Lease then Buyout - Contract Explanation

[NYLAWBIZ]

Any down payment reduces the buyout, but I wouldn't bother.

You'll still get taxed on all of it though, you're taxed on the price, not the amount owed.

Actually (at least in NY) sales tax is paid twice: first at the time of the lease, base upon the monthly payments due under the lease; and then at buyout - taxed on the residual value. So you re essentially paying sales tax as if the lease ran its full course and the car is purchased by the lessee.

 

[stinger541]

Any down payment reduces the buyout, but I wouldn't bother.

You'll still get taxed on all of it though, you're taxed on the price, not the amount owed.

Thank you very much Blayde. I went to lease the Stinger Premium and then was told that there is Zero allowance for wear/tear unless I buy their protection at 29/month. That, or expect a 2k bill at end of lease. So that is why I am looking at buyout, but worried about being upside down on depreciation vs what I will owe on the car.

 

[shaggystinger]

Thank you, I actually have read most of this long thread but am still confused, even after this answer. Say my final price is 40k after lease cash and dealer discount. I put down 3k in total, to cover first payment and whatever else they use that for. Does that mean by buyout price would be reduced by the 3k? So I then need to pay 37k plus tax or would I still be paying 40k plus tax?

@NYLAWBIZ is correct. Your tax question is based on State. In my state (Maryland) you pay all taxes upfront as if you were purchasing the car outright and not leasing. Come lease buyout time, my buyout amount factors in taxes being paid already.

 

[Paul32]

Thank you very much Blayde. I went to lease the Stinger Premium and then was told that there is Zero allowance for wear/tear unless I buy their protection at 29/month. That, or expect a 2k bill at end of lease. So that is why I am looking at buyout, but worried about being upside down on depreciation vs what I will owe on the car.

Don't trust this dealer........

 

[shaggystinger]

Thank you very much Blayde. I went to lease the Stinger Premium and then was told that there is Zero allowance for wear/tear unless I buy their protection at 29/month. That, or expect a 2k bill at end of lease. So that is why I am looking at buyout, but worried about being upside down on depreciation vs what I will owe on the car.

Sounds like dealer BS to me to get you to buy their "protection" plan. Don't let what they are telling you factor in to doing a lease buyout. Do the lease buyout because you want the car and are getting a good deal. They will say anything to get more money!

 

[Indy499]

That’s what I thought but do they get charged back the rebate they gave out?

This is why I hate dealing with lower end dealerships from the customer service to bait and switch pricing. If kia wants to up their image not only are they going to need to do it with their cars but also with the dealerships.

The dealers can choose to mark up the lease money factor to make a profit on the lease, or they can get a flat "dealer reserve", which is I believe a flat $150 or $175. If you buy out the lease within 90 days, KMF charges the dealer reserve back - this is why dealers want you to wait 90 days. You have no obligation to tell them you're going to buy out the lease though. If you do want to be straightforward with them, it's better to offer to pay an additional $175 than to hold onto the lease for 3 months, because KMF's lease rates are so high you're paying $100-$150 per month in rent charge.

 

[BlaydeX15]

Yeah, tax is state dependent. He's in IL, so payment is not collected up front, but is baked into the monthly payment. VA and GA make you front tax on the whole value of the car, and NY, NJ and MN make you front tax on the leased portion.

In those 5 states, it's not as good of a deal because you'll get hit by taxes twice. Everywhere else, you either get charged tax monthly or at the time of total purchase, but not both.

As far as allowances for wear on the car, there's reasonable wear and tear allowances. Dealer is trying to scare you.

 

[Indy499]

Hi all - in the market for a red on black GT2. Just got a quote yesterday with the following:

MSRP: 52,500
Dealer Discount and Rebate: 12,901
Vehicle Price (net after rebate): 39,599
Doc fee: 600
Estimated payment with 0 down: 636-646

I'm in Illinois with a 7% tax rate.

Can anyone help me understand what my buyout amount would be?

It looks like the dealer is marking up the money factor to get that high of a payment with that price. Joke's on him though, because he won't see that markup if you buy out the lease.

Make sure they're not adding in other fees though that aren't money factor markup.

 

[GronkSoyFiesta]

Hi Shaggy -

Thank you very much for your reply. I'm leveraging the info right now with another dealer and asking for $45k flat purchase price with the 0.9% financing option still included. We'll see if they're hungry enough to bite. I'm really excited about the prospect of having this done in the next day or two.

This is what I’d like to do. Interested to hear how it goes for you

 

[stinger541]

Actually (at least in NY) sales tax is paid twice: first at the time of the lease, base upon the monthly payments due under the lease; and then at buyout - taxed on the residual value. So you re essentially paying sales tax as if the lease ran its full course and the car is purchased by the lessee.

I saw that in the thread. In my state, you only get taxed on the monthly payment. Which sort of sucks too because you are paying taxes on top of the finance charges (rent). So by buying out you can save on taxes there too, as you only pay on the cost, with no rent. Just got scared by the whole 'if you do not buy the lease safe protection, you can expect a huge bill at end'. Specifically called out the Stinger for this, saying how expensive it will be.

 

[stinger541]

This is what I’d like to do. Interested to hear how it goes for you

This would be awesome but when I checked, they said no way...no lease cash if you finance.

 

[niko]

My dealership I bought the car called me and said I was eligible to buy out my lease. They asked me to come in. Should I go in and finance through them or go to a credit union get a check and send it to kmf?

 

[Mach_Tuck]

If you plan to buy it out, there is no need to put down any cash unless you are doing that to decrease the amount of the loan to purchase the car. Let’s say you got a GT2 AWD for $43k after with taxes and fees, the loan will be based on that number so the monthly payment amount will be higher for 60 months.. If you use that to reduce the buyout price, you are looking at a loan in the $30+k range which would be a lower payment for 60 months.

This has been discussed here already, hope this helps.

Additionally, i would NOT put money down on the lease side of the deal. Wait and put that down with the lender for the buyout. Reason being that if you put the money down on the lease, drive it down the street and, god forbid, the car become totaled, you are up shit creek. The GAP will make the dealer whole but you can kiss that down payment goodbye at that point. No need for you to put up more cash until the asset becomes yours via lien with the buyout. Just my 2 cents!

 

[Mach_Tuck]

My dealership I bought the car called me and said I was eligible to buy out my lease. They asked me to come in. Should I go in and finance through them or go to a credit union get a check and send it to kmf?

if they can beat the interest rate then go with them. make sure they are allowing the buyout in accordance with the lease contract and not hiding some added fees or god knows what in there! Buyout amount should match what is shown on the KMF Account page

 

[shaggystinger]

My dealership I bought the car called me and said I was eligible to buy out my lease. They asked me to come in. Should I go in and finance through them or go to a credit union get a check and send it to kmf?

No harm in seeing what they will offer you as far as rates go. Compare it to what your credit union is offering and go from there.

 

[stinger541]

My dealership I bought the car called me and said I was eligible to buy out my lease. They asked me to come in. Should I go in and finance through them or go to a credit union get a check and send it to kmf?

Hey Niko, how long have you had the car? They just called and said, hey, want to buy out the lease that we already gave you so much in rebates on'? Sounds interesting.

 

[Mach_Tuck]

The only thing i can think of is that they want to finance the entire amount of the lease including the rent...so beware

 

[shaggystinger]

Hey Niko, how long have you had the car? They just called and said, hey, want to buy out the lease that we already gave you so much in rebates on'? Sounds interesting.

More than likely the dealership will get some sort of "incentive" for pushing you towards a certain bank they frequently work with.

 

[Atl5Stripes]

I just tried the lease buyout approach and here was my experience:
-Negotiate hard on the price. Get a good price. All over the phone with multiple dealers
-Get to dealer
-Let them know you are interested in leasing
-Don't get the price you negotiated

According to the dealer, there is a different lease price vs. sale price. I don't know or care if that's the case, but thought I'd share as many of the methods on this forum involve negotiating the price then telling them you're leasing.

It was kinda BS as they called me before I got there to "make sure we're on the same page". We weren't.

 

[Mach_Tuck]

I just tried the lease buyout approach and here was my experience:
-Negotiate hard on the price. Get a good price. All over the phone with multiple dealers
-Get to dealer
-Let them know you are interested in leasing
-Don't get the price you negotiated

According to the dealer, there is a different lease price vs. sale price. I don't know or care if that's the case, but thought I'd share as many of the methods on this forum involve negotiating the price then telling them you're leasing.

It was kinda BS as they called me before I got there to "make sure we're on the same page". We weren't.

You got a shady dealer...bottom line.

There is no difference in price when comes to lease vs buy. Any A-Hole that says different is just plain ignorant. Find another dealer.

Negotiate Purchase Price is same whether lease or buy. Incentives or rebates may vary but not purchase price