Anyone know how a "Loan/Lease Termination Event" work?

[phatjoe]

Hey,

I got an email from a nearby Jeep dealership, regarding a 72 hour "Early Termination Event", Below is some of the information within the email. My wife is leasing a 2016 Lexus IS200t, with one more year left. It would be great to move her into a wrangler.

Anyone familiar with how these programs work? I know they wouldn't do it unless the dealership (whoever) is making some money.


TERMINATE YOUR LOAN OR LEASE EARLY!

Our records show you qualify for this program.

We work with all lenders in the U.S. and payoff your vehicle in full.

Also, you may have significant equity or paid off your vehicle; we can purchase your vehicle during this event or use it to offset taxes and monthly payments.

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[jmill012]

Every vehicle financed, whether it be lease or buy, has a payoff. Some leases require an additional fee to pay it off early or "buy" it early.

Call your leasing company, which if it is a Lexus my guess is it's Toyota financial Services, and ask for the payoff amount which will include any fees associates with paying it off early. Then do research to see what the trade value is as of today. If you owe more than the trade value, they will roll the negative equity into the new car purchase.

Hope that helps....

 

[Kadonny]

Sales tactic. What @jmill012 said is 100% accurate. All leases and loans have a payout to break the contract, it's just a matter of how much it is and how that compares to trade in value. That dealer is really doing nothing different than any dealer does on any day of the year except they are trying to make it some sort of "event". Lame. Take your time, get your buyout of your Lexus and shop around to different dealers, you'll be better off than some faux event hyped by some dealer.

 

[Chocolate Thunder]

Marketing to get you in the door. Whatever they pay off for you will be added into your new loan or lease.

 

[islandtees]

Remaining lease payments get calculated into the new lease.

 

[jmill012]

Remaining lease payments get calculated into the new lease.

Not necessarily. If the trade value is higher than the payoff, he will have a credit toward the new purchase. (Doesn't happen often but COULD happen)

 

[islandtees]

Not necessarily. If the trade value is higher than the payoff, he will have a credit toward the new purchase. (Doesn't happen often but COULD happen)

I have never seen remaining payments and residual value lower than ACV.

 

[jmill012]

I have never seen remaining payments and residual value lower than ACV.

Ford Raptor is the only one I have ever seen. By 2020 I may be leasing a Raptor given Jeeps history on price increases :cwl:

 

[islandtees]

Ford Raptor is the only one I have ever seen. By 2020 I may be leasing a Raptor given Jeeps history on price increases :cwl:

Here is the next problem. You can not trade a lease, as you do not own the car. The dealer has to purchase the car from the lease company. The residual is only available to the person on the contract. If the dealer wishes to purchase the finance company can tell the dealer what price they can buy for. The lease company owns the car. If a residual is lower than ACV the finance company knows with auction reports and will sell it higher than the contract residual. The only way it can work is the person leasing has to buy the car at the contract residual, flip title in their name and trade in.

 

[jmill012]

Here is the next problem. You can not trade a lease, as you do not own the car. The dealer has to purchase the car from the lease company. The residual is only available to the person on the contract. If the dealer wishes to purchase the finance company can tell the dealer what price they can buy for. The lease company owns the car. If a residual is lower than ACV the finance company knows with auction reports and will sell it higher than the contract residual. The only way it can work is the person leasing has to buy the car at the contract residual, flip title in their name and trade in.

I would disagree. It doesn't matter "who" pays off the car.

When you trade in a car, the dealer agrees to pay you $XYZ for the car and you sign paper work allowing them to do the title work for you i.e. reassign the title to them once they receive the free and clear title. If the amount owed is more than the amount they agree to give you then you get money back. If it is less then you owe the dealer money or you roll it into the next purchase.

 

[GARRIGA]

Here is the next problem. You can not trade a lease, as you do not own the car. The dealer has to purchase the car from the lease company. The residual is only available to the person on the contract. If the dealer wishes to purchase the finance company can tell the dealer what price they can buy for. The lease company owns the car. If a residual is lower than ACV the finance company knows with auction reports and will sell it higher than the contract residual. The only way it can work is the person leasing has to buy the car at the contract residual, flip title in their name and trade in.

Having paid sales tax on purchase amount that some states allow as credit towards sales tax on new vehicle but not so on lease if tax not part of capitalized value. Or something like that. Going off memory. I’m sure most of it is correct. Lol

 

[The_Phew]

I have never seen remaining payments and residual value lower than ACV.

My wife's AWD Sienna was worth over $3k more (private party) than the lease residual at lease end, so obviously we bought it out. It was a zero money factor lease, so we came out way ahead by leasing instead of financing. The lease acquisition fee was like $600, but it saved us over $2k in interest that we would have paid if we financed.

If you understand the math and shop around, you can save big bucks by leasing. Unfortunately, most lessees are just blindly shopping for a lower payment and end up paying far more than they would have if they financed.

 

[islandtees]

Having paid sales tax on purchase amount that some states allow as credit towards sales tax on new vehicle but not so on lease if tax not part of capitalized value. Or something like that. Going off memory. I’m sure most of it is correct. Lol

In Florida tax is only on the payments, not the residual. If you buy it at lease end you pay the tax on the residual amount.

 

[islandtees]

I would disagree. It doesn't matter "who" pays off the car.

When you trade in a car, the dealer agrees to pay you $XYZ for the car and you sign paper work allowing them to do the title work for you i.e. reassign the title to them once they receive the free and clear title. If the amount owed is more than the amount they agree to give you then you get money back. If it is less then you owe the dealer money or you roll it into the next purchase.

You do not own the car when you lease. The leasing company buys the car and leases it to you. That's why you don't get a tax break on a lease turn in on another car.

 

[jmill012]

You do not own the car when you lease. The leasing company buys the car and leases it to you. That's why you don't get a tax break on a lease turn in on another car.

In MD you pay the full tax upfront on behalf of the leasing company. Maryland gives you a tax break IF you trade it in or buy it out right. If you "turn" it in to the dealer and leave and purchase elsewhere, you do not get a tax break. You have to be careful, dealers of the same brand will take the car as a "turn in" because it is under water which is OK because the amount you are under may be more than the tax benefit. However, if you buy a different brand they can only take it as a "trade in". He is going from Lexus to Jeep, so he would have to either;

A - terminate his lease early, return the lease to Lexus and pay the remaining payments less the remaining monthly lease fees (interest) plus the termination fee. This route may be worth it if you have significant negative equity and can't wait to buy the Jeep. The leasing company is OK with this because they get a car a year early at the same residual (because you paid the remaining balance of your term) and it's worth more now than a year from now. This is spelled out in all lease contracts.

OR

B - trade it is on another vehicle and pay the negative equity OR get a credit for his equity (plus depending on his states tax code, he may get a tax break on the new purchase i.e MD)

Depending on the value of the car at the time he wants to buy the Jeep will determine if A or B is the better route.

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