Lease then Buyout - Contract Explanation

[Rob M]

Help somebody with a small brain understand this... am I correct in thinking that unless one has the cash on hand to immediately fully buyout the car using the lease / buyout discount "trick" it would be dumb to finance the buyout immediately rather than pay the lower monthly lease payment, save the "extra" cash, NOT pay interest on borrowed money (because there isn't any), and then use the saved cash to put down on the buyout and THEN finance the remaining lower balance when the lease is up?

Not necessarily. With the lease you are still borrowing money and paying interest (the "money factor"). For example, in post #614 above the money factor = 0.00220. You multiply that number by 2400 to come up with the interest rate on a lease, in this example 0.00220 x 2400 = 5.28%. That's a couple percentage points higher than the new car interest rate you can get today with excellent credit from some lenders. So in that case, if your goal is long term ownership of the vehicle, it still makes sense to do the buyout and get the benefit of the lower interest rate. The comparison you would want to make is how much in total (including all fees and interest) you spend when buying (with any applicable rebates/incentives applied) vs. leasing (with the generous lease cash) followed by a lease buyout. Keep in mind that if you wait til lease end to do buyout and obtain financing that used car loans have a slightly higher interest rate than new.

 

[pantheman75]

Not necessarily. With the lease you are still borrowing money and paying interest (the "money factor"). For example, in post #614 above the money factor = 0.00220. You multiply that number by 2400 to come up with the interest rate on a lease, in this example 0.00220 x 2400 = 5.28%. That's a couple percentage points higher than the new car interest rate you can get today with excellent credit from some lenders. So in that case, if your goal is long term ownership of the vehicle, it still makes sense to do the buyout and get the benefit of the lower interest rate. The comparison you would want to make is how much in total (including all fees and interest) you spend when buying (with any applicable rebates/incentives applied) vs. leasing (with the generous lease cash) followed by a lease buyout. Keep in mind that if you wait til lease end to do buyout and obtain financing that used car loans have a slightly higher interest rate than new.

But don't you have to pay the full payments of the lease anyway whether you pay them month by month or all at once? Isn't the total the same?

 

[Rob M]

But don't you have to pay the full payments of the lease anyway whether you pay them month by month or all at once? Isn't the total the same?

No. At buyout you only pay the residual plus remaining lease payments MINUS the rent (money factor) that was scheduled with each payment.

 

[MerlintheMad]

Help somebody with a small brain understand this... am I correct in thinking that unless one has the cash on hand to immediately fully buyout the car using the lease / buyout discount "trick" it would be dumb to finance the buyout immediately rather than pay the lower monthly lease payment, save the "extra" cash, NOT pay interest on borrowed money (because there isn't any), and then use the saved cash to put down on the buyout and THEN finance the remaining lower balance when the lease is up?

Each month that you pay on the lease is one-thirty-sixth (or one-twenty-fourth) of the lease "rent", which is the interest paid to lease. So the sooner you pay the lease off (buyout the lease), the more rent/interest on the lease you save. Use any cash you have for this to reduce the amount that you borrow (e.g. from a credit union), so that the interest on the loan is significantly less than the remaining lease rent/interest. Obviously, if you have cash to do the buyout without having to take out a loan, this is ideal. You are leasing merely to take full advantage of Kia's lease incentive to lower "out the door" price, then exercising the buyout immediately the instant your Kia account shows the buyout figure.

 

[brancky3]

I called my local dealer today for a lease buyout quote (South Carolina, can't go through KMF) and they told me I have to bring the car in for an appraisal so they can determine my buyout. Wtf? Why would they care? I have aftermarket wheels / tires and some upgrades on the interior (alcantara heated steering wheel, all weather floormats, etc) that I'm wondering they're going to factor into the buyout price. It should be a simple calculation - remaining payments plus end of lease buyout price minus lease rent charges / interest. Am I missing something?

 

[JVsGT]

I called my local dealer today for a lease buyout quote (South Carolina, can't go through KMF) and they told me I have to bring the car in for an appraisal so they can determine my buyout. Wtf? Why would they care? I have aftermarket wheels / tires and some upgrades on the interior (alcantara heated steering wheel, all weather floormats, etc) that I'm wondering they're going to factor into the buyout price. It should be a simple calculation - remaining payments plus end of lease buyout price minus lease rent charges / interest. Am I missing something?

Sounds like B/S to me. The buyout information should be listed on your KMF account. It's true you may have to buyout thru the dealer but the info should still be available online. The only reason I could think they need to appraise the car would be for tax purposes (if SC is a state that taxes you again on lease buyout). But even then, that additional tax would go to the local tax assessor and not the dealer.

 

[brancky3]

Sounds like B/S to me. The buyout information should be listed on your KMF account. It's true you may have to buyout thru the dealer but the info should still be available online. The only reason I could think they need to appraise the car would be for tax purposes (if SC is a state that taxes you again on lease buyout). But even then, that additional tax would go to the local tax assessor and not the dealer.

KMF won't put the info online, they say in SC you have to get the info through a dealer. I confirmed this with a phone call as well to KMF. We don't pay tax on cars here when purchasing / leasing exactly, we pay a yearly property tax that is handled through the state, not the dealer. There may be a $500 'tax' or something but it's definitely not a ~6% sales tax like my previous state (Michigan) had.

I'm sick of the runaround already and this was only after 2 phone calls. Funny that I leased an Audi before this and my buyout was available online through VW Credit without any issue.

 

[MerlintheMad]

Funny that I leased an Audi before this and my buyout was available online through VW Credit without any issue.

In SC? Something is not right. Either it's a law or it isn't. If the buyout must come through the dealer it will be the same for everybody in car sales.

 

[brancky3]

In SC? Something is not right. Either it's a law or it isn't. If the buyout must come through the dealer it will be the same for everybody in car sales.

Lol yep! Both are in SC. It's not just me, others on here from SC have the same process of needing to go through the dealer.

 

[MerlintheMad]

Lol yep! Both are in SC. It's not just me, others on here from SC have the same process of needing to go through the dealer.

How could that be just a Kia thing? Does VW/Audi have some under the table agreement with SC? Are Korean manufacturers persona non grata in SC?

 

[supershanesta]

Just got one boys! 2019 Stinger GT in Cali.. Leased. Never thought I would lease but am going to buy it out! Thanks for all the info on here.

2019 Kia Stinger GT white
MSRP 40000
Purchase Price 35950
Rebate -5500
Down Payment -3500 (Trade In 2500 (negative equity) + 6000 cash)
Taxes on DP & fees -2414 (Taxes on DP and on rebate,Registration,Acquisition,first payment, etc)
Cap Cost 29414
Monthly Payment 333

Looking to buyout asap to save some more money. Thanks to this forum for showing me this option. I went knowing about the lease deal but thought I could get a better deal on a used 2018 gt with 22k miles from a 9 month lease which was kinda scary. Asking was 33.5k They could not go down enough. So they mentioned lease and I was interested. After crunching these numbers, asking them to remove other mumbo jumbo I can say I am pretty happy to be with my new car. Thanks again!

 

[MerlintheMad]

Just got one boys! 2019 Stinger GT in Cali.. Leased. Never thought I would lease but am going to buy it out! Thanks for all the info on here.

2019 Kia Stinger GT white
MSRP 40000
Purchase Price 35950
Rebate -5500
Down Payment -3500 (Trade In 2500 (negative equity) + 6000 cash)
Taxes on DP & fees -2414 (Taxes on DP and on rebate,Registration,Acquisition,first payment, etc)
Cap Cost 29414
Monthly Payment 333

Looking to buyout asap to save some more money. Thanks to this forum for showing me this option. I went knowing about the lease deal but thought I could get a better deal on a used 2018 gt with 22k miles from a 9 month lease which was kinda scary. Asking was 33.5k They could not go down enough. So they mentioned lease and I was interested. After crunching these numbers, asking them to remove other mumbo jumbo I can say I am pretty happy to be with my new car. Thanks again!

That's a really low monthly payment. Are you limited to 6K miles a year?

Welcome. And congratulations. Good luck on a smooth and swift buyout process!

 

[supershanesta]

That's a really low monthly payment. Are you limited to 6K miles a year?

Welcome. And congratulations. Good luck on a smooth and swift buyout process!

Lol you know what... I think it is 10k but I don't remember what we made it. I will check when I get home. I was told that if I am going to buy it out before the end of the lease (which I will) that it really doesn't matter the miles... a little late but is that true?

 

[eflyguy]

That's a really low monthly payment. Are you limited to 6K miles a year?

Welcome. And congratulations. Good luck on a smooth and swift buyout process!

He put down 6k in cash and 3.5k in trade - that's $9500 "pre-paid" - that'll take a bunch off your monthly payments. Over 36 mos that's $263/mo.

 

[supershanesta]

He put down 6k in cash and 3.5k in trade - that's $9500 "pre-paid" - that'll take a bunch off your monthly payments. Over 36 mos that's $263/mo.

No it was only 3500 prepaid. I lost 2.5k from the trade in then put 6k down. Leaves 3.5k downpayment.

And I did a 2 year.

 

[eflyguy]

Ah got it - I see that now reading again.

2yr certainly explains a lot, though!

 

[supershanesta]

Yea Can you answer this for me... If I buy it out it really doesn't matter the miles driven correct?

 

[robz32]

that is correct.

 

[JVsGT]

Just got one boys! 2019 Stinger GT in Cali.. Leased. Never thought I would lease but am going to buy it out! Thanks for all the info on here.

2019 Kia Stinger GT white
MSRP 40000
Purchase Price 35950
Rebate -5500
Down Payment -3500 (Trade In 2500 (negative equity) + 6000 cash)
Taxes on DP & fees -2414 (Taxes on DP and on rebate,Registration,Acquisition,first payment, etc)
Cap Cost 29414
Monthly Payment 333

Looking to buyout asap to save some more money. Thanks to this forum for showing me this option. I went knowing about the lease deal but thought I could get a better deal on a used 2018 gt with 22k miles from a 9 month lease which was kinda scary. Asking was 33.5k They could not go down enough. So they mentioned lease and I was interested. After crunching these numbers, asking them to remove other mumbo jumbo I can say I am pretty happy to be with my new car. Thanks again!

Congrats on the purchase/lease. You're gonna enjoy driving this car. Only thing I'd recommend is buying out that lease ASAP. Heaven forbid, that car gets totaled while still under the lease, the car gets paid off and you walk away with nothing. That's why I would never put money down on a lease.

 

[supershanesta]

Congrats on the purchase/lease. You're gonna enjoy driving this car. Only thing I'd recommend is buying out that lease ASAP. Heaven forbid, that car gets totaled while still under the lease, the car gets paid off and you walk away with nothing. That's why I would never put money down on a lease.

Thanks!! And wow I never thought about that! That is a very good thought. I was going to wait around a year to get the payments to my liking because if I did it now I would be pushing it, but it sounds like it might be worth it in the case of an accident. Also I know the sooner I pay it off the more I save, but I was willing to give a little to get the monthly right.