I’m looking at leasing a Volvo XC60 Recharge Plus (Oregon), then immediately buying out the lease after the 4th payment (minimum required payments to keep the rebate). Since I intend to buy out the lease nearly immediately, I am trying to determine if maxing out the down payment will reduce my total cost or not. I have read through a number of threads here (great forum!), but I didn’t see anyone asking about this particular situation, or perhaps I have missed it or misunderstood it.

I don’t know the exact MF, but its quite high… somewhere around 0.00375 or so. Less concerned about that right now, since I don’t intend on holding it for longer than 4 months.

Which I think translates to a cost of:
67425 - 3000 - 9500 + 995 + 250 + 950 + (950 * 3) + 575 + 580 + 450 = $61575

If I add a large down payment to the lease, my monthly charges would drop, so the 4 payments on the lease would drop, which would further reduce the total cost. Am I getting the math right here or am I missing something? I have seen other threads calculating the total cost differently by factoring in depreciation, but I’m wondering if that is only because in those cases the lease is held to term or something.

Any help would be appreciated, first time leasing.

You will lose that entire amount, if you total the car.

Given what interest rates are, why not make a big down payment when you buy the car out?

There is really no mathematical way that making a larger down payment won’t reduce your total cost. Only you can decide whether the cash flow works for you.

Yes, the dealer told me this. It seems suspect to me too, so I will be looking to see evidence of this in the paperwork if I decide to proceed with the deal.

Right, but since I intend on purchasing the vehicle, in cash, as soon as possible (after 1st payment if that is possible), then I think the question becomes “is saving $2000 (making this number up) on the purchase price more valuable to you than the potential downside of losing it all if you write off the vehicle in the 30 days before you buy out the lease”. I don’t have the actuarial skills to calculate the precise value of that insurance, but I suspect it would be < $1000 given the short time horizon.

My intention here is to lower the purchase cost of this particular vehicle as much as possible, which is how I’m trying to optimize. It is worth considering the fact that I may lose the entire down payment in the off chance it gets written off in the first month though.

I don’t know what you mean by “write off.” I assume you are not referring to a tax write off?

There are much better mathematicians here than I am (who will correct me, if I am mistaken), but there is really no advantage to making a large down payment for a lease, if you plan to buy out the car immediately.

And you can actually buy out the car immediately (I don’t quite know what you mean by “first payment” since the first month’s payment is frequently part of what you pay at signing).

I’m not sure what you mean by referring to insurance.

If you want to estimate the savings, take the down payment amount you would make and multiply by the money factor. Thats roughly how much youd save eqch month you keep the lease going.

So if you put $10k down and buyout in the first month, youre risking $10k for a month to save about $30

How much I would be saving depends on if I am really required to make 4 payments on the lease before buying it out. If I am required to make 4 payments and with $0 down its costs $950/mo, then it would add $2850 to the cost. If I’m only required to make the first payment (at signing), then it would only add $950, for a savings of $1900. Sadly, I don’t know for sure if I’m required to make 4 payments or not, that is simply what the dealer told me was required.

I was referring to totaling the vehicle

I’m hoping I can confirm this once I see the paper work. It would be nice if I could buy it out immediately without losing the $9500 rebate.

I was considering the amount saved on the total purchase price as a form of “insurance” against not losing 100% of your down payment in the event of totaling the leased vehicle before it is bought out.

This is excellent information! Thank you! If it really is only ~$30, then for sure its not worth the risk.

Most dealers get clawed back if it’s paid off under 90 days, which is why they said that. If the dealer has been helpful, it’s kind to eat 3 months of interest.

The way I’m calculating the total cost must be off then. I’m seeing a ~$2500 difference in the total between $0 down and $19k down (max). With $0 down, the monthly is $950, but with $19k down the monthly is $327. (950 * 4) - (327 * 4) = $2492 savings

Thats just on the $3000 discount though, right? If you factor in the $9500 lease rebate it should be higher. Its looking like 8.67% if my math is actually right on the leasing route, but I’m not confident it is.

Could you elaborate? I’m not sure what you mean. If the selling price is $67000 (taxes+fees incl), and I’m able to “purchase” the same vehicle through a lease for $61500 (all-in), then it does seem like there are saving to be had there. Is my math wrong somewhere?

I see. Negotiation isn’t my strong suit, so I was amazed I even got $3000 from them.