New Purchase, Lease Buyout. Any Gotchas?

[Hapa88]

I looked up the language for the lease we have on my wife's car. Keep in mind this is NOT through Kia, so the terms can be different.

(c) Looks like Kia charges ~$400 for the vehicle turn in.

After reading (d) the Adjusted Lease Balance, it seems @Travis Wills and @Ruturaj are correct in that you don't need to pay the interest on the full term of the lease (just on the payments you already made).

BUT, check out (e) 4% of the Adjusted Lease Balance. So while you didn't pay the interest/money factor, you are paying a 4% fee on the total which could be like another $400 plus the turn in fee (so $800 total).

Then do you have to re-register it with the new lien holder?

I don't know, it seems like a lot of effort. Can you not just buy at the 0% interest Kia was offering at that price?

 

[Rob M]

@Guitarcrazy, you don't list your state of residence. With respect to a lease, laws in your home state and/or state where you leased are the source of two potentially major pitfalls of a lease buyout. Ruturaj alluded to that earlier, and again after he was disagreed with, lol. For example, in the state of TX (and maybe a couple of others) you will get hit with sales tax on the entire agreed upon value of the vehicle at lease inception and then again on the market value (buyout amount) when purchasing, and in essence paying sales tax on the entire value of the vehicle twice. This is because of the way a lease is treated - the lessor owns the vehicle and you pay taxes for them, then you do buyout and become owner so assessor says another taxable event. Some other states may charge tax on full agreed upon value of vehicle up front but then waive any additional tax to the lessee if they buy the vehicle. Another potential pitfall is leasing in a state (FL, others) where a dealership is required to process the buyout as opposed to lessee doing it directly with Kia. KMF can be a pain to work with, but there are no additional costs. If you have to return to a dealer, they will likely insist on charging you dealer processing fees all over again to do the paperwork on the buyout. Not really a pitfall, but you also want to be mindful of title, tag, registration fees that you will incur at buyout.

 

[Guitarcrazy]

I am in Montana where we don't have sales tax, fortunately. I typically buy my vehicles out of state, pay no tax, and register here where we pay a tag fee that will probably be $500 to $600 dollars. I could certainly have done the 0% financing but then I would not have received the $9900 lease rebate. Thanks to all for the help.

 

[Rob M]

I looked up the language for the lease we have on my wife's car. Keep in mind this is NOT through Kia, so the terms can be different.

(c) Looks like Kia charges ~$400 for the vehicle turn in.

After reading (d) the Adjusted Lease Balance, it seems @Travis Wills and @Ruturaj are correct in that you don't need to pay the interest on the full term of the lease (just on the payments you already made).

BUT, check out (e) 4% of the Adjusted Lease Balance. So while you didn't pay the interest/money factor, you are paying a 4% fee on the total which could be like another $400 plus the turn in fee (so $800 total).

Then do you have to re-register it with the new lien holder?

I don't know, it seems like a lot of effort. Can you not just buy at the 0% interest Kia was offering at that price?

Buyout is $300 for just about any Stinger. A very few lucky early adopters claimed they paid no buyout fee. There is no 4% fee on any balance in the KMF lease. Compared to an outright purchase lease/buyout incurs two fees ($650 acq fee, $300 buyout fee). But in this example take the $10,300 lease rebate and subtract the $950. You have to make up a good portion of that $9,350 to make a conventional purchase the better deal. All the possible purchase incentives won't get you close (consider that for roughly the first year of Stinger sales, there were no purchase incentives at all other than special financing rates. Some that did buyouts just waited a couple weeks then mailed a payoff check off to Kia. At 2.75% interest/5 years, total interest is well less than $3K. So you would need a 0% loan and around $6,000 in purchase rebates to come close to the lease deal. I actually hate the idea of leasing a car for personal use. I had never leased a car before, and never would have, if not for the info posted in the forum. Ultimately, leasing was just too good a deal in my situation. But shame on Kia for doing it this way instead of providing similar discounts on purchases. This is more or less a desperate attempt by Kia to compete with Euro luxury cars (which are typically leased). The lease incentives counter the poor residuals to make the lease payments more competitive.

 

[Rob M]

I am in Montana where we don't have sales tax, fortunately. I typically buy my vehicles out of state, pay no tax, and register here where we pay a tag fee that will probably be $500 to $600 dollars. I could certainly have done the 0% financing but then I would not have received the $9900 lease rebate. Thanks to all for the help.

Damn, I'm moving to Montana! I paid taxes on the entire agreed upon price at lease inception (rolled into monthly payments). Fortunately, MD waives any additional sales taxes to the lessee at buyout. I was wondering how your calculated lease payments were so low.

 

[Hapa88]

Buyout is $300 for just about any Stinger. A very few lucky early adopters claimed they paid no buyout fee. There is no 4% fee on any balance in the KMF lease. Compared to an outright purchase lease/buyout incurs two fees ($650 acq fee, $300 buyout fee). But in this example take the $10,300 lease rebate and subtract the $950. You have to make up a good portion of that $9,350 to make a conventional purchase the better deal. All the possible purchase incentives won't get you close (consider that for roughly the first year of Stinger sales, there were no purchase incentives at all other than special financing rates. Some that did buyouts just waited a couple weeks then mailed a payoff check off to Kia. At 2.75% interest/5 years, total interest is well less than $3K. So you would need a 0% loan and around $6,000 in purchase rebates to come close to the lease deal. I actually hate the idea of leasing a car for personal use. I had never leased a car before, and never would have, if not for the info posted in the forum. Ultimately, leasing was just too good a deal in my situation. But shame on Kia for doing it this way instead of providing similar discounts on purchases. This is more or less a desperate attempt by Kia to compete with Euro luxury cars (which are typically leased). The lease incentives counter the poor residuals to make the lease payments more competitive.

That being the case, I say do it!
And thanks for the insight!

 

[MerlintheMad]

I don't know, it seems like a lot of effort. Can you not just buy at the 0% interest Kia was offering at that price?

I've already said before, that I won't go through leasing and buying out again. Too complex and time consuming for little benefit; i.e. not worth the work. Imho.

Since we could pay cash for the car, we were angling to do that. But we both were shocked to discover that dealer discount (already just short of $3K) would only tack on another $500. That's it. Kia's finance incentive was just under a thousand, so puny compared to the lease incentive, which for us was $5,900. It seemed obvious, then, that leasing was the way to get the car for less. However, we knew nothing about "least rent" tacked on monthly to the tune of c. $5,700 by lease end!? Coming to the Forum, I learned about buyout, and more about leasing in general. We did the buyout to avoid the lease rent.

And were I to do it again, I'd just take every dollar I could get on dealer discount and pay cash and be done with everything.

 

[Ruturaj]

I've already said before, that I won't go through leasing and buying out again. Too complex and time consuming for little benefit; i.e. not worth the work. Imho.

Since we could pay cash for the car, we were angling to do that. But we both were shocked to discover that dealer discount (already just short of $3K) would only tack on another $500. That's it. Kia's finance incentive was just under a thousand, so puny compared to the lease incentive, which for us was $5,900. It seemed obvious, then, that leasing was the way to get the car for less. However, we knew nothing about "least rent" tacked on monthly to the tune of c. $5,700 by lease end!? Coming to the Forum, I learned about buyout, and more about leasing in general. We did the buyout to avoid the lease rent.

And were I to do it again, I'd just take every dollar I could get on dealer discount and pay cash and be done with everything.

You still ended up saving I assume more than 4,000. How much was effort you had to put in for buyout?

Also current two year lease incentive is around 10k, subtract 1k from it for lease related fees, it is still 8-9k savings vs buying cash. How much time is worth 8-9k?

 

[MerlintheMad]

You still ended up saving I assume more than 4,000. How much was effort you had to put in for buyout?

Also current two year lease incentive is around 10k, subtract 1k from it for lease related fees, it is still 8-9k savings vs buying cash. How much time is worth 8-9k?

If you can take home that amount of money off a Stinger, it's worth quite a bit of hassle. But my lease seems to show a lot of added back in costs that mostly consume the lease rebate. Like I said, if I knew then what I know now, I'd have asked questions and most likely have driven away with a car purchased outright with cash.

I did save over $5K in lease rent by doing the buyout (basically undoing what I did to myself by leasing). And in my case, the process of buyout through Kia Finance was seamless. I had my title in hand in less than a month.

Here's the main question I have about the supposed advantages of leasing. Kia's lease incentive/rebate is big; very attractive; but of what practical use is it, if by lease's end, the rent charge has equaled or even exceeded the amount of the rebate?

So, it comes down to what amount of the rebate you get to keep. We got to keep a little over a thousand (minus three months payments) of the $5,900 rebate. Not worth it.

 

[Buzz]

Kia motor finance can only be contacted via a time bubble over a failing fax line to the 90s. You may have to fight them in epic combat (Faxes and certified letters) to get your new credit union your title.

In my state I had the whole tax bill as a purchase at that time, so writing a check for 1k kinda sucked, but I knew it was coming and was just deferred from the initial price.

Overall, A+ would save thousands again!

 

[Ruturaj]

If you can take home that amount of money off a Stinger, it's worth quite a bit of hassle. But my lease seems to show a lot of added back in costs that mostly consume the lease rebate. Like I said, if I knew then what I know now, I'd have asked questions and most likely have driven away with a car purchased outright with cash.

I did save over $5K in lease rent by doing the buyout (basically undoing what I did to myself by leasing). And in my case, the process of buyout through Kia Finance was seamless. I had my title in hand in less than a month.

Here's the main question I have about the supposed advantages of leasing. Kia's lease incentive/rebate is big; very attractive; but of what practical use is it, if by lease's end, the rent charge has equaled or even exceeded the amount of the rebate?

So, it comes down to what amount of the rebate you get to keep. We got to keep a little over a thousand (minus three months payments) of the $5,900 rebate. Not worth it.

Merlin, looks like you are struggling with numbers. Individual case might differ by state.

Here is my breakdown for NC state,

If I had bought the car
MSRP 54,015
Agreed upon price 50,515
Trade in 1600
Title and registration fee 104
Doc fee 600
Sales Tax 1488
OTD: 51,107

If I lease for a month and then buyout
MSRP 54,015
Agreed upon price 50,515
Trade in 1600
Lease rebate 6500
Title and registration fee 104
Doc fee 600
Lease acquisition fee 650
Sales tax 638
First month payment 617

Paid at the time 0

Before second payment
Buyout price (includes buyout fee) 44,190.59
Sales Tax 1325.71
Title fee 104
OTD: 45,620.30

So I ended up saving 5487

Lets do the same for WA state (not going to put all numbers here, it was my friends lease)
MSRP 55,000
Agreed upon price: 49,000
Lease rebate: 9,900
Title fees: 846

For cash buy would have paid: 49,000 + 846 + 4984 (sales tax 10%)

Paid at the time of lease: 0
Buyout before second payment: 44k (includes sales tax) + registration fees

Difference of around 9,000 (I was surprised to see this number as sales tax on incentive like I have seen at most places wasn't charged, but even if then this number would have been 8000).

 

[Ruturaj]

Here's the main question I have about the supposed advantages of leasing. Kia's lease incentive/rebate is big; very attractive; but of what practical use is it, if by lease's end, the rent charge has equaled or even exceeded the amount of the rebate?

Answering this question, when you lease you pay interest/rent charge, if it evens out means you did not have to pay any. If you have cash buy it out, if you do not have cash compare (savings from buyout - interest after that) and 0% financing benefit

If someone uses lease cash to ride out the lease then finances at some interest rate, he would have been off going other routes.

1. Do lease buyout after 1st month with lower interest rate
2. Get 0% financing

 

[Ruturaj]

We got to keep a little over a thousand (minus three months payments) of the $5,900 rebate.

Can you explain to me how?

 

[MerlintheMad]

We got to keep a little over a thousand (minus three months payments) of the $5,900 rebate.

Can you explain to me how?

I'll try. This is the first time that I've posted this in detail. Let's see if you can figure out where most of the rebate went. (I think I know, but don't like where this leads.)

5. Total of Payments (The amount you will have paid by the end of the Lease) = $29,458.69

6. Itemization of Amount Due at Lease Signing or Delivery

A. Amount Due at Lease Signing or Deliver:
(1) Capitalized cost Reduction = $5,900
(2) Sales/Use Tax on Capitalized Cost Reduction N/A
(3) First Monthly Payment = $627.02
(4) Refundable Security Deposit N/A
(5) Acquisition Fee N/A
(6) Initial License, Title and Registration Fees = $564.12
(7) Sales/Use Tax = 21.85
(8, 9, 10) N/A
(11) Total = $7,112.99

B. How the Amount Due at Lease Signing or Delivery will Be Paid:
(1) Net Trade-in Allowance N/A
(2) Rebates and Noncash Credits = $5,900
(3) Amount to be Paid in Cash = $1,212.99
(4) N/A

7. Your Monthly Payment is Determined as Shown Below

A. Gross Capitalized Cost. The agreed upon value of the Vehicle ($42,455.00) and any items you pay over the Lease Term (such as service contracts, insurance, and any outstanding prior credit or lease balance) = $45,407.26
B. Capitalized Cost Reduction. The amount of any Net Trade-in Allowance, Rebate, Noncash Credit, or Cash you pay that reduces the Gross Capitalized Cost = $5,900
C. Adjusted Capitalized Cost. The amount used in calculating your Base Monthly Payment = $39,507.26
D. Residual Value. The value of the Vehicle at the end of the Lease used in calculating your Base Monthly Payment = $24,156.60
E. Depreciation and any Amortized Amounts. The amount charged for the Vehicle's decline in value through normal use and for other items paid over the Lease Term = $15,350.66
F. Rent Charge. The amount charged in addition to the Depreciation and any Amortized Amounts = $5,774.86
G. Total of Base Monthly Payments. The Depreciation and any Amortized Amounts plus the Rent Charge = $21,125.52
H. Lease Payments. The number of payments in your lease = 36
I. Base Monthly Payment = $586.82
J. Monthly Sales/Use Tax = $40.20
K. Other (specify): N/A
L. Total Monthly Payment = $627.02

There you go. Have at it.

 

[Ruturaj]

I'll try. This is the first time that I've posted this in detail. Let's see if you can figure out where most of the rebate went. (I think I know, but don't like where this leads.)

5. Total of Payments (The amount you will have paid by the end of the Lease) = $29,458.69

6. Itemization of Amount Due at Lease Signing or Delivery

A. Amount Due at Lease Signing or Deliver:
(1) Capitalized cost Reduction = $5,900
(2) Sales/Use Tax on Capitalized Cost Reduction N/A
(3) First Monthly Payment = $627.02
(4) Refundable Security Deposit N/A
(5) Acquisition Fee N/A
(6) Initial License, Title and Registration Fees = $564.12
(7) Sales/Use Tax = 21.85
(8, 9, 10) N/A
(11) Total = $7,112.99

B. How the Amount Due at Lease Signing or Delivery will Be Paid:
(1) Net Trade-in Allowance N/A
(2) Rebates and Noncash Credits = $5,900
(3) Amount to be Paid in Cash = $1,212.99
(4) N/A

7. Your Monthly Payment is Determined as Shown Below

A. Gross Capitalized Cost. The agreed upon value of the Vehicle ($42,455.00) and any items you pay over the Lease Term (such as service contracts, insurance, and any outstanding prior credit or lease balance) = $45,407.20
B. Capitalized Cost Reduction. The amount of any Net Trade-in Allowance, Rebate, Noncash Credit, or Cash you pay that reduces the Gross Capitalized Cost = $5,900
C. Adjusted Capitalized Cost. The amount used in calculating your Base Monthly Payment = $39,507.26
D. Residual Value. The value of the Vehicle at the end of the Lease used in calculating your Base Monthly Payment = $24,156.60
E. Depreciation and any Amortized Amounts. The amount charged for the Vehicle's decline in value through normal use and for other items paid over the Lease Term = $15,350.66
F. Rent Charge. The amount charged in addition to the Depreciation and any Amortized Amounts = $5,774.86
G. Total of Base Monthly Payments. The Depreciation and any Amortized Amounts plus the Rent Charge = $21,125.52
H. Lease Payments. The number of payments in your lease = 36
I. Base Monthly Payment = $586.82
J. Monthly Sales/Use Tax = $40.20
K. Other (specify): N/A
L. Total Monthly Payment = $627.02

There you go. Have at it.

I am really interested in breakdown of 45,407.20, because car's value is 42,455.00, so from where did other 2952.2 came from? because lease acquisition fee 650 goes in there and may be dealer documentation fee, so I am still not sure about rest. You should have details in 11 (I would like to see it if you can share, I have seen few dealers add tax in there).

So if you had paid cash: 44,757 (45,407.20 - 650 lease acq fee) + 3065 (sales tax on 44,757) + 564.12 (Initial License, Title and Registration Fees) => 48,386

Amount you paid
At lease inception: 1,212.99
Then two monthly payments: 627.02 (out of which 40.20 is tax and some is rent/interest) x 2
Buyout amount: 41,250 Remainder of adjusted capitalized cost (39,507.26 - 1200 (approx 400 x 3)) + 300 buyout fee + sales tax on previous numbers
Total => 43,717

Rent charge of 5,774.86 doesn't matter because you never paid all of it (may be around 540 in 3 payments).

Can you share how much was your buyout amount? Was it close 41,250?

 

[MerlintheMad]

Buyout amount was exactly $40,954.79.

11. Itemization of Gross Capitalized cost

A. Agreed upon Value of Vehicle = $42,455.00
B. Sales/Use Tax = N/A
C. License, Title and Registration Fees = N/A
D. Outstanding Prior Credit or Lease Balance = N/A
E. Dealer Documentation/Service Fee = $299.50
F. Optional Vehicle Service Contract = N/A
G. Optional Excess Wear & Use Waiver = $895.00
H. Titanium = $895.00
I. CR Ins. = $212.76
J. Acquisition Fee = $650.00
K. Total = Gross Capitalized Cost = $45,407.26

The "Excess Wear & Use" was my voluntary inclusion of (as explained to me) insured minor damage that I could come in anytime during the lease period and the dealership would repair/repaint any dings or nicks not exceeding the size of a business card. I thought at the time of lease signing that that was a good one to get (but, seriously, it is stupid; because if you don't want to lose your car for days, weeks, all that they would do is go over the damage with a touchup pen: hell, I've done that much myself, and probably better than they would have done; so, yeah, I'd take that one back, if I could). Also, I believe that the $212.76 was another voluntary insurance such that if I suffered my demise during the lease period, my wife could terminate the lease without penalty (but I seem to remember that the agent said it was more like $150 or less; "human memory is a fallible device, not to be trusted!" ). Whatever. What I don't understand is why the "Excess Wear & Use" amount is listed twice. Originally, he listed H. as N/A, and I. as "Titanium CR INS = $1107.76. Then c. two weeks later he called me and asked me to please come in and take another copy of the lease agreement: because he'd mistakenly not separated out the two amounts: and on the replacement lease agreement, it shows up like I transcribed it above, with H. and I. separated. What do you make of that?

(edit: I fixed the Gross Capitalized cost to correct my incorrect transcribing: I was off by .06)

 

[Hapa88]

Merlin, looks like you are struggling with numbers. Individual case might differ by state.

Here is my breakdown for NC state,

If I had bought the car
MSRP 54,015
Agreed upon price 50,515
Trade in 1600
Title and registration fee 104
Doc fee 600
Sales Tax 1488
OTD: 51,107

If I lease for a month and then buyout
MSRP 54,015
Agreed upon price 50,515
Trade in 1600
Lease rebate 6500
Title and registration fee 104
Doc fee 600
Lease acquisition fee 650
Sales tax 638
First month payment 617

Paid at the time 0

Before second payment
Buyout price (includes buyout fee) 44,190.59
Sales Tax 1325.71
Title fee 104
OTD: 45,620.30

So I ended up saving 5487

Lets do the same for WA state (not going to put all numbers here, it was my friends lease)
MSRP 55,000
Agreed upon price: 49,000
Lease rebate: 9,900
Title fees: 846

For cash buy would have paid: 49,000 + 846 + 4984 (sales tax 10%)

Paid at the time of lease: 0
Buyout before second payment: 44k (includes sales tax) + registration fees

Difference of around 9,000 (I was surprised to see this number as sales tax on incentive like I have seen at most places wasn't charged, but even if then this number would have been 8000).

What you forgot to do is account for the loan, for your case, of $45,620 when you buy out the lease(I think most people won't have the full cash on hand). You won't be able to take advantage of the 0% for 66 - 75 months Kia financing in that instance, so you pay on average around 3-4% interest.

If you take that into account, your first option:
You have $51,107 and do 0% for 75 months, you would have paid only $51,107 by the end.

If you do your option and get a loan at 4% for 75 months (I don't know any institution other than Kia doing 75 month loans), the total cost at the end is $51,635.

So for most people, doing it the lease then buy way instead of taking advantage of the 0% financing at the beginning, you end up wasting a ton more time and effort and paying $528 more.

 

[Ruturaj]

What you forgot to do is account for the loan, for your case, of $45,620 when you buy out the lease(I think most people won't have the full cash on hand). You won't be able to take advantage of the 0% for 66 - 75 months Kia financing in that instance, so you pay on average around 3-4% interest.

If you take that into account, your first option:
You have $51,107 and do 0% for 75 months, you would have paid only $51,107 by the end.

If you do your option and get a loan at 4% for 75 months (I don't know any institution other than Kia doing 75 month loans), the total cost at the end is $51,635.

So for most people, doing it the lease then buy way instead of taking advantage of the 0% financing at the beginning, you end up wasting a ton more time and effort and paying $528 more.

I was solely talking about when 'you have cash then doing lease and buyout' vs 'buying with cash outright' as an reply to Merlin.

At the time I got my car, 0% offer wasn't there. That's why I don't recommend either, lease buyout vs finance. I recommend them to evaluate and understand their situation. As lease rebate keeps changing, finance offers keep changing, someone might be or not be qualified for other incentives which can be combined with finance only, some people have partial money so they don't want to finance the whole amount, interest rate varies a lot for person to person after lease buyout, some don't want to do 75 months loan at all even if they get 0%.

 

[Ruturaj]

Buyout amount was exactly $40,954.79.

11. Itemization of Gross Capitalized cost

A. Agreed upon Value of Vehicle = $42,455.00
B. Sales/Use Tax = N/A
C. License, Title and Registration Fees = N/A
D. Outstanding Prior Credit or Lease Balance = N/A
E. Dealer Documentation/Service Fee = $299.50
F. Optional Vehicle Service Contract = N/A
G. Optional Excess Wear & Use Waiver = $895.00
H. Titanium = $895.00
I. CR Ins. = $212.76
J. Acquisition Fee = $650.00
K. Total = Gross Capitalized Cost = $45,407.26

The "Excess Wear & Use" was my voluntary inclusion of (as explained to me) insured minor damage that I could come in anytime during the lease period and the dealership would repair/repaint any dings or nicks not exceeding the size of a business card. I thought at the time of lease signing that that was a good one to get (but, seriously, it is stupid; because if you don't want to lose your car for days, weeks, all that they would do is go over the damage with a touchup pen: hell, I've done that much myself, and probably better than they would have done; so, yeah, I'd take that one back, if I could). Also, I believe that the $212.76 was another voluntary insurance such that if I suffered my demise during the lease period, my wife could terminate the lease without penalty (but I seem to remember that the agent said it was more like $150 or less; "human memory is a fallible device, not to be trusted!" ). Whatever. What I don't understand is why the "Excess Wear & Use" amount is listed twice. Originally, he listed H. as N/A, and I. as "Titanium CR INS = $1107.76. Then c. two weeks later he called me and asked me to please come in and take another copy of the lease agreement: because he'd mistakenly not separated out the two amounts: and on the replacement lease agreement, it shows up like I transcribed it above, with H. and I. separated. What do you make of that?

(edit: I fixed the Gross Capitalized cost to correct my incorrect transcribing: I was off by .06)

Merlin, you basically bought things with your lease that you would not have with direct purchase (which is worth 2002). You lost some lease money buying those things. You till saved 2600 compared to directly buying, and you could have saved all of those 2002 as well, totaling 4600.

 

[MerlintheMad]

Merlin, you basically bought things with your lease that you would not have with direct purchase (which is worth 2002). You lost some lease money buying those things. You till saved 2600 compared to directly buying, and you could have saved all of those 2002 as well, totaling 4600.

I just composed a post explaining what I (think I) understand. And now I don't even know what I was thinking to get the math right. Heh!?

You're adding up the $895 twice too. That is the part I don't get. Why was the "ding insurance" added in twice?

Could you tell me how I got OTD $2,600 ahead by leasing, when paying cash would have totaled $3,495? off MSRP?