OT: Buying out a lease?
10-29-2001, 10:29 AM
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OT: Buying out a lease?
Does anyone know how much of the monthly payment goes toward a buyout every month? For example I pay $540.00 per month. As each month passes do I pay more toward the buyout? I thought it was calculated differently from a conventional loan.
Thanks in advance
Thanks in advance
10-29-2001, 10:38 AM
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Re: OT: Buying out a lease?
I believe the residual value is set at the beginning of the lease. You pay the difference between the cost of the car and the residual (ie. the part you use). If you want to buy the car, you will have to pay the payments off and then buy it for the residual value.
10-29-2001, 03:44 PM
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Actually...
Leases generally use some screwed up (my opinion) math.
If you want to buy at the end of the lease, it's for the residual, which was set up front.
If you want to buy it out before the end of the lease (or turn it in before the end of the lease) they basically calculate what you owe which should be "somewhat" less than the sum of all your remaining payments.
The catch is (for turn in anyway) if the car is worth LESS than the residual already, then you get the short end of the stick, i.e. you can get stuck paying all the remaining payments.
At the end of the day, the math looks really close to this:
Monthly_Payment == interest_on_residual + standard_loan_payment( cost_of_car - residual, length_of_lease)
For those that aren't pseudo programmers, that means your monthly payment is part interest on the residual amount, and part paying off (with interest) the difference between the purchase price and the residual.
Early buy out costs the residual plus the balance of that "hidden" loan amount. Don't expect them to disclose those numbers to you very often (although I did get them once from a leasing company).
They try to present everything as "simpler" than this, but the result is messy (my opinion).
Bottom line is that leasing companies make their money by interest you pay and taking some risks on what the car will be worth at the end of the lease. When you try to end the lease early they're going to usually make sure they come out ahead of the game, which measn you lose some money compared to if you hadn't leased the car in the first place.
I.e. if you lease, it's usually best to run to the end of the lease, otherwise use normal loans (or better yet, all cash!)
...Jason
If you want to buy at the end of the lease, it's for the residual, which was set up front.
If you want to buy it out before the end of the lease (or turn it in before the end of the lease) they basically calculate what you owe which should be "somewhat" less than the sum of all your remaining payments.
The catch is (for turn in anyway) if the car is worth LESS than the residual already, then you get the short end of the stick, i.e. you can get stuck paying all the remaining payments.
At the end of the day, the math looks really close to this:
Monthly_Payment == interest_on_residual + standard_loan_payment( cost_of_car - residual, length_of_lease)
For those that aren't pseudo programmers, that means your monthly payment is part interest on the residual amount, and part paying off (with interest) the difference between the purchase price and the residual.
Early buy out costs the residual plus the balance of that "hidden" loan amount. Don't expect them to disclose those numbers to you very often (although I did get them once from a leasing company).
They try to present everything as "simpler" than this, but the result is messy (my opinion).
Bottom line is that leasing companies make their money by interest you pay and taking some risks on what the car will be worth at the end of the lease. When you try to end the lease early they're going to usually make sure they come out ahead of the game, which measn you lose some money compared to if you hadn't leased the car in the first place.
I.e. if you lease, it's usually best to run to the end of the lease, otherwise use normal loans (or better yet, all cash!)
...Jason
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