"Why you should buy your leased car now"...WSJ article today...
05-15-2002, 09:58 AM
#1
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"Why you should buy your leased car now"...WSJ article today...
Article tells the story of a woman who "beat the bank" (her words) by negotiating a purchase at lease-end for $4,000 below her specified lease "buyout price."
Quote:
"The millions of Americans who lease cars are about to get a pleasant surprise. Though they don't like to talk about it, many auto lenders are now deperate for you to buy your car at the end of its lease. A glut of used cars--combined with a huge number of leases (3.1 million) ending this year--has put pressure on lenders to unload cars, or face big losses."
and...
"...leasing companies last year lost an average $2,914 on every car returned to them...up from $2,550 the year before."
and...
"Increasingly, lenders are scheduling inspections on the vehicles some 30 days before the lease is up, in part to give consumers an ominous sense of the thousands of dollars in charges they may face for dented side panels, stained carpets or extra miles logged" (to motivate consumers to buy at the lease buyout number).
Suggestion is made that lease holders wait and wait and wait before agreeing to any reduced buyout price, with examples shown where folks saw the buyout number drop by $2,000 from first offer to final-final offer in as many as three steps.
Guy who saw his buyout price drop $6,000 on a Toyota 4-Runner's advice: "Don't take the contract (price) for granted."
Quote:
"The millions of Americans who lease cars are about to get a pleasant surprise. Though they don't like to talk about it, many auto lenders are now deperate for you to buy your car at the end of its lease. A glut of used cars--combined with a huge number of leases (3.1 million) ending this year--has put pressure on lenders to unload cars, or face big losses."
and...
"...leasing companies last year lost an average $2,914 on every car returned to them...up from $2,550 the year before."
and...
"Increasingly, lenders are scheduling inspections on the vehicles some 30 days before the lease is up, in part to give consumers an ominous sense of the thousands of dollars in charges they may face for dented side panels, stained carpets or extra miles logged" (to motivate consumers to buy at the lease buyout number).
Suggestion is made that lease holders wait and wait and wait before agreeing to any reduced buyout price, with examples shown where folks saw the buyout number drop by $2,000 from first offer to final-final offer in as many as three steps.
Guy who saw his buyout price drop $6,000 on a Toyota 4-Runner's advice: "Don't take the contract (price) for granted."
05-15-2002, 03:24 PM
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or read it here
With Financing Firms Facing a Glut,
Now's Time to Buy Your Leased Car
By KAREN LUNDEGAARD
Staff Reporter of THE WALL STREET JOURNAL
Like many car shoppers, Dagmar Bogan negotiated hard at the beginning of her lease. She pushed for a extra-generous mileage allotment on her 1998 Ford Expedition XLT, and even walked out once when the dealership wouldn't meet her price. (It later caved.)
But unlike most shoppers, Ms. Bogan also negotiated at the end of her lease, when she wanted to buy her SUV outright. Armed with Internet research that showed her the truck was worth less than the buyout price stipulated in the lease, she called her leasing company and started another round of bargaining. The result: a $20,570 deal, nearly $4,000 less than the original buyout price. "I think I beat the bank," says the Irving, Texas, software engineer.
The millions of Americans who lease cars are about to get a pleasant surprise. Though they don't like to talk about it, many auto lenders are now desperate for you to buy your car at the end of its lease. A glut of used cars -- combined with a huge number of leases (3.1 million) ending this year -- has put pressure on lenders to unload cars, or face big losses.
According to a soon-to-be-released study from the Consumer Bankers Association, leasing companies last year lost an average $2,914 on every car returned to them. That's up from $2,550 the year before.
As a result, banks and finance companies that lease cars are trying several new tactics to convert more leaseholders into owners. For one, leasing companies are contacting consumers earlier in the process -- on average six months before the lease is up -- to gauge their interest in buying.
Increasingly, lenders are scheduling inspections on the vehicles some 30 days before the lease is up, in part to give consumers an ominous sense of the thousands of dollars in charges they may face for dented side panels, stained carpets or extra miles logged. In the past, such inspections were largely conducted after the lease expired.
Hearing those charges could be a motivating factor for some consumers to look into buying the vehicle to avoid the fees, say Ted Brown, auto-finance manager at BenchMark Consulting International of Atlanta, which conducted the new study showing the industry's mounting losses on returned vehicles.
Let's Deal
While banks and finance companies are increasingly willing to haggle, the leasing arms of some big auto makers are less inclined to do so. For one, they don't want to undermine their relationship with dealers. Even more important, the auto makers have a different agenda. "We would much rather have that customer buy a new vehicle," says Joe Poi, residual risk manager at Ford Credit. General Motors' big finance company, however, is willing to negotiate with lease customers.
But about 50% of leases are held by banks, credit unions or finance companies, nearly all of which are open to deal-making. To find out where you stand, first request an offer from the leasing company. Then, check out what your vehicle is worth at Edmunds.com or Kelley Blue Book (www.kbb.com), both of which offer free estimates. Consumer Reports also offers a used-car pricing service for a $10 fee, online at www.consumerreports.com.
Waiting is by far the most effective strategy. Catherine DeStefano asked Bank of America, which owned her lease, about buying her 1999 Honda Accord before the contract expired at the end of last month. But the $16,700 buyout price listed in the initial lease was more than the vehicle was worth in the current market, and she countered with an offer of $14,000, which was rejected.
Every time she talked to her "end-of-lease representative," the buyout price came down. Finally the week before she turned the vehicle in, the offer was $14,400, more than $2,000 less than the initial offer. It was too late, she had already bought her father's used Camry. Still, she says, "Wait 'til the week before."
That strategy worked for Allen Ollis, the controller at Edmunds. He planned to return his 1998 Toyota 4-Runner when his lease expired last June. The initial buyout price was $26,500 on a vehicle that was worth about $23,000 in the current market.
Then his lender, First Union, said it would be willing to deal. He offered $18,000, and they went back and forth for a week. Finally, he bought the SUV for $20,500, a $6,000 savings. Mr. Ollis's advice: "Don't take the contract for granted."
Write to Karen Lundegaard at karen.lundegaard@wsj.com
Updated May 15, 2002
EAGER TO DEAL
Average loss on returned cars and trucks
Originally predicted values for cars and what they are actually worth today; older models generally have more negotiating room
Model Year Actual Resale Price Orig. Est. Price The Difference
1997 $10,105.01 $11,266.49 $1,161.48
1998 11,680.08 12,671.55 991.47
1999 13,676.97 14,487.99 811.02
Sources: Consumer Bankers Association; Automotive Lease Guide
<IMG SRC="http://pictureposter.audiworld.com/37327/pj_carlease05142002204423.jpg">
Now's Time to Buy Your Leased Car
By KAREN LUNDEGAARD
Staff Reporter of THE WALL STREET JOURNAL
Like many car shoppers, Dagmar Bogan negotiated hard at the beginning of her lease. She pushed for a extra-generous mileage allotment on her 1998 Ford Expedition XLT, and even walked out once when the dealership wouldn't meet her price. (It later caved.)
But unlike most shoppers, Ms. Bogan also negotiated at the end of her lease, when she wanted to buy her SUV outright. Armed with Internet research that showed her the truck was worth less than the buyout price stipulated in the lease, she called her leasing company and started another round of bargaining. The result: a $20,570 deal, nearly $4,000 less than the original buyout price. "I think I beat the bank," says the Irving, Texas, software engineer.
The millions of Americans who lease cars are about to get a pleasant surprise. Though they don't like to talk about it, many auto lenders are now desperate for you to buy your car at the end of its lease. A glut of used cars -- combined with a huge number of leases (3.1 million) ending this year -- has put pressure on lenders to unload cars, or face big losses.
According to a soon-to-be-released study from the Consumer Bankers Association, leasing companies last year lost an average $2,914 on every car returned to them. That's up from $2,550 the year before.
As a result, banks and finance companies that lease cars are trying several new tactics to convert more leaseholders into owners. For one, leasing companies are contacting consumers earlier in the process -- on average six months before the lease is up -- to gauge their interest in buying.
Increasingly, lenders are scheduling inspections on the vehicles some 30 days before the lease is up, in part to give consumers an ominous sense of the thousands of dollars in charges they may face for dented side panels, stained carpets or extra miles logged. In the past, such inspections were largely conducted after the lease expired.
Hearing those charges could be a motivating factor for some consumers to look into buying the vehicle to avoid the fees, say Ted Brown, auto-finance manager at BenchMark Consulting International of Atlanta, which conducted the new study showing the industry's mounting losses on returned vehicles.
Let's Deal
While banks and finance companies are increasingly willing to haggle, the leasing arms of some big auto makers are less inclined to do so. For one, they don't want to undermine their relationship with dealers. Even more important, the auto makers have a different agenda. "We would much rather have that customer buy a new vehicle," says Joe Poi, residual risk manager at Ford Credit. General Motors' big finance company, however, is willing to negotiate with lease customers.
But about 50% of leases are held by banks, credit unions or finance companies, nearly all of which are open to deal-making. To find out where you stand, first request an offer from the leasing company. Then, check out what your vehicle is worth at Edmunds.com or Kelley Blue Book (www.kbb.com), both of which offer free estimates. Consumer Reports also offers a used-car pricing service for a $10 fee, online at www.consumerreports.com.
Waiting is by far the most effective strategy. Catherine DeStefano asked Bank of America, which owned her lease, about buying her 1999 Honda Accord before the contract expired at the end of last month. But the $16,700 buyout price listed in the initial lease was more than the vehicle was worth in the current market, and she countered with an offer of $14,000, which was rejected.
Every time she talked to her "end-of-lease representative," the buyout price came down. Finally the week before she turned the vehicle in, the offer was $14,400, more than $2,000 less than the initial offer. It was too late, she had already bought her father's used Camry. Still, she says, "Wait 'til the week before."
That strategy worked for Allen Ollis, the controller at Edmunds. He planned to return his 1998 Toyota 4-Runner when his lease expired last June. The initial buyout price was $26,500 on a vehicle that was worth about $23,000 in the current market.
Then his lender, First Union, said it would be willing to deal. He offered $18,000, and they went back and forth for a week. Finally, he bought the SUV for $20,500, a $6,000 savings. Mr. Ollis's advice: "Don't take the contract for granted."
Write to Karen Lundegaard at karen.lundegaard@wsj.com
Updated May 15, 2002
EAGER TO DEAL
Average loss on returned cars and trucks
Originally predicted values for cars and what they are actually worth today; older models generally have more negotiating room
Model Year Actual Resale Price Orig. Est. Price The Difference
1997 $10,105.01 $11,266.49 $1,161.48
1998 11,680.08 12,671.55 991.47
1999 13,676.97 14,487.99 811.02
Sources: Consumer Bankers Association; Automotive Lease Guide
<IMG SRC="http://pictureposter.audiworld.com/37327/pj_carlease05142002204423.jpg">
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05-15-2002, 07:23 PM
#9
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Thousands of dollars in charges?
how? unless you beat the crap out of the car. My volvo lease is up in Juky but I have taken excellent care of the car. People who know they beat up cars should not lease anyways, as they get nailed on the back end.
05-16-2002, 05:11 AM
#10
Not always true, some Lessors insure their residuals and won't negotiate...
May smart leasing companies buy residual insurance to protect them against just such losses. I have a GE Capital lease on my car and the residual is insured. No negotiation available (I know because a- I asked, and b- I negotiated the insurance for them when I workde there.) Such a company will get full residual value at lease end from the insurance company.
Than said, many captives- i.e. factory finance companies- do not insure their residuals. They reserve marketing $$ to cover potential losses. But many have not set aside enough money for the losses of today so negotiation is not only possible, but in many cases highly desirable. Just negotiated the "payoff" of our 2000 Explorer Eddie Bauer and bought the truck for $4500 less than residual value, which roughly equates to NADA wholesale value.
Than said, many captives- i.e. factory finance companies- do not insure their residuals. They reserve marketing $$ to cover potential losses. But many have not set aside enough money for the losses of today so negotiation is not only possible, but in many cases highly desirable. Just negotiated the "payoff" of our 2000 Explorer Eddie Bauer and bought the truck for $4500 less than residual value, which roughly equates to NADA wholesale value.
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