Question: If a lease is extended by 6 months (Subaru through Chase Bank), does the buyout price decrease each month?
Background: I set up the deal at the bottom on a 2018 Subaru Outback for my parents. Since Covid hit, my parents are going to be at roughly 20,000 miles on a 36,000 mile lease and the used car market is crazy…Carvana is offering ~ $5k over the payoff. The issue is that my parents only have one vehicle and they don’t want to go car-shopping right now. My parents are considering two options:
Option 1: Buy the car at 36 months and assume that the market will not correct itself dramatically in the next 6 months. Shop for a car in the next 6 months or so and sell to Carvana/Vroom/Carmax and cash out the hopefully ~$5k. There is a risk that the positive equity could decrease in those 6 months, but I don’t think it will be super dramatic, plus they can get monthly quotes to see if there are market changes.
Option 2: Extend the lease on a month to month basis and buy the car out / sell to Carvana/Vroom/Carmax once they’ve sorted out the next vehicle in the next 6 months or so.
The only downside to Option 2 is that if the buyout price doesn’t decrease each month, then at the end of the 6 month extension, they’ve wasted the 6 lease payments that could have been purchase payments that increase the difference between what is owed on the car and the Carvana/Vroom/Carmax offer.
Strangely, they said that the lease extension is done verbally over the phone and that they don’t provide the extension agreement until after it is approved over the phone. Seems very weird.
I have a lease extension from Toyota. I had to call them to get approved and they emailed me the agreement. I need to sign and return it within10 days. Perhaps Subaru is different.
I’m in the same boat. I was TOLD by Acura that all terms stay the same and the residual is lowered by the payments (less the interest/tax). They send the paperwork with the math on it to sign. Have 2K in sunk cost of taxes if I buy/sell, which is why im leaning toward extending. I want to lease again after the markets settle. I’m sure it’s bank specific on if it accretes the buyout price.
I called and they said that they extension is a continuation of the original lease with no modifications and, as such, the buyout price would continue to decrease. Since I didn’t have the account info, they wouldn’t review specifics with me.
Now I’m wondering how they calculate it and I can think of two ways.
The 59% residual of $31,695 is $18,700. So the depreciation on a monthly basis is 41% / 36 month ~ 1.14% of 31,695 = $360.73. So does that mean that the buyout price will decrease by that amount each month? This method seems plausible, but doesn’t take into account the sales price at all. In fact, the depreciation part of the payment is only $232.80, so this seems too good to be true.
The monthly portion of the payment that is depreciation. The adjusted cap cost was $27,081 and the residual is $18,700, so the depreciation is $8,381 / 36 months or $232.80 per month, not including the MF or sales tax part of the monthly payment.
Does anyone know which way this goes? #2 seems more reasonable, but who knows.
Thanks @Mule65 I presume that it may vary by bank, but can you provide the MSRP, Residual, and Sale price on the original lease? That would help me see how Toyota Financial Services reduces the buyout price.
So does this mean if I extend the lease to meet Carvana’s 60 day rule (assuming they need 60-day in place at the time of pick up), my net positive equity will go down (due to the extension cost - 2 or 3 month payment whatever that is) while not as much as the total payment since the residual also does down slightly?
Still a little bit disappointed to have to lose on the extension since I really dont need it, but think positively it’s a good offer from Carvana I cannot walk away…
