300 GT2 AWD.

Hello Brian,

Did you negotiate ANYTHING off the MSRP BEFORE the lease cash was applied? If not, you sure should! There is NO magic in a lease making the dealer impervious to negotiating off the sticker price. START there FIRST. Get $3k off or work for Invoice (throw the Costco program out there, etc...). THEN get the lease cash applied, and THEN you are at your Adjusted Capital Cost.

If you are not doing a Lease to Quick Buyout option, I would never put a dime down on a lease. Would you put $5k down on an apartment? No. So why put $5k down to rent a car? If the answer is to lower the monthly fee, then that's another discussion entirely on what you can truly afford, but that's another discussion road of course.

Good luck Brian!

 

[Brian Lewis]

Hello Brian,

Did you negotiate ANYTHING off the MSRP BEFORE the lease cash was applied? If not, you sure should! There is NO magic in a lease making the dealer impervious to negotiating off the sticker price. START there FIRST. Get $3k off or work for Invoice (throw the Costco program out there, etc...). THEN get the lease cash applied, and THEN you are at your Adjusted Capital Cost.

If you are not doing a Lease to Quick Buyout option, I would never put a dime down on a lease. Would you put $5k down on an apartment? No. So why put $5k down to rent a car? If the answer is to lower the monthly fee, then that's another discussion entirely on what you can truly afford, but that's another discussion road of course.

Good luck Brian!

Yes, the $52,300 is down to $50,000 flat. Does it matter at all to the dealer if I share my plans to lease and then pay-off a week later in full? I have all the Cash, so I don't care how much I put down at first. $1 to $10,000. Same to me. I have just not discussed my plans of a quick lease/buy-out and didn't know if it mattered to the dealer or not.

 

[MarkyMark]

Yes, the $52,300 is down to $50,000 flat. Does it matter at all to the dealer if I share my plans to lease and then pay-off a week later in full? I have all the Cash, so I don't care how much I put down at first. $1 to $10,000. Same to me. I have just not discussed my plans of a quick lease/buy-out and didn't know if it mattered to the dealer or not.

They have no need to know. It's all about you and KMF at that point. Once you see your account with them post online, login and contact them for the Buyout. Dealer isn't involved at all. Just get the best deal you can from them and go from there.

And we would all love to see how this all works out in the end!

 

[SEA Stinger]

Yes, the $52,300 is down to $50,000 flat. Does it matter at all to the dealer if I share my plans to lease and then pay-off a week later in full? I have all the Cash, so I don't care how much I put down at first. $1 to $10,000. Same to me. I have just not discussed my plans of a quick lease/buy-out and didn't know if it mattered to the dealer or not.

Oh, so you're going to do a lease then quick buyout!

In that case, the monthly payment amount isn't the best metric for evaluating your deal. Instead, it's more a matter of:
1. Maximizing dealer discount from MSRP
2. Taking advantage of the $7,200 lease cash
3. Avoiding/minimizing dealer add-on charges

Since you will only have the lease briefly, things like Money Factor and Residual Value are not important.

 

[Brian@shottenkirk]

So, I am looking to purchase a Stinger with out taking out a loan. Paying Cash. Based on what I am seeing above, seems that I would be better to follow your steps. The MSRP is $52,535 for a GT2 AWD. I have not started negotiations but I am 100% going to buy the car. There is 3 exact cars I am looking for at 3 different dealers within my area.

My question is, do to the huge discount Kia is giving for a Lease, would I be saving allot of money by do the above versus just writing a check?

Is it weird that I am a kia sales rep who is also named Brian Lewis?

 

[Brian@shottenkirk]

They have no need to know. It's all about you and KMF at that point. Once you see your account with them post online, login and contact them for the Buyout. Dealer isn't involved at all. Just get the best deal you can from them and go from there.

And we would all love to see how this all works out in the end!

He is absolutely right, after the purchase the dealer isn’t involved anymore in the finance. I encourage my customers to do a lease buyout on the stingers for the lease cash rebate

 

[0FSGVN]

So if I'm understanding this all correctly, you lease it to take advantage of lease incentives, save on total cost of car when you buy it out?

 

[Brian@shottenkirk]

So if I'm understanding this all correctly, you lease it to take advantage of lease incentives, save on total cost of car when you buy it out?

Ok, so yes basically. Lease cash incentives are higher than normal rebates. So if your plan is to lease the car and buy it out immediately then this is a good way to go. Now if you intend to lease it and keep it through the whole lease then this is not the best way to go about buying the car. The money you saved in lease cash was made up in lease rental charges on monthly payment. Let me know if this helped you

 

[Mach_Tuck]

Ok, so yes basically. Lease cash incentives are higher than normal rebates. So if your plan is to lease the car and buy it out immediately then this is a good way to go. Now if you intend to lease it and keep it through the whole lease then this is not the best way to go about buying the car. The money you saved in lease cash was made up in lease rental charges on monthly payment. Let me know if this helped you

@Brian@shottenkirk is absolutely correct. The lease cash is made back over the life of the lease as the RENT charge. Hopefully the rent is lower than the lease cash otherwise you are getting taken on the lease deal.

Lease then buyout IMMEDIATELY is the only benefit here. DO NOT wait till into the lease to buyout as you would have paid unnecessary rent fees.

 

[Brian Lewis]

I want to THANK each of you for your help. I was able to take advantage of this Lease/Buyout yesterday. Leased a GT2 AWD (Sticker of $52,300 plus tinted windows and other extras) at $50,000 plus the $7,200 lease bonus.

Ill pay the whole balance off as soon as I can .

Only question I have is how do I find out my balance and pay it off quickly? Do I have to wait several weeks to get my lease payment book in the mail?

Again, THANKS!!! This post really saved me money...