Buying a leased car at end of contract?

[TAEMom]

So, 18mos. ago it seemed like a great idea to lease our van instead of purchasing it, due to the tempting lower payments. We have always bought our vehicles in the past. However, I have a bad habit of getting "car envy" after 4 yrs. and wanting a new vehicle, so we have always ended up buying a new van just as, or even before our old one was paid off, meaning we always had car payments anyhow. That's why we decided to go the lease route this time. Trouble is, in the past, we were always able to sell the vehicle (on our own, rather than trading it in) and then we had that $$ toward a nice downpayment on a new one. Obviously, that's not going to happen this time.

We have gotten really serious this year and have been able to eliminate all of our CC debt, we're just stuck with these car payments (DH's is almost paid off though). As our kids get older, and college looms closer each year, we feel like we would rather not have perpetual payments! We have been very happy with the van (Honda Odyssey) and we're thinking that it might make sense to try to purchase it at the end of the 3 yr. contract. Hondas tend to have good residual value. Does anybody know if that makes sense to do? Or is it better to simply return it at the end of the lease (we will not be over our mileage limit) or sooner, and buy a different vehicle? Of course, the problem then becomes finding enough $$ to use toward a downpayment, which would enable us to keep the payments low. I am sure that one of you budget experts can help us!

Thank you!

 

[AmyinKY]

My husband just did this. He has a Toyota Tacoma that he leased for 5 years then bought it at the end of the lease. He was WAY under the mileage limit due to him driving it less than one mile a day. It is a big pain, but so worth it for us. You should have a payoff already stated in your lease documents, if you can't find it call honda. Start saving a little now so when it is due you can either payoff the buyout price or have a downpayment if you have to borrow the balance. Hope this is clearer than mud.

Amy

 

[bumbershoot]

If you like the car and the payoff amount (as far as I know it is always set at the beginning of the lease; I have always known how much I would pay for my leased cars, if I chose to buy them) makes sense (is similar to a similar used car), then do it.

If the cost makes sense and you still like it, the best part about buying THAT car is you know exactly how it's been driven.

For me it has never made sense...my Jetta was a borderline lemon, my New Beetle just wasn't, I don't know, right for me, and my Golf (last month before finishing its lease!), well, I'm tired of 20-something men revving next to me at stoplights, wanting to race. And when DH is driving it, it's especially bad... So we're DONE with having a Golf.

So I might have had very specific reasons why not to buy my leased car, but if it works for you, do it!

 

[Cheshire Figment]

I agree with Amy. My mother had a Nissan Altima on lease in NYC and was averaging about 3,000 miles per year while the lease was compouted on 10,000. When the 39 month lease was up she bought the car.

She knew it and was comfortable with and in it. She was able to pay cash. However, if necessary she could have gotten a loan based on the contracted purchase price which was sent in the lease agreement, and her monthly payments would actually have been lower than the lease payments.

And check with both your bank and the dealer, see what can be done for financing. It is better to start your inquiries a few months before the lease is up so any paperwork can all be taken care.

Just remember, the selling price to you is already in the contract.

 

[PatsGirl]

Although the price is set on the contract at the beginning you may be able to hagle with the dealership. I had a 36-month lease on my grand cherokee laredo with a buy-out at the end for I think just under $10,000. I stayed within mileage give or take a bit I don't remember but the book was only $9K when the lease finished. I called three months prior to the end and asked if they would lower the purchase price. I was told outright no.

Guess what? About a month before the lease was up the dealership called me and wanted to work out a deal. I offered them $8500 -- they accepted and counter-offered a 6% term -- I don't think so. I called my credit union who was able to offer me the car loan for 4%, called the dealership back and negotiated this with them. In the end, car $8500 at 4%, so you never know! I don't think I got a fantastic deal, I think I got a fair deal. As far as I was concerned they could take the jeep back and I'd go buy something else so...

Must say too that I have never owned a jeep and this lease was by "default". I had purchased a Kia Sportage 4X4 at the dealership -- the Kia twice lost its 4X4 when I was on the beach, the second time on July 4th. The only car they could get me into that weekend was this Jeep -- boy am I glad, the jeep now has 120K on it and runs like a charm!

 

[cajunpeach]

If the purchase price at the end of the lease is similar to what comparable vehicles are selling for, go for it. As others stated, you know this vehicle. The good, bad and the ugly. If you buy a used vehicle, even the same model, you don't know how it was taken care of. On the other hand, if your buy out is way off, try to negotiate, if that doesn't work, look elsewhere. I'm a big fan of Craigslist.com. I found a fantastic deal on a used vehicle there.

Congrats on paying off your debt. It's a constant struggle for me

 

[Nicolepa]

You don't have to wait until the lease is up. You can call the bank at any time and get your payoff. Then just get a loan thru your bank or credit union. That way you will be x months ahead of your payments. For example if you have 12 months on your lease and you are planning a 5 year car loan, then you will only have 4 years left when that lease would have been up. Plus you will lock in your interest rate now instead of at whatever it would be down the line.

 

[SarahKate]

I too have a leased Odyssey. From all that I have read, it is not a bad idea at all to purchase a Japanese vehicle (mainly, Honda or Toyota) at the end of the lease because many times the residual is less than what the car is REALLY worth and if you sell on your own, you can make a profit.

I have also talked to people in the car selling business and they said that I would have absolutely NO problem selling the van on my own if I wanted to. Just look in your local newspaper.....do you see Odyssey's for sale? Usually not. You'll see Dodges, Fords, etc. but not Hondas. They really do keep their resale value.

I'm not sure what I'll do when my lease is up. Actually, I'm past the 2-year lease and am on a month-to-month lease right now and just have to give Honda 30 days notice whenever I decide to end the lease. I just sold our house by owner, so I'm not quite ready to sell something else myself!!!

All in all, I've been super happy w/ our decision to lease. I know there are lots of folks on the Dis who are against it, but I would definitely consider doing it again. IT's not for everyone though. And I would never, ever lease an American vehicle....it must be an import that will retain value.

 

[TAEMom]

I appreciate all of this information! I had no idea that we could actually get a payoff amount *before* the lease is up, which is something we may consider. I also had no idea that we could haggle at the end, although I have a feeling that there won't be much, if any incentive for the dealership to lower the price to us, as it will probably be a very marketable car.

Thanks so for all of your great input!