Hey All,
Can someone explain to me why dealerships don’t offer to buy out the rest of the lease instead of paying the car off.
Example: if the remaining payments on my lease are only 20k but the KBB is 35k wouldn’t it make sense for the dealership to offer that instead? Even if they could turn around and sell the car for 38k wouldn’t the other things that go into prepping a used car cost them more in the long run? Especially in the case where there is negative equity in the car the consumer doesn’t want to eat that in the next payment, so they just ride it out.
Remaining payments on lease and the kbb value are not related.
A car has a Residual value, and the kbb reflects that, your lease payments is a rental payment and thats it
So if they take your car, they would be on the hook for the current RV and your payments dont factor in
Because they are buying and keeping the car… At lease end, you do not get to keep your car unless you buy it at the residual value; on top of all of the lease payments that you have made. So of course, dealers will only buy out your lease at a rate that makes sense for their profits, independent of whether you come out underwater or ahead, that is for your to eat or benefit from.
Post the termination section of your lease contact.
Unless the OEM offers a pull-ahead, the dealer has no ability to renegotiate the lease you signed, and it lays out all the ways to end that lease.
Thanks all.
I was thinking more of a they write me a check for the balance of my payments and I turn the car back in at the dealer. And a lot of times they don’t even keep the car they send it for auction - or if they do keep it the profit is minimal.
They cut the check for 20k instead to me instead of the lease company for 35k and then turning around selling the car for 38k(minus their cost to market, inspection,tires etc.) They would still net more if they just paid my remaining payments. Similar to when they do pull ahead programs with 5payments left. Just with like 20 instead.
They dont just get the car because you turned it in to them
Giving you 20k fixes your lease, but doesn’t give them control of the car
They would have to give another 35k (The KBB value) to the bank to get the title of the car. (Maybe less as certain dealers pay less)
So they are out $55k for your car. Which they will not do.
When you turn in a car at the end of your lease, it is owned by the bank, not the dealer, and the dealer has to pay the bank $$ to get the car. Your 20k has no relation here
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Gothca - I wasn’t sure how that piece worked. Went to BMW dealer, my lease is with BMW financial, and that dealer kept the car if I turned it in to them.They have to send it to a “processing location” and then allocated to a dealer. Makes more sense. I just figured why would they care about keeping my car? If they can spend 20k to get me into a new car instead of the 35k. Because then they either send to auction or try to make 3-5k as a used car.
Example:
They give me 20k they are up 10k (assuming they make 5k on the sale of the used car).Vs the 5k if they pay the bank 35k for the car and sell for 40k.and they had to take all the risk of trying to resell the car.
Are they just making way more money on the used car deal then I am assuming?
As I keep saying your 20k means nothing.
you give them the car. Someone still owes $20k, which is you.
So now the dealer gives you 20k (or pays BMW directly) and the dealer is now -20k and has a car on the lot that doesn’t belong to them.
They then sell it for 35k, they are now +15k
The bank then tells them. …. Don’t forget you owe us $35k for selling that car…it aint free. So now the dealer is DOWN -20k again.
So at the end, you have no car, dealer has no car, a buyer has the car, and the Dealer has lost 20k, and the BANK has 35k.
You are mixing up, payoff and remaining payments. They are different numbers.
But they don’t keep the car in this situation.
Scenario 1: I can turn in my lease whenever I want, I am responsible for the remaining payments. I can write a check for 20k and drop it off at my local BMW dealer and be done(minus maybe early turn in). BMW takes said car and does paper work and allocates to a dealer after it is inspected etc.(might not be turn in dealer)
Scenario 2: I take my car to BMW and they say your car is worth 35k and I only owe 35k on mine and they agree to buy out my car. I get new… car happy customer 
They are now -35k, they sell it for 40k they made 5k.
My scenario 3 - Different manufacture dealer gives me a check for 20k. I pay off my obligated 20k. give car to a dealer(they don’t take said car just like in scenario 1, who cares where car goes?) Dealer is only out 20k (still up 10k vs the above scenario 2)
BMW doesnt just “give it” to some dealer to sell. They give the dealer the opportunity to buy it from them to sell.
In your hypothetical where car is worth $35k and they can sell it for $40k, if they did what you’re suggesting, they would give you $20k then give bmw $35k, making their total cost $55k. They would thrn sell it for $40k, losing $15k in the process.
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I am suggesting Mercedes gives me a check for 20k, I use that to pay off my remaining payments on a BMW. I take my car to BMW and say I want to turn in my lease. They say sign here and take my car.I cash said check and pay off my lease with BMW.
Does Mercedes really care who gets to keep my BMW? Mercedes dealership saved themselves 10k from not buying a 35k car from the “bank”. They only had to pay me 20k.
If you’re suggesting Mercedes rolls $20k of negative equity into your lease, cutting you a check for that amount, then yes, that happens all the time, as long as the lease can support that much negative equity being rolled in and you don’t mind turning your $20k into $24k by paying tax on that $20k and rent charge, and adding $600-700/mo to your lease.
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cheers! I appreciate that
Are you really saying to Mercedes, Hey I got a BMW that I owe 20k on. Roll me $20k into a mercedes lease and cut me a check? I PROMISE to pay BMW with this 20k?
My brain just went HUH?
If the lease will really eat the negative equity and still fund, they wouldn’t care what you actually did with it.
My mind is blown! I didn’t think you could just ask leasing companies for free money like that.
Oh, you’ll definitely pay for it. It gets hit with rent charge.
Let’s get an update on this when it happens
Is that really the case? Never really seen a dealer cut a check like that before.
Say there’s a MB deal where MSRP is $100k, APR is 0% and buyer agrees to buy it for $100k OTD. Would the buyer be able to get a loan for $120k at 0% APR and have the dealer cut a check back for the extra $20k?