Lease then Buyout - Contract Explanation

[Mach_Tuck]

What was that I read above, about lease contracts being "typically" set up that way? But some are set up so that you are stiffed with the unpaid rent balance? I'm assuming that the KMF rep was telling us how our lease is configured. Maybe somebody else in my place would have figured that out before signing and refused to allow that. I'm admitting that I didn't read the contract in any sort of lengthy detail. So how can you be one hundred percent sure that the unpaid balance on the rent is not charged? It wasn't charged on your lease buyout apparently. But if I can't trust what KMF says, who else am I supposed to go to, to find out if that c. $5,500 is going to be "forgiven"?

I am willing to bet that KMF does NOT have different lease contracts for different parts of the country.

Go read Sections 9, 22D and 23B on your lease agreement. All explained right there. IF yours is different then ALL the rest of the folks who have done i will happily apologize and warn people even more that they must READ before they SIGN.

What does the buyout amount say on KMF?? I would wager its not residual plus rent plus outstanding....just saying

 

[Mach_Tuck]

100% Agree. People can say all sorts of things on the phone, and either:
A. Not know what they are talking about.
or
B. Know what they are saying and are instructed to do so to discourage early buyouts of leasing the Stinger.

They can't charge you Rent on an early buyout.

Think of it this way:
– When you get a car loan, you can pay it off early, by paying off the principal. You are NOT charged interest on paying off the principal. That is illegal.
or
– When you get a mortgage, you can also pay off the principal and again, the bank cannot legally charge you interest on paying against the balance early. I personally saved over $60,000 (over the remainder of the term) by paying off my mortgage early. I didn't say "Hey, I want to pay off my mortgage, but charge me 10yrs x all those monthly payments w/interest please." Uh no. I get an actuary table, and validate the Bank just gave me the remaining principal charges and boom - done.

A lease is - 100% - JUST ANOTHER TTYPE OF LOAN. A costly, complicatedly structured loan, but none-the-less a loan. The CAR, not money, is what is loaned to you in a car lease. Once you pay them the balance for it, you give the car back - loan paid off with interest. You can then purchase or walk way.

NOW: If the person at KMF thought you were speaking to paying off the 36 month term only, and not buying out the entire car, then yes, you must pay the total stream of those 36 months payments with the interest/rent built in. HOWEVER, if you are buying out the car entirely in cash or a loan from another bank, etc... and they understood you are doing a buyout, residual and all, then no, they cannot charge you rent.

I'm sure dozens of people on this blog (and others) can show you their paperwork, their legal contract, and how the Lease Cash pays off if you go the least to buyout route.

And no. KMF would rather NO ONE ever do this!!! And few people do.... However, it seems quite popular with the Stinger, due to the fact Kia's Money Factor is close to insanely high. Of course to offset that rate, they provide a healthy dose of Lease Cash to re-aqcquire over the term.

As a result, it appears many people are taking advantage of the large lease cash offerings, purchasing their Stinger via the lease program. I'm sure KMF is NOT happy with the amount of people doing this, but they are offering this, so hey, take advantage of what people offer. Nothing unethical about that at all.

Good luck!

Correct, this is all about being knowledgeable and making the best deal possible given the available options. Of course KMF dont want you do this as they lose money. Send me a PM if you want and i will give you my exact breakdown on my numbers. You can easily see that i did not pay any RENT

 

[MerlintheMad]

So what was that about, earlier in the thread, about some leases getting stiffed with the rental balance? Nobody gainsaid that, or else I missed it.

 

[MerlintheMad]

I am willing to bet that KMF does NOT have different lease contracts for different parts of the country.

Go read Sections 9, 22D and 23B on your lease agreement. All explained right there. IF yours is different then ALL the rest of the folks who have done i will happily apologize and warn people even more that they must READ before they SIGN.

What does the buyout amount say on KMF?? I would wager its not residual plus rent plus outstanding....just saying

The numbers don't agree exactly, to say the least. Our buyout is currently $40,954.79. The Residual is $24,156.60. After adding on the remaining 33 payments to the Residual, the total is right back up to c. the total purchase price: the Residual and the 33 payments do not equal the buyout price by over four thousand bucks. What's up with that? The KMF rep said that the two added together equalled the buyout figure. So, I don't know what is going on. This doesn't even include the $300 Purchase Option Fee; or who knows what else.

 

[MarkyMark]

The numbers don't agree exactly, to say the least. Our buyout is currently $40,954.79. The Residual is $24,156.60. After adding on the remaining 33 payments to the Residual, the total is right back up to c. the total purchase price: the Residual and the 33 payments do not equal the buyout price by over four thousand bucks. What's up with that? The KMF rep said that the two added together equalled the buyout figure. So, I don't know what is going on. This doesn't even include the $300 Purchase Option Fee; or who knows what else.

Check your lease paperwork. Sounds like you are now into your lease by a few months? 33 payments remaining? I am not sure, but I've read about needing to conduct the buyout very soon, and that some of these leases "may" have wording that after a few months it's steam of payments? Not sure, but do check that out in the fine print. That's why it's fine print, because it never favors you the buyer that's for sure!... hmmm...

 

[MerlintheMad]

Well, I don't understand any this of well enough to make a confident decision to buyout. So I am just going to stick with the rest of the lease and go with my original plan to make up my mind then to exercise the option to buy or not. If there are any repeat sales taxes applied because the title would be in my name, at least the taxes will be on a considerably lower amount than c. $41K. Have fun, all you all, deciding what to do!

Oh, and btw, my lease reads exactly the same as those quoted sections by Mach_Tuck. So, I am pretty sure that there is only one lease, and not different ones for different states.

 

[BetterthanaBMW]

Hi! I just discovered this site and this thread. Question: when doing a lease and planning to do a buyout, it would seem to be best to NOT trade in your old car when doing the lease, because it only reduces your payments, and doesn't reduce your purchase or lease price, correct?

Did everybody doing the lease buyout not have a car when they went shopping? Or did you do the lease, sell your old car, and then apply that cash to your credit union financed amount?

 

[SEA Stinger]

So what was that about, earlier in the thread, about some leases getting stiffed with the rental balance? Nobody gainsaid that, or else I missed it.

It appears to be a reference to the following that you posted on Thursday (June 7):

I've read this entire thread. In the midst of it, I called KMF to ask if my lease allowed the buyout to avoid the unpaid balance on the lease rent. She said no. On buyout the unpaid balance would be added onto the price. So, no early buyout for me. I leased in the first place to give myself the option to lease something new in three years: who knows what is going to be available in Stingers in 2021? I might not even be satisfied with this particular car by comparison, and it would be a bummer if I wanted to upgrade at that time, and I had a used car to sell (selling cars has never been one of my things). If the buyout was going to save me significant money I'd be tempted to do it right now: because I really, really, really enjoy this car after almost three months (and the one negative about leasing has always been the limited annual miles). But if I still feel the same way in 33 months, I can opt to buy then, at much reduced sales tax than I'd have to pay today. And when that day arrives, I plan on paying cash for the option to buy (thus avoiding any further interest). The gal on the phone from KMF said that it looked like if we did the buyout right now we would actually lose money, compared to waiting to term and then paying cash.

 

[SEA Stinger]

Well, I don't understand any this of well enough to make a confident decision to buyout. So I am just going to stick with the rest of the lease and go with my original plan to make up my mind then to exercise the option to buy or not. If there are any repeat sales taxes applied because the title would be in my name, at least the taxes will be on a considerably lower amount than c. $41K. Have fun, all you all, deciding what to do!

Oh, and btw, my lease reads exactly the same as those quoted sections by Mach_Tuck. So, I am pretty sure that there is only one lease, and not different ones for different states.

@MerlintheMad, nothing prevents you from requesting KMF to provide you with a lease buyout quote. Have you set up online access your lease account? If not, that would be a good idea. Then you can use your account to request a buyout estimate. Once you get the quote, it's entirely your choice about whether or not to proceed with the lease buyout. You will have the option to proceed with the buyout if you choose, but you're not obligated to do so.

An important advantage of obtaining an official lease buyout quote from KMF is that it puts them on record for telling you the actual payoff amount. This is much better than oral conversation over the phone with a service rep, which exposes you to the risk of miscommunication and getting either uninformed or deliberately deceptive information.

I suspect that if you request that KMF send you an official buyout quote, they'll provide a quote to you that leaves out the rent (i.e., future interest charges) for months beyond the requested buyout date.

On the other hand, if KMF were to send you a buyout quote that violates your lease agreement by including post-buyout rent charges, that could constitute evidence of deliberately false and misleading business practices by KMF.

Unless you are so wealthy that the savings from a lease buyout wouldn't justify the time and aggravation of holding KMF to the terms of the lease agreement, I encourage you to at least take the step of getting an official buyout quote.

Please keep us posted!

 

[SEA Stinger]

The numbers don't agree exactly, to say the least. Our buyout is currently $40,954.79. The Residual is $24,156.60. After adding on the remaining 33 payments to the Residual, the total is right back up to c. the total purchase price: the Residual and the 33 payments do not equal the buyout price by over four thousand bucks. What's up with that? The KMF rep said that the two added together equalled the buyout figure. So, I don't know what is going on. This doesn't even include the $300 Purchase Option Fee; or who knows what else.

Maybe I can help you sort this out. How much is your monthly payment amount, and what is the Money Factor for your lease?

 

[MerlintheMad]

Maybe I can help you sort this out. How much is your monthly payment amount, and what is the Money Factor for your lease?

If by money factor you mean what the total lease "rent" is by the end, it is $5774.86. I pay $627.02 (that two cents really bugs me). I've already made three payments. June will be the fourth.

 

[SEA Stinger]

If by money factor you mean what the total lease "rent" is by the end, it is $5774.86. I pay $627.02 (that two cents really bugs me). I've already made three payments. June will be the fourth.

Ok, I think I am starting to get a better grasp of your situation.

1. You state that the cumulative total lease "rent" during the 36 month term of your lease is $5,774.86. This translates to a monthly "rent" charge of $160.41.
2. Subtracting the "rent" charge of $160.41 per month from your lease payment of $627.02 per month means that each lease payment reduces your outstanding balance by $466.61 per month. (This is assuming sales tax is not included in your monthly lease payment.)
3. $466.61 per month times 36 monthly lease payments is $16,797.96. That's the cumulative amount that your outstanding balance would decrease by if you keep the lease for the full 36 months.
4. $16,797.96 added to the lease-end Residual Value of $24,156.60 is $40,954.56. This matches the buyout amount that you were given by the rep you spoke with at KMF. It also makes me wonder if the purchase price stated in your lease agreement was the same amount.

Two other things about the buyout amount you were quoted still don't seem quite right.

First, since you have already made three payments, if the purchase price was $40,954.56, your current outstanding balance should be less by $1,399.83 (i.e., 3 times $466.61), or $39,554.73.

Second, your buyout amount should include a $300 purchase option fee, which would bring the total buyout amount to about $39,854.73.

So in summary, based on the assumptions shown above, the buyout amount you were quoted appears to be overstated by about $1,000. Perhaps this could have been the result of the service rep that you spoke to on the phone making a rough guesstimate. As I suggested in a previous post, to nail this down more definitively it would be worthwhile for you to request a formal estimate of your lease buyout amount. In your request for a lease buyout estimate, be sure to ask KMF to itemize each part of the total buyout amount.

Finally, you might be wondering how much money you would actually be able to save by buying out your lease now. The answer is that you would avoid 33 monthly "rent" payments of $160.41, for a total "rent" (i.e., interest cost) savings of $5,293.53. Note that this is a gross amount of avoided interest cost - if at the time you buy out your lease you roll some or all of the outstanding balance into a loan (presumably at a lower interest rate), then the interest charges over the life of your new loan would partially offset some of the $5,293.53 savings.

Of course you have already saved a significant chunk of money by receiving the lease incentive when you originally leased your Stinger rather than buying it. The lease buyout strategy helps keep KMF from clawing back too much of the value of the lease incentive by collecting the high interest charges embedded in the "rent" component of your monthly lease payments.

Clear as mud?

 

[MerlintheMad]

Ok, I think I am starting to get a better grasp of your situation.

...

Clear as mud?

Yeah, like I said, I don't understand this well enough to tell if we'd be saving enough (or anything!) to make buying out the lease right now worthwhile moneywise. Decision-wise, I've already chosen to go with our original decision and just stick with it, giving myself both options at the end of the (now) 33 months: buy the car or lease a brand new one. If I buyout then I am giving up the option to lease another car: I'd have to sell this one first, and if there is one thing I dislike intensely it is selling vehicles! Not my thing, at, all.

You've underscored the complexity. The buyout figure is directly off KMF's account page. It wasn't created as an estimate by the rep on the phone: she was looking at our account page, and I printed it off as well (to stop having to keep logging back in and finding the danged thing: they don't exactly wave flags to direct you to it, do they?).

KMF says that the buyout figure can be different for added on reasons, the main one being UT sales tax. I do know that if we buyout, the sales tax will not be escaped: there is no way that UT will miss out on the "final" purchase price. So far we are only paying sales/use tax on the depreciation. The residual (what we pay if we exercise our option to buy at the end of the lease) will get taxed at the time as a lump sum. Buying out now will also incur the same damned thing. There is no escaping the tax man.

During the lease, the monthly sales/use tax added on (part of the $627.02) is $40.20.By the end of the lease we will have paid an additional $1,447.20. It's all part of KMF's disclaimer: "The buyout amount shown may include sales tax* ... and any other amounts as set forth in your finance agreement." I detect the appeal to "fine print". I do not trust the buyout figure.

The original "Gross Capitalized Cost" is $45,407.26. "Adjusted Capitalized Cost" is $39,507.26. I don't know if any of that helps clarify the numbers so far.

(Oh, and btw, you quoted "me" as the originator on this thread of the assertion that some contracts tack on the whole "rent fee" during the buyout. But I was referring to what someone had said earlier in the thread. No, I don't want to go look for it, again!)

 

[MerlintheMad]

Hi! I just discovered this site and this thread. Question: when doing a lease and planning to do a buyout, it would seem to be best to NOT trade in your old car when doing the lease, because it only reduces your payments, and doesn't reduce your purchase or lease price, correct?

Did everybody doing the lease buyout not have a car when they went shopping? Or did you do the lease, sell your old car, and then apply that cash to your credit union financed amount?

Iirc, further back in this thread, it was asserted that trading in does not help in the buyout.

I had a '94 Plymouth Voyager. Heh! The only trade in value was the price of the rolling metal, c. $500. I got twice that by selling it. I made my second lease payment with cash from that sale.

 

[Kickin Kiaster]

Hello, and thank you everyone for this very useful thread. I have been following it since before my Purchase. I say purchase because, even though it's currently a lease, I went into it knowing I would be doing the Buyout. Because of all the detailed info on here!

Now it's time for me to get my buyout rolling. I'm approved for a loan thru CU and need to provide the following per email from loan officer:

"1. Lease buyout statement
2. Copy of the registration
3. Application for title
4. Insurance Binder
The Credit Union should be listed as follows on the insurance binder and application for title..."

Numbers 1, 2 and 4 are simple for me to take care of. #3 - Application for Title - is where I'm not sure how to get rolling. ???

Here are some details, in the hopes someone can help me get looking in the right direction:
State car leased and will be purchased in: New Hampshire
Date leased: 5/10/18
Date registered w/ DMV: 6/2/18
Tax: none issue for me, it's dealt w/ via registration
State takes about 2 to 3 months to create and send the Title to KMFUSA
I'll be paying from my own funds $5,000 toward buyout.

How and where do I get the Application for Title w/ CU's name on it? I had to turn the application for title I got from the dealer, over to the town clerk, which had Kia/Hyundia Motors listed on it as the owner. So first the Title has to be created and sent to Kia.

And the other thing I'm not sure about is when and how to make my payment of $5,000 towards the buyout?

I know to some this may all sound like just too much hassle and work to even deal with. But to put it in perspective for my situation, I will be looking at a savings of around 20% off the purchase of a brand new car. And that's a new car which is also a new model, in high demand, and somewhat of an enthusiasts vehicle, with a great warranty!

Cheers!

 

[MerlintheMad]

20%! I don't see it. But, that's what I've been battling all along.

 

[CJ21]

After dealer cash my ceramic/red Stinger GT2 was roughly $50K. I did the lease with $5k in KIA lease cash. I also put $5,000 into the transaction.

Received a "Buyout offer" of $40,023.03 Sent (overnight) a bank check and KMF account updated that funds were received and my balance shows $0.

My total cost (sans taxes) = $45,023. Couldn't be more happy - heckuva deal for a very cool car.

Now, lets see if I promptly receive title from KMF.

A little bit of work to save $5k but, so far/so good.

 

[Kickin Kiaster]

My 2.0 Premium AWD w/ Drivewise MSRP 42,255:
$365 dealer fees
$650 Lease fee
$300 lease buyout fee
Total cost w/ fees 43,570

$3150 dealer discount
$6800 lease rebate

Buyout statement now says $32,550. Total cash in so far $925.50 (2 lease payments). So far looks to be a 23% savings. And of course I'll end up paying some finance interest as I will borrow some for the buyout. Still way better than I could have done on a straight purchase thru the dealer vs lease then buyout.

 

[MerlintheMad]

What about instant sales tax? That's got to cut into it.

 

[CJ21]

What about instant sales tax? That's got to cut into it.

Have to pay it in any case. We'll see if it is once, or twice.