How does early lease term and lease equity work?

Ask the Hackrs
1

Trying to figure out this scenario. I have a 2020 BMW lease, where multiple dealers have been contacting me to try and buy me out due to low inventory.

I have $5,000 or so down payment into the lease (I know, I shouldn’t have), and very good terms. A dealership offers me X dollars for it (they have). What does this actually mean? Is there some calculation based on all of the lease agreement factors to which I’ll be able to hand over the keys early and they’ll write me a check for any positive equity?

Sorry if it’s a stupid question, I’ve never been in this situation with a lease.

2

Ask for your payoff quote first from the bank. It is basically Residual value + (Monthly payment * number of months left). If the offer is more, you can pocket the equity. If not, you pay the difference.

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3

Thank you. The offer is 53k and the payoff is 42k.

Edit: I think I misread. That’s the payoff at end of lease term. I think you’re saying I can get a ‘now’ payoff, which is different?

4

Log onto your BMW account and you can see the current payoff (if a dealer buys it out in most states you can back out the sales tax from the payoff quote). Take that number from the offers and you have the equity.

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5

Ignore the downpayment, it’s gone…forever.

Call BMW and find out your payoff today. That’s the number the BMW dealer will pay.
Then find out the difference from the Dealer, that’s what you walk home with. (Note there’s some small issues if that payoff has tax but that’s for more details).

7

Thanks guys, I figured it out. My current payoff quote is 40,500 and the dealer offer is 53,000. I believe you’re saying that if I accepted, I can hand over the keys now and walk away with roughly $12,500.

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8

End of lease term price is the Residual Value.

Yes. That would be Residual value + (monthly payment * no. of mos left)

I would call BMW and ask for the payoff “now” quote. And compare that to the offers.

9

Thanks Harrow, you got it. The payoff now is 40,500. Much appreciated.

10

Is the dealer offer from a BMW dealer or from someone else?

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11

Dealership. First one I’ve tried, I have 5 in the area.

12

a BMW dealership or a different brand dealership?

13

BMW dealership

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14

If I may ask, what model / mileage are you getting such a 10k equity?

15

X5 40i stripper. It was a loaner vehicle that I negotiated a great price on and leased.

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16

So you could cash-in. Do you have a replacement vehicle in mind, or are you downsizing the number of cars? Cashing out the equity is the easy part, replacing (if needed) is more difficult.

17

Thank you. The 53K offer seems a bit low compared to KBB and CarFax estimates (I know those aren’t super accurate), but these seem to be valuing it around 58K trade. I may push a bit or try some more quotes.

I think I’m in a good spot now to take advantage of this. We have two cars (my primary is a 2021 M5), and I ‘guess’ my wife can share with me for a bit. We work from home. The other plus I’m seeing is that if I dump the X5 before Jan 1, I skip next year’s personal property taxes.

18

They’re meaningless. It’s only worth what someone might actually pay you (so get quotes from the car buying services), and do the math on possibly buying it on and paying tax to resell it.

Be prepared before you approach the dealer and don’t overplay your hand.

19

Definitely understand! I think my approach is simply to grab a few offers to best understand my options and then make a decision to keep or sell. I appreciate the help!

20

Great price? But are you including the 5k in cap cost reduction that you gave them at least inception?

21

That’s a sunk cost, and not relevant to the OP’s next steps.