Early Lease Buyout

Rich? Hardly. Cash? Hardly either.

Why don't you sit down and honestly calculate your monthly payment on your lease vs a 5 year finance payment on the exact equally equipped car. Figure in keeping the car for 10 years (which equals 5 years of no payments) vs 10 years of lease payments (plus any and all cash/fees/downpayments involved in the multiple leases during that time period). Basically figure in every cent that would go to either plan. Then also don't forget to subtract the remaining value (resale value) of the car you OWN, vs the rental cars which you own nothing... The difference in maintenance costs will be negligible. On top of all that, then don't forget that once you own a car you can reduce the amount of insurance coverage you have on it, vs a string of rentals which you need full coverage 100% of the time. In the end you will be very surprised on how much you think you "saved", when you see how much you actually lost.

The only perk is you get a new car every few years, but then again a rental car also comes with it's limitations like mileage caps which == less freedom to use the car as you please unless you want to start paying tons of extra cash. Sorry, my original statement of "lol" still stands.

FYI. Doing a rough calculation of my fully loaded 2012 Prius 5 over a 10 year period minus a very poor resale value comes to under $250 per month. With a good resale value it's closer to or even less than $200 a month. Leasing (which would cost fees plus around $500 per month) can't even come close to this. After a 10 year period a lease would cost in the vicinity of $30,000 to $35,000 more... That's why I say lol.

a lease does not benefit the dealer that much or they would be pushing everyone towards it. they much rather sell the vehicle. in reality, its the bank that loses because they finance less, so they make less but allows the leassee to get into a more expensive vehicle with much less out of pocket.

all in all, its the lender that loses not the dealer or the leassee. that is the primary reason that all leases are pretty much done by an entity that is wholly owned by the manufacturer. i dont think regular banks would want to get involved.

Dealers sell twice as many cars with a lease. Most people that buy keep it for about 6 years. Most people that lease have it for 3 years.

ya they probably have to do twice as many leases to make any money

Not true. The dealer gets a fee from the finance company (typically Toyota Financial Services) for every lease and sales financing they do. And on a lease, they sell the car to TFS so their profit on that portion isn't affected. The lease acquisition fee when I did mine was $650 (not sure if dealer gets it all or not), which is not insignificant compared to the profit on the sale of the car.

Every time I've bought a car, they've always tried to push financing or leasing--because it's profitable for them (not that there's anything wrong with that ) .

just because a lease is better than no sale at all does not mean it is as profitable TO THE DEALER as a sale.

I disagree.

Let's say the dealer sells a car for $30K.

On a cash sale, they make X profit.

On a lease, they make that X profit (since they sell the car to the finance company for $30K), plus their fee from the financing company. So their profit is X + leasing fee (which is > X).

Same logic applies to a financed (loan) sale.

Both leasing and financing are additional profit making components of the transaction, and are therefore more profitable than cash sales.

Relevance would be if he was going to buy a new Prius or other Toyota vs. walking shoes, bike or bus pass.

Chuckle. So is yours. Leasing is more economical in some situations than in others as all the Lease-Buy comparisons will demonstrate.

In the 3-5 year window, leasing will work as well or better financially if you are within the mileage parameters of the leases (12-15,000 miles).

With cars like Prius that tend to beat the book depreciation, a lessee can even make an extra $2,000 by buying the care out and selling it at the end.

When buying new, high tech cars, leasing within the warranty period, usually with free maintenance agreements for the duration, doing the lease can be protection in case the leading edge becomes the bleeding edge.

I disagree. Can you come up with a reason to own a Toyota Prius less than 5 years? Here are some examples that do not make sense.

- I have a lot of money and like a new car every three years. (I doubt a Prius would be their first choice and they do not care about gas prices)
- The company I work for requires us to get a new car every three years. (This is extremely uncommon most companies will let their sales force keep a car for up to 6 years)
- The company I work for requires its field people to drive a car less than 3 years old to hold up and image. (Driving a Prius is not a flashy car)
- I get a better tax break on leasing (This is absoulty not true. The taxes work out the same if you work for a large company or a small company)

Again flawed math. You are not making $2,000 dollars. You are losing thousands of dollars leasing a new car every 3 years and then getting a new one for another 3 years. You are eating a large part of the depreciation by getting rid of the car after 3 years and doing it over and over. It is like the joke were the lady goes to the store and buys $300 worth of shoes and tells her husband they saved money because they were 80% off. That math is flawed also.

Toyota makes the most reliable cars in the world. Many people have 100,000 to 300,000 miles with less than $1,000 in repairs. My prius is 3 years old this Oct and has 89,000 miles with out any issues. 12 years ago the Prius was bleeding edge. Not so much today.

I'm sure you do, just pointing out that most non-bias consumer sites will tell you leasing is equivalent to purchase or maybe a bit better if you fit the parameters for leasing, basically drive 15,000 a year or less and like to get a new care every three years.

There are circumstances where the leasing works better. It's not by much and buying the car will give you more options but going jihadist on leasing is incorrect.

Assuming you're also the type that enjoys having to buy out a lease with cash on hand (to avoid losing all your "profit" in finance charges) and also enjoys selling cars 10%+ above the going rate. Not for me. Fact is people generally do not buy out leases to "sell" them just to break even. People see the lower monthly while not seeing the larger picture that is loosing them thousands of dollars per year.

The only real reason to lease a car is to drive something that you really can't afford in the first place. In the end you own nothing, or have to finance a buy out for another 3 to 5 years. All that will put you way behind the $$ game if you had just financed in the first place.

Post the consumer sites.
Post the circumstances where the leasing works better. Read my examples before you post.

RaZa – Well put. I agree.

Author had 2010 Prius with buyout of $16,000. 2010 Prius with 36,000 in good condition with mid range options has Kelly Blue Book retail price of $20,000.

So you honestly expect a person that leased a vehicle to get a payment down to $230 per month to come up with $16,000 cash in order to buy it outright so that they can (hopefully) sell it at KBB?

Wasn't he was going to do just that, buyout the lease and finance a new car? Transaction is no different and with good credit union the transaction costs are low. It is good used car buy for himself at $16K or an opportunity to make $2K to use toward purchase of new car.

Lol,im not claiming to have saved more then financing from the start.In my original post I even say I shouldnt have leased in the 1st place.I had a Chevy Pickup getting about 15 miles to the gallon.My monthly gas bill was about $400 a month.I leased my Prius during the so called "spontanious acceleration problem"time period,so i got a great deal($229 per month),with 500 down including 1st months payment.So from my point of view I was getting out of my $300 truck payment and saving 250 per month in gas.Plus I had a warranty on the Prius which was a plus because the warranty on the truck had expired.I bought the Prius as a matter of economics and had no intention of keeping it or buying it out.So the lease made sense.The problem was that I fell in love with the dam car and dont wanna give it up.Believe me I wish now I had financed it in the 1st place.All I was saying is the money I saved over financing in the 1st place is a good portion of the buyout price which makes it a little easier for me to live with the fact that I leased.I now wish I had financed from the start but you live and learn.

You've decided you want to keep the car you are leasing?
From my understanding there is a monthly rent charge calculated into each monthly lease payment. The sooner you buyout the lease from TFS, the less you will pay of the monthly rent portion of your lease.

I'm sure that the OP has contacted TFS by now -- I do not believe that they change the terms of the lease. Sometimes they will wave the fees/ final term at special sale events -- but this is only when you are going to replace the vehicle with another new car. We have leased many many new cars and anyone who says that that they do not work out financially -- is simple wrong. Not everyone wants to own a car for 10 years or until the wheels fall off - situations change and one needs a different car -- Many luxury cars are actually cheaper to lease for the normal term than they are to purchase. Like anything else you need to do the numbers and see the true costs -- The actual resale on the purchase is the big variable .. as is the money cost. Often the lease rate is subsidized at higher rates than purchase.

The the OP -- why do you want to get out early? I would also crunch the numbers again as you will have he cost of the buyout.

Someone told me that I would save the interest portion of the remaining 6 lease payments but not sure thats true.Gonna call TMC on Monday.

In my TFS lease, the early buyout amount is the residual value plus the sum of the depreciation portion of the remaining payments--so yes, that means you don't pay the interest portion of the remaining lease payments. It's detailed in a paragraph in my lease--I imagine it's in yours as well.