Off-Topic: exiting a car lease

[flydhest]

Has anyone ever ended a car lease early? As noted in this thread

http://forums.thepaceline.net/showthread.php?t=199987

we are on the verge of a move to NYC. Where we live is not determined yet, but if we live in Brooklyn, there is a good chance we would keep our car. If we live in Manhattan, there is a good chance we would not. Problem: before the prospect of moving to NY was even a twinkle in anyone's eye, we needed to get a new car to replace our VW TDI (yet another Paceline thread). Because we don't drive much and could imagine getting a different car in a few years, and to reduce the transactions cost when we wanted to change cars (this bit is ironic now), we leased.

Thoughts on what the process and cost is in general to get out of a lease? One possibility is to buy the car from the leasing agent and then sell it. Penalty for the purchase and then whatever the hit is on selling a 6 month old car. I can wrap my head around that strategy, but curious if folks knew of a better one.

And yes, I have learned my lesson with leasing.

[jlyon]

swapalease.com

You need to get the details from the lease co on fees and credit app to assume you lease then post those details on the site and see if anyone wants to assume yours.

If you got a good deal and have plenty of miles left you should be ok. If it is too much money and low miles left your out of luck.

Or you can take it to CarMax (or any other good dealer) and let them buy it and you would have to pay them the difference between payoff and value they give for the car.

[Ken Robb]

What does your lease say about early termination penalty?

[likebikes]

you're going to take a bath regardless of whatever option you choose.

[Ralph]

Look over the early termination policy. You're not necessarily worse off than if you had bought it. Depends on the value of the vehicle, and what your contract says. Would first ask the dealer the cost to unwind the deal. Then as noted above, seek others help to sell the car and pay off lease. There may be a contract penalty "hit" plus depreciation to get out of the lease....but you shouldn't have as much tied up in car as if you bought it. May kinda balance out.

On their own merits....leases are neither good nor bad.....they are just contracts. Bad for some, useful for others. I've done both. However....the only way leases ever worked for me was in the middle of a depression and stocks dirt cheap, instead of paying cash for the car, I invested the money and leased the car. Did this in 2010....made so much money on the money....figure car was free.

[Ken Robb]

I remember that one of my leases required just 3 extra payments for early termination which seemed like a pretty good deal rather than trying to sell the car myself. I guess the "goodness" depends on the market value of the car vs. the depreciated value calculated by the lease company.

[11.4]

Auto leases are typically structured so the lessor gets the equivalent of the full term of the lease. That's because most leases are sold and the acquiring party doesn't want to have to figure in early terminations. So you are potentially paying for the lifetime cost to you of the lease anyway. Your only savings would be parking and insurance costs and potential property tax passthroughs. Auto leases make marginal sense if you run them to termination and hand the vehicle back in, and don't exceed the scheduled mileage. If you have to terminate them early, it's usually more a matter of how much you can talk them into a deal (or accept a deal, if provided for, in your lease agreement). They will sell the vehicle at a wholesale lease auction, which is lower than what a regular car dealer would sell one for -- lease fleets get dumped and the prices are ridiculously low (unless you're an employee for the leasing company and can get that wholesale auction price on a secondhand car, which is an incredible deal). Basically, if they keep the car you get hosed badly. If you take it and sell it yourself, you may have to pay all the income they would have gotten from you anyway and then turn and sell it yourself. (Once upon a time I ran a major corporate auto lease business ... still trying to wash my hands after that stint in my career.)

[dgauthier]

Stop paying. They'll just come and take it.

[tctyres]

Stop paying. They'll just come and take it.

Sure, but there will be a hit to your credit score. Moving across the country is not a great time to create problems with your credit.

To the OP, talk to the dealer but expect nothing. They work with a broker who deals with leases, including selling them to other brokers. See what the dealer says. If it's too much money, figure out another plan. That's where I would start.

[Ken Robb]

Laws vary among states so there may be multiple answers to this question: if a buyer or lessee defaults can the creditor/lessor seek to recover anything but repossessing the car? Does a lessor have more or less rights than a creditor?

I know a few people in CA. who got ugly surprises when they walked away from their mortgages. (Technically we have loans with deeds of trust but most folks still call them mortgages.) A purchase money deed of trust loan(the loan you get to buy your home) is exempt from any chance of a deficiency judgement so the borrower's only at risk of losing any equity he has in the home. BUT----if the loan was a refinance this protection no longer applies and a lender can foreclose on the home, sell it, and get a judgement against the borrower for any shortfall to satisfy the outstanding balance, late fees, etc.

In the boom days some owners refinanced several times to withdraw cash equity, refinance at a lower rate, or both. When the crash came they thought it didn't really affect them because they had already pulled more $$ out of their home than they had put in so there was no way they were going to keep making payments on property that was now worth less than the outstanding loan. They had to pay off the balance or try to get relief through bankruptcy.

I don't know what the law is on car loans or leases.

[11.4]

Laws vary among states so there may be multiple answers to this question: if a buyer or lessee defaults can the creditor/lessor seek to recover anything but repossessing the car? Does a lessor have more or less rights than a creditor?

I know a few people in CA. who got ugly surprises when they walked away from their mortgages. (Technically we have loans with deeds of trust but most folks still call them mortgages.) A purchase money deed of trust loan(the loan you get to buy your home) is exempt from any chance of a deficiency judgement so the borrower's only at risk of losing any equity he has in the home. BUT----if the loan was a refinance this protection no longer applies and a lender can foreclose on the home, sell it, and get a judgement against the borrower for any shortfall to satisfy the outstanding balance, late fees, etc.

In the boom days some owners refinanced several times to withdraw cash equity, refinance at a lower rate, or both. When the crash came they thought it didn't really affect them because they had already pulled more $$ out of their home than they had put in so there was no way they were going to keep making payments on property that was now worth less than the outstanding loan. They had to pay off the balance or try to get relief through bankruptcy.

I don't know what the law is on car loans or leases.

The law varies slightly between states but mostly in how representations are managed, and that kind of thing. You can still lose 150 points on your credit rating if you walk. Plus, if you don't pay in the end, the IRS treats it just like any other forgiven debt and you have to treat any forgiven lease payments as income on your tax return. Again, not fun. You definitely don't want to walk away if you think you'll ever need your credit rating again.

These kind of things do happen. One solution is obviously to talk to the leasing company. Especially if it's VW's captive leasing entity, they will sometimes be reasonable so they have a chance of getting you back later. Another solution is to transfer the lease; you may not be able to do so technically under the lease agreement but hand it to a family member or friend for a discounted rate until it gets returned to the lessor. And last, but definitely not least, if you have to move into Manhattan, you own't be the first to ask your new employer to absorb the cost of the lease as part of your relocation expense. Seriously, having lived in Manhattan, I can't tell you how many people have come to town and had their leases absorbed by the company.