Go Back  The Hull Truth - Boating and Fishing Forum > BOATING FORUMS > Dockside Chat
Reload this Page >

Dumb question about trading in a vehicle and leasing a new one

Notices

Dumb question about trading in a vehicle and leasing a new one

Old 01-05-2020, 10:43 AM
  #1  
Admirals Club Admiral's Club Member
Thread Starter
 
Join Date: Sep 2013
Location: Newburyport, MA
Posts: 1,884
Received 172 Likes on 103 Posts
Default Dumb question about trading in a vehicle and leasing a new one

Please excuse the dumb question, but I really don't have much experience when it comes to leasing. My car is paid off and it's current trade-in value is about $15k. My question is what happens to this $15k if I decide to trade it in for a lease, instead of purchasing another vehicle? Most leases require $0 to $2500 down payment, so where does the rest go?
Old 01-05-2020, 10:46 AM
  #2  
Senior Member
 
Lprizman's Avatar
 
Join Date: May 2009
Location: RI
Posts: 6,383
Received 4,536 Likes on 1,986 Posts
Default

Towards your payment....your going to get hosed on the value you think you have versus what they think you have
Current vehicle?
leased vehicle?
Old 01-05-2020, 10:47 AM
  #3  
Admirals Club Admiral's Club Member
 
Join Date: Feb 2010
Location: Land O Lakes, FL
Posts: 3,527
Likes: 0
Received 214 Likes on 120 Posts
Default

I wouldn't trade on a lease. If you don't want to sell it yourself then take it to Car Max.
Old 01-05-2020, 10:52 AM
  #4  
Member
 
Join Date: Sep 2018
Posts: 69
Likes: 0
Received 194 Likes on 55 Posts
Default

You will come out better moving your vehicle via private sale, placing a down payment on the lease, and pocketing the balance.

If you don’t want to private sale, dealers will also allow you to use the trade in equity as prepayment on the lease.
Old 01-05-2020, 10:56 AM
  #5  
Admirals Club Admiral's Club Member
Thread Starter
 
Join Date: Sep 2013
Location: Newburyport, MA
Posts: 1,884
Received 172 Likes on 103 Posts
Default

Originally Posted by Fractured but whole View Post
You will come out better moving your vehicle via private sale, placing a down payment on the lease, and pocketing the balance.

If you don’t want to private sale, dealers will also allow you to use the trade in equity as prepayment on the lease.
Ok so that's the key, to use the trade-in equity as prepayment on the lease. So what happens if the leased vehicle gets totaled after 3 months let's say? Again, sorry for the dumb questions, this is all new to me.
Old 01-05-2020, 11:00 AM
  #6  
Admirals Club Admiral's Club Member
 
Join Date: Nov 2014
Posts: 2,176
Received 384 Likes on 221 Posts
Default

Originally Posted by Devil_Inside View Post
Ok so that's the key, to use the trade-in equity as prepayment on the lease. So what happens if the leased vehicle gets totaled after 3 months let's say? Again, sorry for the dumb questions, this is all new to me.
You're shit out of luck. Hence, the reason you dont put money down on a lease.
Old 01-05-2020, 11:04 AM
  #7  
Admirals Club Admiral's Club Member
 
Join Date: Aug 2004
Location: Cypress, Texas
Posts: 95
Likes: 0
Received 18 Likes on 10 Posts
Default

How many miles a year do you drive? It makes a big difference. Most of the ads you see where a payment is advertised are for a base model, low miles and a down payment. I know some like it because they can drive an expensive vehicle usually for a lower payment and stay in a newer vehicle to avoid the maintenance costs.
Old 01-05-2020, 11:05 AM
  #8  
Admirals Club Admiral's Club Member
Thread Starter
 
Join Date: Sep 2013
Location: Newburyport, MA
Posts: 1,884
Received 172 Likes on 103 Posts
Default

Originally Posted by On the Half Shell View Post
You're shit out of luck. Hence, the reason you dont put money down on a lease.
So in essence there’s no difference between putting money down and using the equity to pre-pay your lease payments? Either way you are SOL in the event of a loss?
Old 01-05-2020, 11:10 AM
  #9  
Senior Member
 
Join Date: Jul 2017
Location: Northeast
Posts: 114
Received 27 Likes on 17 Posts
Default

I had a car paid off that had a trade in value of $36K and I leased a new car with $0 down. I left with a new car and got a $36k check in the mail a couple days later from the dealer. I closed the deal on a Saturday and the check came from the corporate office (big dealership), so it went out on Monday.
Old 01-05-2020, 11:10 AM
  #10  
Junior Member
 
Join Date: Dec 2015
Location: Ohio ~ The I'm outa here state
Posts: 48
Likes: 0
Received 509 Likes on 319 Posts
Default

It will still be insured & covered - The devil will be in the details of the lease terms

I would sell outright - Have a lease car lined up per se & then move into it - Always can rent a car for a week or so in the interim
Old 01-05-2020, 11:18 AM
  #11  
Senior Member
 
Join Date: Jul 2016
Posts: 729
Received 1,122 Likes on 526 Posts
Default

Originally Posted by Devil_Inside View Post
Ok so that's the key, to use the trade-in equity as prepayment on the lease. So what happens if the leased vehicle gets totaled after 3 months let's say? Again, sorry for the dumb questions, this is all new to me.
leases have a lot more room to get screwed because of a number of factors that are harder for a lessee to determine

it is harder to determine what they are "selling" the car for

it is more difficult to compare the "money factor" which is essentially the interest rate

and it is more difficult to determine what the residual value should be and to compare them between leases

if you have decided a lease is for you then as others have said you would be MUCH better off selling your car outright and then working the lease on it's own.....adding in a trade with a large amount of equity is a disaster for starting a lease

now to your specific question you need to read the lease carefully and look for words like this "Loss of value after a major repair completed to a commercially acceptable standard is assumed by the lessor"

that is a phrase dealing with diminished value after an accident.....what that phrase says is that you need to have insurance that will repair the car to an acceptable standard for your leasing company which may include things like no used or after market parts or parts that are OEM standard or better....and if the repair is made in an acceptable fashion to the leasing company then the diminished value is on them and not you

you need to discuss this with the "business office" or the "fiance guy" or as everyone else knows them the asshole that actually closes the deal and tries to sell you shit you do not want or need for way too much money and tried to play games with the numbers one final time to get more down payment, longer months, a higher interest rate or all of the above out of you or to catch you sleeping

unfortunately asking them about the diminished value and how that is handled on a lease is a perfect time for them to try and bend you over and sell you something you do not need

you need to talk with your auto insurance company (and again be careful of trusting them as well) and ask them how that is generally handled BY THEM.....as far as acceptable OEM quality repairs to a leased car and diminished value......again a chance for your insurance agent to also sell you something you do not need

but between them and the "F&I guy" at the dealership and YOU READING THE LEASE AGREEMENT AND ASKING DIRECT QUESTIONS ABOUT SPECIFIC LANGUAGE you should be able to CYA without taking it in the A

DO NOT MAKE A DEAL ON THE FIRST DAY YOU IN PARTICULAR NEED TO TAKE YOUR TIME AND WORK THIS SLOWLY DO NOT GET NEW CAR FEVER AND MAKE A DEAL OUT OF EXCITEMENT OR FATIGUE TAKE CONTROL OF YOUR DEAL AND GET YOUR QUESTIONS ANSWERED BEFORE YOU ARE "in the box" and signing the closing papers on a deal

then take those answers and WALK OUT THE DOOR AND DOUBLE CHECK THEM....IT IS A CAR THEY WILL MAKE MORE OF THEM EVERY DAY AND HAVE MORE OF THEM TO SELL TOMORROW!!!!

talk to your insurance FIRST see what they say and then go from there
Old 01-05-2020, 11:24 AM
  #12  
Admirals Club Admiral's Club Member
Thread Starter
 
Join Date: Sep 2013
Location: Newburyport, MA
Posts: 1,884
Received 172 Likes on 103 Posts
Default

Thank you very much, guys. This was extremely helpful.
Old 01-05-2020, 11:38 AM
  #13  
Senior MemberCaptains Club Member
 
Join Date: Sep 2004
Location:
Posts: 549
Likes: 0
Received 48 Likes on 37 Posts
Default

The dealer you lease from can simply give you a check for the difference between the initial cost of getting into the lease and the value of your trade. Nothing wrong with trading in on a lease.
Old 01-05-2020, 11:50 AM
  #14  
Admirals Club Admiral's Club Member
 
Join Date: Nov 2007
Location: Long Island, NY
Posts: 8,568
Received 471 Likes on 313 Posts
Default

Most dealers, at least the reputable ones, will just cut you a check for the agreed trade in value if the new lease is zero money down. If it is money down, the money down comes out of the trade-in.
Old 01-05-2020, 11:52 AM
  #15  
Admirals Club Admiral's Club Member
 
Join Date: Sep 2019
Location: Jax Beach, FL
Posts: 176
Received 102 Likes on 57 Posts
Default

All new leases will require that you take out GAP insurance to cover diminished value so factor that into the cost. Your trade in reduces your overall tax liability (sales tax) on the value portion of your lease as in if you are "buying" 52% of the car over a three year lease you pay the tax on that portion of the overall value which is determined upfront by the residual value.

Shop for leases that hold the highest residual value and you might come out ahead at the end of the lease. Make sure you factor in the REALISTIC number of miles per year you will drive or you'll end up with the mileage penalty and pre-purchasing mileage is usually at a lower rate.

If you can sell your car privately for more than the tax savings from the trade then you should do that. If your time is worth more than your money then trade it on the lease. Remember that leases are just partial purchases in that you are essentially paying for the portion of the car that you're going to use over the term of the lease. Lease factor is just an interest rate and you can Google lease factor calculators to do the math at the dealer. Any competent and scrupulous salesperson will work the math for you at their desk.

Your credit score will determine the lease factor outside of advertised rates. And yes, most advertised leases are somewhat of a bait and switch. Base models in certain colors that don't exist on the lot. Putting zero down will add about $70 a month to your payment.

If you get $15k on trade and you fold it into the lease you'll have a low monthly payment and then you can invest what you didn't end up paying into an IRA or 401K and make money on your money.

If you own a business look into leasing through the company.
Old 01-05-2020, 12:00 PM
  #16  
Senior MemberCaptains Club Member
 
Join Date: Feb 2002
Location: Saugus, Ma. USA
Posts: 11,570
Received 1,246 Likes on 703 Posts
Default

One thing to keep in mind is that leasing companies make it convenient to keep you in a perpetual lease.

You and I both decide to lease the same car. I put down $2500, you trade in your car. Your lease payments will be lower, or they'll upsell you to convince you to lease a more expensive vehicle, or a combination of both.

After the lease, we both give back the vehicles.

Now what? You have to lease again. You can try to go back to purchasing a car, but with no equity this time around, the monthly payments would be huge unless you can come up with a big down payment.
And then when that lease finishes, you lease again. You now have a forever payment, but get used to having a new vehicle every 3 years.

Now if you were really disciplined, when you first got the lower lease payments, you'd save (deposit into a savings account) the difference between the lease payments vs purchase payments, so that at the end of the lease, all that money you saved up is similar to the equity you'd have if you had purchased instead of leased. Now at the end of the lease you're in good shape and can put that money down on the new lease to lower the monthly payments.
Old 01-05-2020, 12:01 PM
  #17  
Senior Member
 
Join Date: Jul 2016
Posts: 729
Received 1,122 Likes on 526 Posts
Default

I can agree somewhat with #13 and #14, but in this case the OP seems to be new at car deals and even newer at leasing

there is nothing wrong with jumping right into the fire if one is ready to do so, but there is also nothing wrong with making a car deal less complicated especially a lease

there are always those that say "just email the fleet guy at 3 places and make your demands" and then of course many chime in that has worked for them, but then many others chime in that has resulted in a lot of wasted time and effort and annoying calls from new salesmen at several dealers

it is about "attitude" and the sharks can smell fresh blood and false confidence and they will swarm to it

nothing wrong with pointing out that a car deal does not always have to be an ordeal, but often those that make them easy have learned from an ordeal in the past....nothing wrong with any method, but when one sounds inexperienced my advice is move slowly and uncomplicate the deal as much as possible....I mean after all you can always go back and make it complicated if you want

I do commend the OP highly for actually having a trade with real significant equity in it instead of being $12,000 upside down and looking to mix that $12,000 deficit into a new deal.....much less being one of those that thinks that $12,000 deficit in the trade somehow disappears in a new car deal because there is so much profit for a new car dealer to work with
Old 01-05-2020, 12:13 PM
  #18  
Senior Member
 
Join Date: Jan 2014
Location: Palm Harbor, FL.
Posts: 383
Likes: 0
Received 89 Likes on 53 Posts
Default

Lots of good information here.
Remember that everything on a lease is negotiable, no matter what the salesman tells you. I learned the hard way on one of those ultra low mileage leases years ago. The second time I leased I had to almost walk, but they caved and gave me the miles per year I wanted, at no additional cost.
Normal wear and tear is not the same dependent on the type of vehicle. Turned in a Porsche with 16,000 miles and had to pay for new rear tires.
I agree with selling your old vehicle first. I used We buy any car.com twice in the last couple years, for a Cadillac and a Porsche I owned. They were very fair.
Old 01-05-2020, 12:23 PM
  #19  
Senior Member
 
Join Date: Jul 2013
Posts: 1,369
Received 162 Likes on 83 Posts
Default

With a lease you are not Screwed in the event of an accident. You're still required to carry insurance. The insurance will keep you whole.
Old 01-05-2020, 12:32 PM
  #20  
Admirals Club Admiral's Club Member
 
Join Date: Nov 2014
Posts: 2,176
Received 384 Likes on 221 Posts
Default

Although I believe I know the right answer, there seems to be some lease experts on here, so please confirm this for me.....

Scenario:
- trade in a car with $20,000 equity in on a lease (same as $20K down payment minus any tax advantage)
- get in a wreck and it is a total loss the following week
- insurance + Gap insurance pays the car off (pays the leasing company not me)
- I AM OUT THE $20,000 I PUT DOWN! The insurance company nor dealership is refunding my $20K

If that is the case, then why in the hell would you ever put money down on a lease?

Thread Tools
Search this Thread

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service - Do Not Sell My Personal Information

Copyright © 2018 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.