Are there penalties if you cancel a one pay lease early?

Ask the Hackrs
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1

Hey guys

What fees (should) come up if you have a one pay lease and end it early?
I don’t have a One Pay lease, but curious how this works
I’m not asking if one pay leases are a good idea. I’m aware that money put toward the lease is never coming back. And lets assume the car is worth less than the residual, so can’t sell it to Carvana.
Since you already made all the payments, do you just pay the deposition fee, or are there additional costs for ending it early?

2

Fees would be disposition fee and possible excess wear/excess mileage charges.

No early termination fee

3

That’s not true. MBFS and GMF will prorate your one-pay if it’s totaled, AFAIK.

Anyway this question is meaningless unless you specify which lender you’re talking about.

4

Okay, General Motors Financial
Also, please define:
MBFS
GMF
AFAIK

5

Mercedes Benz financial services
General Motors finance
As far as I know

Lol laugh out loud!

6

Thanks @Maverick2020!

7

Interesting. What if it’s stolen?

So, it’s different than just putting money down to get a lower monthly payment then, yes? I always understood that if you put say 5k down on a lease, to get a lower monthly payment, but then in a month your car was totaled or stolen, that the bank would get payed off but your 5k down payment was lost. Is that correct?

Thanks.

8

Stolen but not recovered = totaled

The insurer pays out actual cash value. If ACV > payoff, you should get the difference back. Although apparently some lenders are now including language to keep the overage

9

Thanks @max_g

However, ACV includes depreciation, which we all know is greatest when you first drive vehicle off lot, so there goes your down payment.

10

We should also know that total loss events are very low probability events, even more so on the first day or month.

11

Absolutely… but it is a risk to consider as it would likely take years, maybe never, for the ACV to offset the immediate loss in depreciation to where you would recoup any of your down payment back.

But back to your comment of Stolen but not recovered = totaled… so you’re saying that on a one pay lease with MBFS (for example) you would still get back a prorated amount of your lease payment if the vehicle was stolen but not recovered?

12

It’s been a while since i checked MBFS’ verbiage… but in the case of a total loss event, I don’t see why they would care “how” it happened, eg theft, collision, fire, etc. Other than salvage value for the insurer, it doesn’t make any difference, does it? The car is gone.

13

Well, like you said

To you and I, a loss is a loss but to the bank, and insurers, I’m sure the details matter. Plus I believe stolen and totaled are paid by different portions of your insurance policy (collision or comprehensive) and that might make a difference also. Usually different deductibles as well.

Thanks for the info though. I always thought one-pay leases were a huge risk and now I know better… or at least it’s something to consider, depending on the terms of the bank.

14

I recently did a one-pay lease for several reasons in which the benefits outweighed the negatives in my situation. In that I was able to negotiate a lower mf and obviously cut out the interest portion on the rent & depr charge. Savings was approximately $15 / month over 24 months = $360…when my effective payment is $311. If I decide to buy a place then the payments will not go into DTI calculations.

Depending on who your insurer is, and of course it costs a little more but you could get an Agreed Value Policy vs ACV.

15

With US Bank and Ally, they asked for a much higher payoff amount when trading it into a dealer vs cash payoff. So I consider this a sort of a penalty.

16

Curious, how is the one pay reported to credit bureaus? For example if it’s a 24 month term do they report your account in good standing, paid on time each month for 24 months? Or does it just show as basically a closed account, sort of like a loan that’s been paid in full?

17

That’s a good question. I would imagine it shows as in good standing, paid on time, since the lessor essentially transfers the money from unearned revenue over to revenue on a monthly basis even though the consumer pays it all up front. From what my bank shows me on the “Credit Score” it only went down a point between 12/3 and now…i’ll see if can find out more.

18

Can you further explain the premise of your question, since I don’t understand it at all as posted.

If its a one pay lease, just’ve made all payments, why would you want to end early? You don’t mention in the event of a total insurance loss, so why would this scenario ever make sense?!?