keithandstef

Question please. Most lease cars have a posted residual vale of 55% or so of their original MSRP at the end of the three year lease. But I rarely see a $40K car go for $22K just 36 months after it hits the road. At least not from what I've seen (they're more like $26 - $28K for a nice car like an A4). Is the mark-up on an off lease car that extreme?

So let's work a deal. I'll lease the car for a modest payment for 36 months, then someone else can buy it for the residual value. I might have to sign for it, or would Audi (for example) allow someone else to step in and buy the car at residual value. I'd have saved the buyer probably $4 - $6K over what he/she would pay for a dealership off lease car, and maybe we could split the windfall.

Am I missing something? Just curious. Thanks.

keithandstef

Guess I need to clarify to that it's my understanding that he lessee can buy the car for it's residual value at the end of the lease. Have seen this many times.

AofC_RR

Yes you can buy the car for the residual as the lessee. However to buy it and sell it to someone else is a complicated process unless you have the cash to pay the whole thing off. There's usually escrowing money involved.
Also keep in mind what you're talking about in terms of pricing usually includes certification and reconditioning. So the four curbed wheels, french fries under the seats, the penny stuck in the cigarette lighter, that's all been fixed. The car has been detailed, and mechanically inspected.
So lets say realistically you did a 36/12k. Didn't do tires or brakes the whole time. You want to sell it to someone for residual. They agree. They inspect your car and ask you to put tires on it. Instantly you're out 600-1000. They drive the car for a bit, then they have to put brakes on it, 600 again. Additionally the car only has 1 year of warranty left. So they have to pay the dealer a visit and drop between 1200-3500 on an extended warranty.
Where's the savings?

keithandstef

Very valid points. Still, sinking the money into the tires and brakes, you're still way ahead of the dealer mark-up. And I'm not convinced the dealer does much of anything to these off lease cars, except enjoy charging a premium for buying them off the lot (as opposed to private party).

And I guess I hate leasing too because I take REALLY good care of my cars, and then all that does is allow someone else to benefit from my meticulous nature and care. The dealer would make a killing on my lease cars, no doubt. That's why I probably will never do it.

Thanks for responding. I hear what your saying about the hidden costs. And I would hate to return a lease car, have a friend take ownership, and then have it turn into a turd.

canyoncarver

Most manufacturers do have specific rules for certifying pre-owned vehicles. These would involve doing a full inspection, checking service records, etc.

I always personally have horrible thoughts about lease returns and would not buy one, just as I would not buy a used car at a dealer if I could avoid it. I'd rather buy from the original owner and have an idea of how the vehicle was treated.

I remember a friend who worked at a shop telling me about a lease vehicle whose engine had grenaded and blown up. Turns out the idiot who leased it figured "it's a rental" and never changed the engine oil.

We leased my wife's MDX, primarily as a hedge against possibly outrageous fuel prices. We were worried about being stuck with a car with no value if gas got up to $6 a gallon.

The car has been outstanding so when the lease is up next year we will likely write a check and pay it off outright for a negotiated value below the 60% residual.

keithandstef

That's what I'm talking about. That could warm me up to a lease. Writing a check at the end of your lease for a bit below residual value. So a dealership might actually do that (as opposed to say no thanks, since they know they can get much more than that selling it off the lot)?

Would love to hear that could work (the below residual value offer). I just have to wonder given how much it seems the dealerships mark them up after the lease.

canyoncarver

The dealer has no say in this, it's completely between you (the leasee) and the bank (the leaser). The dealer serves no other purpose than to collect the vehicle at drop off and begin the re-certification process. The dealer typically gets the vehicle for a price BELOW the residual value which makes it easy for them to turn a profit on the vehicle if they want to keep it, or if they don't want it the vehicle will often go to auction, etc.

When your lease is a month or two away from being up you will start getting notices from the BANK about the end of the lease and the option to purchase the car at the residual (payoff) price.

At this point you are free to call them and try to negotiate a lower price. Some banks will absolutely refuse to negotiate, others are known for being willing to knock something off of the price since it frees them up from having to re-certify the vehicle and dispose of it themselves.

keithandstef

Great info. Thanks Canyoncarver.

need_TQM

Of course this doesn't always mean you are 100% certian to get a good car. I had a friend buy a Toyota certified (whatever they call it) car that after she drove it off the lot at an out-of-town dealer (one of the reasons she wanted the toyota certified car) she had a squeaking belt and took it to a local dealer. They discovered the underbody panels had been severely damaged -- some were missing, others were literally held on with bungee cords... The dealer she purchased from and Toyota corporate are sort of giving her the run-around -- from her side of the story Toyota corporate isn't standing behind this at all -- they say it's the dealer's job as they certify the car -- they obviously never did the inspection or did and decided not to fix these things....

Sorry -- don't want to thread-jack this.

Leases to me are beneficial in that they allow you to know the cost of the car for a fixed amount of time -- if you know you want to keep the car longer purchase will likely be less total cost. If the residual turns out to be higher than what the leasing bank estimates, purchase/sale would be lower total cost, but it's a gamble if you plan to sell in the same timeframe as the lease. Plus with a lease you don't have to go through the hassle of selling the car yourself. Both have their advantages. But I also have known some people that treat a lease like a rental -- not sure I'd want to roll the dice... most of the problems would likely show up well after 36k (for example)...

EGainer

i keep the car in pristine condition with every dollar and mile tracked. park as far as possible away in every lot, oil changed every 5k, just put new tires on. here's an example

i did 3yrs, 12k. 39500 was price of car when obtained. residual is 23. private party right now at 32000 miles is 28k, trade in is 24k and retail is 31k

2008 a42.0t