Prepaying lease finance charge reduction good to be true?

Ask the Hackrs
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I’ve been trying to do a one pay deal on an Ioniq 6 in SoCal and finding most Hyundai dealers claiming they don’t do them. I finally spoke to one sales manager who seemed to know what he was talking about, who said that dealers don’t like doing them because the way Hyundai Motor Finance handles the contracts, the dealer does not get reimbursed for rebates they extend upfront as quickly as they do with finance sales or traditional leases.

As an alternative, he suggested I do a standard lease, then pay the entire remaining balance after 30 days. When I said this would deny me the benefit of the one pay MF, he said Hyundai treats the lease balance such that I would eliminate ALL finance charges on the entirety of the lease - not just on the depreciation, but on the rent charge as well.

Since a lease is not a loan, it strikes me that this is BS, but I’ve seen conflicting information online. If it is true, it would cut the effective monthly payment in half.
If anybody has any insight or experience with HMF lease prepayment, I’d be grateful for some clarity. Thanks!

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I’ve had this question as well with other brands.

I loathe making installment payments, but I grudgingly will (and have) when the MF is lower with max MSDs than it is for a one-pay on the same vehicle.

And I hate paying finance charges even more than I hate making installment payments.

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I believe this is only true if you buy out the lease (exercise the purchase option), not if you simply prepay the remaining lease payments.

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Well there is only one finance charge on the lease and that’s the rent charge. If you pay off the entire balance, ie buy the car, you’d no longer have to pay any rent charge.

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This would be doing an early buyout to purchase the vehicle. You do not have to pay the unearned rent charge, but you have to buy the vehicle. It’s not just paying the remaining lease balance.

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Thanks. That makes more sense. So it would mean essentially paying the full residual after one month.

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It would essentially mean paying the adjusted capitalized cost plus tax after one month.

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In which case, why not just buy the vehicle outright?

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Generally, one would do this to capture the significantly higher lease incentives/ev credit.

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Would it make sense to prepay the entire depreciation upfront as cap cost reduction, then cover the rest of payments as MSDs?

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Just find a dealer that’s willing to do a one pay. Let them know they lost the sale because they were unwilling to do some paperwork.

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I’ve been trying. So far, 0 for 6. One guy told me he gets a couple requests a week and has to turn them down bc management won’t do them.

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HFS gives any insurance overage on a total to the bank. Doing a big cap cost reduction like that puts a lot more at risk and still doesn’t prevent you from paying rent charge.

HFS also doesn’t do MSDs.

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In the scenario that rattles around in my head, I’d dump a single payment of the appropriate amount to leave roughly the equivalent of one lease payment left for the final month.

To make it simpler, though, what happens to total rent charges if I just make 2x the scheduled payment next month?

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Yes - that’s a simpler way of putting it. The dealer is telling me the rent charge is reduced as if it were a loan, but it’s not a loan and the interest doesn’t accrue the same way. He’s presenting it as the equivalent of an interest only mortgage, where any overpayment goes directly to a reduction in principal. Nobody at HMF could confirm - but i couldn’t get to anyone other than phonebank people.

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Let’s take him at his word and assume that you fully pay down the depreciation portion. What does that do to your total rent charge? It definitely doesn’t make it go to zero.

At absolute best, it lowers your monthly rent charge to RV * 2 * MF.

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This is a useless mental exercise, TBH, much like the guy who ranted that only depreciation should be taxed.

Leases exist to make money for the lessor; it’s somewhat arbitrary what the breakdown of the base payment is between depreciation and rent. You cannot just wish one or the other to be eliminated.

Hacks such as MSD or onepay lower the rent charge because you are providing them working capital. But beyond those tools there’s no point in fantasizing what a lease payment would look like without a rent charge.

If you want to payoff the entire balance, ie you want to buy the car because a 72m TCO to finance or pay cash is lower than successive leases, that’s one discussion. But “why can’t we simply eliminate the rent charge on a lease” is not a discussion.

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Fair enough, but I didn’t just ask it as a wish. I asked it because a sales guy is telling me that Hyundai would treat prepayment as a reduction in principal and eliminate some portion of the rent payment. I questioned that, and asked the question to see if anyone had actually ever gone that route or if it was BS as I suspected.

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In which case, I could just pay all the depreciation up front as a cap cost reduction, thereby reducing the finance charge.

I just spoke to him and asked for confirmation from HMF that prepaying all remaining lease payments would impact finance charge. I’m going to wager he comes back and revises what he said…

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Yes… potentially by how much?

The answer is it’d potentially save about $30/mo in this case. Is that worth the risk to you of losing a sizeable amount of money if you total the vehicle?

How does that compare to what a single pay would save you?

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