How long do I need to hold a VCFS lease to avoid a dealer chargeback if I want to buy it out early? Looking to backdoor the $7500 EV credit and the MF is ridiculously high. I’d rather own outright anyways, but I like the dealer I’ve been working with and don’t want to short them.
Also, anyone know if the cost of transferring tags and title when buying out a lease is included in the lease buy-out fee, or is it additional?
Maryland? Do you have to pay 6% of the car’s value twice (once at lease inception, once at buyout)?
No, only once at inception. At least, that’s my understanding.
I heard that VCFS allowed early buy-out after the 1st payment. But I’m unsure if this is accurate.
If you have good relationship with the dealer, why not just take an early look at the lease contract?
I hadn’t picked a dealer yet when I first asked the question. But in the course of negotiating my lease I’ve since figured it out. The lease contract itself says nothing about it since there’s no legal restriction on it, but the finance manager at the dealership said that I should wait until I’ve made 5 payments (6 months). I think you can buy out at any time from VCFS directly but the dealer would get a chargeback from VCFS. The sales guy didn’t know this though and thought I could buy out after 1st payment without any harm to the dealership.
The contract doesnt say amything about the dealer’s compensation structure.
Thanks! It’s very helpful.
6-month holding period sounds a reasonable requirement for dealers to avoid chargeback. It’s similar to mortgage loan, in which the loan agent would get chargeback if the loan is refinanced within 6 months.
So it seems you have gone through this process? After 6 months, you only need to pay the remaining balance, without any interest charge on the remaining balance and fee, right? Have you calculated the actual savings ($7500 - $X for the 6-month lease charge)?
Thanks!
Yes. My savings is much less than expected though because I was offered included a $3500 purchase discount for buying at the outset that they removed when adding the leasing incentive, and the loyalty incentive for leasing is only $500 instead of $1000 for buying, so for me it only came out to a difference of $1300 as a consequence. That number includes $195 total interest return from investing the amount I would have paid upfront into a financial instrument I have access to that pays 5% APY for those 6 months. Not sure if you’d run into the same situation with other dealers, for instance if you weren’t offered the $3500 purchase-only incentive, then you’d expect to save $5000 (loyalty incentive) or $5500 (no loyalty incentive) after accounting for all other extra fees and charges.
The monthly rent charge came out to $195/mo (MF 0.00236), there is a $450 lease buy-out fee (not an early termination fee), and I’m assuming the dealership is going to charge me $331 to redo the title and tags when I buy it out. (They told me the charge was ~$300, and $331 was how much I was charged the first time around.) The rest of the difference came from differences in how taxes were calculated - it actually seems some dealers erroneously exclude certain incentives from being taxed and this one did not.
Thanks for the thorough analysis! If the savings are only $1300, this early buy-out strategy seems less attractive indeed.
Which model did you buy? The MF 0.00236 is much lower than what I get for XC90 Recharge Plus (0.00346).
Thanks!
XC40 Recharge (Pure Electric) Ultimate Trim
I should probably emphasize I think most people will get the full $5000-$5500 out of it. I had a very unique situation that I leveraged for my negotiation, and I also started by negotiating a trade-in and cash purchase (where they offered a total of $11k in rebates and incentives including Costco and AMA with a final OTD price of $5k) before exploring the lease option. I think they noticed that applying an additional $7500 without reducing the purchase incentives would have led to negative equity on their part, prior to fees.
OP, have you completed your transaction?
Actually, I see MB lease does have early buy-out term and the remaining balance calculation. It doesn’t look like there’s any penalty for early buy-out.
Well, I technically have 5 more months before I hit the 6 month holding period. But after I set up my VCFS account I realized I made a miscalculation so I’m going ahead and buying out now. There will have been no advantage to leasing over buying outright because the way rent is paid is similar to interest on a mortgage - that is, more of the early payments are applied towards the rent/interest rather than the principal, so it is not split up equally over the 36 months. I will roughly break even by buying out directly from VCFS near-immediately rather than through the dealer (which charges extra fees to do your MVA work for you).
In other words, the $7500 leasing incentive is equivalent to about $4000 in discounts off a straight purchase if you buy out the lease right away.
Nice. Does VCFS allow credit cards for the buy-out payment? Can the payment be split?
Thanks!
Lol. No credit cards. You can probably split the payment however you like as long as they get the total amount they show you as the payoff by the date indicated.
This isn’t true. It’s split up evenly over 36 months. Leasing and buying out an XC40 Recharge will save you a good chunk of change versus just buying from the get go.
As the above poster said, you have it wrong.
Loans do that, interest is the bulk of the payment and principal increases over time.
Leases charge a fixed depreciation and fixed interest amount each month, no change to principal payments as the months go by, its fixed.
Ie, if you are paying $100 for depreciation on month 1 you are still paying $100 on month 36
The contract states it is calculated on an actuarial basis, not equal/fixed basis. The generated payoff amount should be lower if that were true.
This is one of those things that can vary by lease contract. If yours specifically calls out actuarial basis, I agree with your numbers.
The first part of sentence you quoted is, as you stated, wrong on its own. But it is taken out of context because I used the sentence for my specific situation where other rebates differed between the two options beyond just the $7500 leasing incentive. I did not state it to be true for the general case.