Minimizing leasing costs if I'm exiting on my lease

Hey Leasehackrs,

I’m looking to lease a car for about 30 months or less, and like all of you here, I want to minimize my TCO. So given that TCO = Monthly payment * no. of months + fixed fees, I basically want to minimize my monthly payment.

At the same time, most leases (especially those with low monthly payments) run for 36 or 39 months. Let’s say 10k/36 goes for 300/mo and 10k/39 goes for 290/mo:

300/mo * 30 months = $9,000
290/mo * 30 months = $8,700 ← I pay less in total.

  1. Should I go for the lower monthly payment (second option), despite it being a slightly longer lease? Are there any downsides to having a longer lease (e.g. lower RV?)

  2. My exit strategy for the lease is either selling to Carvana/Vroom/etc or private transfer (swapalease/leasehackr). Generally speaking, how hard is it to find someone to takeover a lease with 6 months left on it, as compared to 9 months left?

  3. If I really only want to limit myself to selling to Carvana/Vroom/etc, does it make sense to do even lower mileages (e.g. 8k/36) to lower the monthly payment since they don’t really care if I go “over”? I know this will make it impossible to find anyone willing to takeover the lease though.

  4. What are some vehicles that usually lease well (i.e. potential positive equity during exit) with low monthly payments (<$300/mo)? I’m currently located in WA, but will relocate to TX post-pandemic for more context.

  5. Given my short timeframe of 30 months, is leasing even the best option for me? Just curious if there are any other options that might make financial sense.

Thanks a lot and I hope this can help others who might be on the same boat in the future.

I wouldn’t count on transferring as an option (as banks seem to be dropping this more and more) and I certainly wouldn’t count on being able to sell your lease out for a decent price. If you need 30 months, I’d explore every possible option for doing a shorter term lease. Some banks will offer a 27 or 30 month option. It may have a higher monthly payment upfront, but that 36 month payment is going to amortize a lot higher when you have to pay the last 6 months or take a bath on an early trade in with lots of negative equity if you have a hard out at 30 months.

I definitely would avoid a 39 month as worst case scenario, you’re paying 9 months of payments to get out early rather than only 6

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are you looking for a sedan/SUV/something else? some brands have restrictions on transfering in last x months of the lease. I wouldn’t bank on positive equity either.

You could maybe get a 24 month lease and try and extend it. You probably aren’t looking at Alfas but when I leased mine in 2018 I picked 24 over 36 months, it was $20 more per month but I wanted to avoid risking having to pay for the 30k service (along with knowing I’d get bored). But I kind of miss that car haha

Appreciate the good data! I’m looking at a sedan and maybe a SUV as a stretch goal.

Do you remember how much was your approx. monthly for the 24 month lease? Also did the dealership not cover the 30k service?

Hearing these inputs it’s definitely swaying me more towards a 24 month lease + extending the lease (I heard some companies allow up to 6 month-over-month extensions). If anyone else have personal experience or reasons to go with any other lease structure, definitely open to give it a thought.

my monthly was $478. everything rolled in nothing due at signing. I got the first service free but had to pay for the second oil change which was about $200, so I can imagine the 30k service touching nearly 1k since they need spark plugs I believe.

I would maybe look into some of the Mazda or Hyundai deals if your budget is $300. You might be able to squeeze into an SUV

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You should go to swapalease and get into someone else’s lease with sub-30 months left.

Like Matt said, don’t count on those exit strategies existing if you start a 31+ month brand new lease today

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The vast majority of cars up on swapalease are crummy deals. I.e, Folks who realized they signed a shitty deal and looking to hopefully dump it. The rare good deals that go on there don’t even last a full day. (Just have to be lucky)

OP, Id scout this webpage and look at what’s currently leasing “decently” to get an idea of what you can get for your budget

The OP just has to find one… one that’s better than paying 36 months for 30 months of use.

If you take a WA lease to Texas, you will have to pay extra taxes. Better to lease when in TX. Here - total TCO lowered…

No. You don’t.

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Do people usually get a new license plate when they move to a new state, especially during a lease? I get that if you own a car you might want to do that, but a leased car ain’t my car.

I think what you’re saying here is the initial registration only ever happens once right? So if I buy it in WA I will pay WA taxes and I can just Keep driving like normal in TX.

I probably won’t want to get a car in WA and have to drive/ship it all the way to TX, the deals (at least on this forum) down south do seem a little better than PNW.

If it’s a requirement by the state, it’s not a matter of personal choice.

Also, it would be fiscally silly not to. Moving out of WA would remove a 10% tax on the monthly payment… and you’d pay no tax to TX beyond a one-time nominal thing of something like $90 AFAIK.

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Exactly. Starting the lease before moving to Texas would be ideal. You’d drop the monthly from WA and avoid the % of MSRP tax normally levied in TX. Just pay small fees for new plates and license. You’d also potentially get full or partial refunds from your previous state when turning in the old ones. Not sure about other states, but this was the case with NY (depends on certain factors).

Do people usually not? Most states have requirements about how long after you move to the state you’re required to get new plates, etc. When I moved from CA to FL, it was something like 30 days.

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This is a really interesting plan, is this leasing a car while I’m in WA (and registering the car here) and then ship/drive it to TX, then start the paperwork to get a TX license plate?

I definitely will look into that and compare to starting a deal in TX. Who knows I might be lucky enough to find some dealer tax credits.

It’s the other way round. As soon as you register vehicle inTexas, you are hit with the taxes.

  • The following fees:
    • Registration fee (base fee of $50.75 for passenger vehicles and light trucks),
    • Title application fee of $28 or $33, depending on the county,
    • State portion of the vehicle inspection fee (up to $30.75)
    • Local county fees (up to $31.50)
    • 6.25% vehicle sales tax,
    • $1 Insurance verification fee
    • $4.75 processing and handling fee
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Don’t listen to the armchair tax experts here. See for yourself

When a vehicle is leased in another state and the lessee brings it to Texas for public highway use, the lessee (as the operator) owes motor vehicle use tax based on the price the lessor paid for the vehicle. The standard tax rate is 6.25 percent. Credit will be given for any tax the lessor or the lessee paid to another state.

https://comptroller.texas.gov/taxes/motor-vehicle/faq.php

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Lol. :joy:
That doesn’t make sense. 6.25% tax is due

@fronk

Since I’m more than an “armchair expert,” the classic lawyer answer I will give is “it depends.” First of all, there are exceptions listed here: https://comptroller.texas.gov/taxes/publications/96-254/new-resident-tax.php.

Second, they can determine you’re not a new resident/that the car wasn’t registered long enough elsewhere, and too bad, so sad, full tax is due on the car. They can also later determine that you haven’t shown the intent to live in Texas if you don’t do things like register to vote in the state. If the registration for WA shows that it was registered there and immediately registered in Texas, they will levy the full tax. You need to register a car in Texas within 30 days of moving there or you’re slapped with the full tax, so you’ll need to show that it was registered outside of Texas for a period of time, but Texas doesn’t specify for how long, unlike other states.

The rule is similar on boats in Texas, and some Texas publications say that you’ll be assessed for the tax if a boat is brought into Texas within 1 year of purchase, so buyer beware.

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If you read through the tax code, it clearly separates between the “new resident tax”, i.e., someone that leased the vehicles as a non-texas resident and then brought it when they moved to the state and the “tax on a vehicle purchase outside the state”, i.e., someone that is a texas resident that leased a vehicle from outside the state and then brought it in.

The former would have to pay the $90 fee, the latter would have to pay 6.25% of the selling price.

This is covered in

Sec. 152.022. TAX ON MOTOR VEHICLE PURCHASED OUTSIDE THIS STATE. (a) A use tax is imposed on a motor vehicle purchased at retail sale outside this state and used on the public highways of this state by a Texas resident or other person who is domiciled or doing business in this state.

(b) The tax rate is 6-1/4 percent of the total consideration.

and

Sec. 152.023. TAX ON MOTOR VEHICLE BROUGHT INTO STATE BY NEW TEXAS RESIDENT. (a) A use tax is imposed on a new resident of this state who brings into this state a motor vehicle:

(1) that has been registered previously in the new resident’s name in any other state or foreign country; or

(2) that the person leased in another state or foreign country.

(b) Except as provided by Subsection (b-1), the tax is $90 for each vehicle.

(b-1) The tax on a motor vehicle eligible to be issued exhibition vehicle specialty license plates under Section 504.502, Transportation Code, is equal to the lesser of $90 or 6.25 percent of the total consideration.

© The tax imposed by this section is in lieu of the tax imposed by Section 152.022.

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