Broker pushing CULA lease-to-own on 2021/2022 Tacoma 4x4 TRD Off-road, Sounds too good to be true

Ask the Hackrs Buy/Finance
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Hello all, this forum has been extremely helpful so far so I’ll try to make this concise as possible.

Brass tacks are as follows:

I live in CO, South of Denver. Centennial, specifically.

Buying a new Tacoma from the factory through an Auto-Broker who is selling to me for exactly MSRP, claiming he is taking only his Hold Back as payment. My aim is to keep this truck 20+yrs if possible.

I have a trade in of a 2015 Nissan Altima SL 2.5l, 90,000miles. I own the Nissan outright.

I am a 26/yo Disabled Veteran, income is $3,146/mo tax free from VA. $1,192/mo tax free from SSDI. I am considered Permanent and Total, if unfamiliar it just means they don’t see me improving and my bennies are here to stay. I do not plan to factor housing allowance from Education benefits into my reported income, but it is around $2,100/mo tax free for the months I am in school, not counting grants.

Total monthly bills are a combined exact $850/month. I have no current debt whatsoever. VA pays for all of my healthcare/insurance.

My credit is around 594 (up from lowest of 419, was homeless during COVID and took a while for my Benefits to kick in) But my Fiduciary/Mother has a Credit Score of exactly 700 and is wanting to Co-sign.

Now for the in depth question,

Originally wanted to do a typical loan $20,000 cash down, Sales tax up front, my trade-in, and finance the rest. Broker told me for Tacomas and 4Runners right now benefit from a CULA lease-to-own as they hold their value better and you can actually come out as positive equity. He told me there would be no mileage limit, No real need for down payment, and I would just “buy it out” for the remainder owed at the end of of the lease. That somehow because Tacomas and 4runners hold so much more value, I would save big by CULA not counting for the increase in resale value Tacos/4runs when the lease came to an end. Is this really how this works? I cannot find any applicable information online or on the forum about how CULA lease-to-own works in this current market, let alone with a Tacoma.

I have no idea if this is legit, besides what I’ve read/watched on these forums the past few days, I am completely new to leasing. I went to school with the broker back in the day, it feels like he’s hooking me up by getting me exactly what I want, unmolested by dealership addons, for MSRP (what he reports is the lowest he can go). He says it makes no difference to him which way I finance, but pushes the CULA lease-to-own extremely hard. This post is my attempt to trust but verify his claims.

Any help is greatly appreciated!

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Thanks for your service, and I’m sorry to hear about what you faced. Wishing you best luck in your recovery.

Lease to own is a pretty decent alternative to a subprime auto loan. I’d be less hesitant with a 4Runner or Tacoma as you’re most likely going to recoup most if not all the cost due to the insane residuals.

That being said, is the dealer offering a lease plan where the vehicle is completely paid off at the end? Or is this a short term lease plan where you’re going to buy out the remainder in cash at the end?

Tally up the amount in payments, and then what the final chunk of change/total cost for the vehicle to be in your ownership. Compare it to a subprime auto loan at ~15% and see how those numbers look.

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Thanks so much for your reply! It was very helpful.

I don’t have any official paper work or numbers ran yet. Broker said that happens when the car shows up. I’m getting a rather rare config for the truck (double cab, long bed, green with only basic tech pkg) and he said it could be anywhere from 4-7months until it gets here.

I believe he was referring to a short term lease plan, he mentioned 3 years quite often and then to buy it out with cash at the end. This is one of the parts that scares me. I have some decent cash saved up now, but my master plan is to buy a property and have a home built in a few years once my credit is more up to par. I’d rather save my cash for down payments on that. Hence me wanting to finance some in the first place, so I can rebuild a credit history. If I was able to reasonably re-finance the remainder of the pay-off, I’d be all for it despite the interest charges, rather small price to pay to get something to move my credit up. But from what I’ve gathered it seems its either have the cash up front to buy it out when the time comes, or kick rocks and turn the car in.

I’ll be using the calculators for sure targeting subprime, but would I still be considered subprime due to my low credit if I have the 700 credit score co-sign?

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Co-signer on the loan will help lower the interest rate but it’s not gonna be as good as a 710 alone.

I don’t think most lease to own plans will report to credit bureaus either since this is between you and the dealer, you’d need to confirm that.

For rebuilding credit I’d probably errr more on the side of financing, but something much cheaper. Bad APR on a 10k car is gonna hit a lot different than bad APR on a 40k car.

As a side note, look into some secured credit cards. My first was a secured $250 discover IT card that I got at 18 to start my credit. Decent cash back perks and gave me a near 100 point boost over a year.

Credit repair as a non factor and strictly from a cost perspective, you’re probably gonna spend equal money on a new Tacoma and keeping it for 3 years than a $10k beater that’s at the constant maintenance age unless you’re handy yourself. So that’s a wash.

If you’re needing transportation that’s dirt cheap and dependable in the long run, can’t go wrong with the Tacoma. If you really want to focus on credit, finance something cheap.

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As a side note, reconsider trade-in of the Altima. This should be a separate deal entirely from getting a new car.

EG they take $5000 off the lease for trade in when you could have gotten $10000 for the car through TRED or Carvana.

Don’t mix your transactions, muddies the water if you’re getting a good deal or not.

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Just stick to your original plan.

Maybe he’s making some commission on the back end. Maybe not. Either way there’s no reason to seek a convoluted “solution” to an easy question.

If you want to buy the car, buy it.

Don’t waste money on things that apply to leases (like acq fees) that don’t apply to cash purchases or financing.

The new car APR you can get now is 99/100 times going to be lower than the used car APR you’ll get when you buy a leased car at lease-end.

Thank you for your service and I hope things work out for you :fist_right:t4:

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Yeah that’s what I was thinking too with the trade in, especially since I own it outright. Carvana puts me at $8,500 initial offering. Struts/shocks need replaced, but I can do most of my own labor on the car, I was a Safety mechanic for aviation before I became disabled. Aircraft and Autos are far from apples to apples. But as long as there are install instructions somewhere online I should be more than set.

Between yours and Max’s advice, I think I’ve come to the conclusion that leasing is kind of fruitless overall for my situation. I will just toss an extra $750/mo into my down payment fund while I wait for it to show up so the APR applies less and less. I was under the assumption that for co-sign they just use my income and co-signer’s credit, or combine our income and go off co-signer’s credit alone. Very good thing to know for sure before I walk into a finance office!

Sadly I’m on a blanket 5 year financial probation of sorts since my benefits package is so comprehensive. Dropping ~$7k a month in a 20-something’s bank account fresh out of service has yielded mixed, and sometimes tragic, results. So a family member (or the state/VA) has to manage all my finances until they know for sure I’m not a drug addict/incompetent. This also includes not being able to get any credit card in my name. But seeing people honestly hand out the information you do truly does warm my heart! Thank you so much again for all the help you have given me!

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Blockquote

This is what my overthinking brain needed to read, thank you. It sounded good at first. But I now plan on just putting an extra $750/mo into my down payment fund during the delivery time for the truck and just expose myself to less of the APR. I figured he was getting a kick back from the CULA, but thought I would entertain the idea at the least, since he does appear to be helping me out quite a bit.

Thank you so very much for your time and help. It truly does make my task of getting the truck much easier!

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Paging @jeisensc @trism et al for any other advice on credit repair, minimizing costs of this loan, etc.

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TYFYS and I’m glad you got your SSDI rating (not an easy accomplishment). Thanks for asking the question and being thoughtful before you pull the trigger.

This deserves a longer reply, later tonight. If your plan is to own it, for a number of reasons I wouldn’t bother trying to lease first.

With your cosigner, a CU will probably give you Tier 1 or Tier 2 financing on a loan. If you plan to keep it that long, I would get Toyota Care and not a 3rd party warranty.

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Thanks for the service!

Here is my thought process,

  • Do a straight lease for 24-months as Toyota covers maintenance for the period to keep your out of pocket expenses low.
  • This will help you build your credit
  • if the market remains the same, you can always buy it out (hopefully with a better finance rate now you have better credit)
  • if the market improves you can get a newer car for another lease (hopefully with a better rate now that you will have better credit)
  • as you are not getting the car for another 4-7 months, just do a separate transaction for the Altima when you get the new truck.

Hopefully within this time you will have saved some $$ in savings so you can make a better decision on the buyout.

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If you do do the ‘lease to own’ remember that you are responsible for any ‘GAP’ if the car gets totaled in the first 3 years. Make sure you get GAP insurance from Toyota or from CULA if it is offered.
A total means your insurance company pays Blue book which is much less than what the car is worth in payoff right now. Some insurance companies market this is ‘replacement’ car insurance.

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Back to this:

@Rolyon kudos for moving that score up from 419 to almost 600 (hopefully these are FICO scores), even on a loan you want to be another 50-80 points high to get better rates and products across the board, not just cars. Keep doing what you’re doing.

Probably a few useful tips here

  1. don’t hire a credit repair service, you can do just about everything yourself.

  2. without digging into OP’s specifics, here: a 594 makes me suspect some/many derogatories are still open, which depending on the type can be a deal killer. Without knowing what they are, or in what status, it’s difficult to be more specific than “continue cleaning them up”

  3. credit score is only one consideration in a loan/lease: it’s effectively used to short-circuit humans always evaluating the entire bureau(s) (see today’s post about how amazing credits scores aren’t enough to lease a MB). If the score itself isn’t a no, other elements of the bureau are checked (even with mom as cosigner, a human is going to review both in detail), then income/dti.

4a) If @Rolyon were to get a loan today: a CU is usually a good choice, especially one that your service makes you eligible for. Even with mom as a cosigner, you may be looking at Tier 2

This is Navy Federal today: 5.59% for 8 years - only on a Toyota with ToyotaCare would I not sweat an 8 year loan

4b) If resuscitating your credit score slightly outweighs the smell of a new 4Runner (and derogs don’t prevent it): get your Credit Union to loan you money (even if you don’t need it) for 12-24 months on the Altima in your driveway: make 12 monthly payments and pay it off. Even if mom has to cosign, even at 6-7% interest. A closed/paid-in-full auto loan on your bureau is :kissing_heart::ok_hand:t2:, no matter the impact to your score (which may go down before it goes up).

Hope something there is helpful - keep asking questions and making progress.

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1 & 2: not unique to leases. Financing will do the same.

3: why pay the LAF (lease acq fee) just to buy the car at the end? Maybe a purchase option fee at the end too. Waste of money considering he always wanted to buy it from the get go.

4: he has never said he wants to be on the hamster wheel of perpetual leases. As his credit improves he can refi his auto loan.

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True but with his finances being so restricted a fixed lower payments without worrying about repairs & other unexpected costs might be better suited until those restrictions are lifted.