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This is an article that is not with an ADDY to locate. So sorry for not posting an ADDy to read this.
I have always had questions about leasing and was told YOU HAVE TO BUY AT THE CONTRACT PRICE???
This article counters that.... hope this can be helpful....................R

When you chose to buy a car at the end of the lease, does the DEALERSHIP sell it to you at the current value or at the price you will owe if you bought the car from the beginning (instead of leasing)?


When I met my wife she was leasing a RAV4 on a standard 3 year lease. The car was $24,000 or so new, and the total of all payments (downpayment + monthly) was probably around $14,000 (I don’t remember exact numbers 17 years later). The buy out on the contract was $11,000.
At the end of the lease I wanted to buy the car. The first thing they did was point to the buy out price. I countered with the black book price, which is what they were going to get at auction if I walked. That was around $8,000. They again countered with the buy out and I explained that since I was under no obligation to buy the car that price in the contract was meaningless, and it would be best to quit wasting our time talking about it. I knew that if I walked they got $8,000 for the car, so all cards were face up on the table. Now the ball was in play.
It turns out they wanted to get financing for me, where they would take another bite of this apple. They were on a computer at this point, and basically they were doing the old “squeeze this end of the balloon and the other end gets bigger trick”. If I’d take a higher interest rate, I’d get a lower price. Unfortunately for them, I’m good with math.
So, I took a high interest rate with no down payment and a long term and got the car for not much more than $8000. I then paid it off a month later. Basically, they got a bonus from the bank for “suckering” me into the higher interest rate, and the bank got screwed, probably to the tune of a grand.
Oh well.
That’s how you negotiate it. Get the black book price, which is the price at auction. That’s what they’ll get if you walk. That’s where you start your negotiation.

Update: I should mention that I didn’t negotiate with the dealership. I have no idea why anyone would think that since the car was owned by the lessor at that point. I probably screwed up by saying the bank got screwed, I realize now I was actually negotiating with the lessor who owned the car at that point. The lessor was also a lender, so there’s no third-party bank involved at that point.
I keep seeing people below bellowing “That’s not how it works! You have to pay the buy-out price in the contract if you want to buy the car!”
No. You don’t.
I’m putting this here instead of replying to everybody below who doesn’t understand this. You are under no obligation to buy the car at the end. Them putting a buy-out number in the contract is meaningless since you aren’t obligated to buy it. You can always just give them the car.
So, give them the car, then offer to buy it back at a reasonable price which involves a much simpler process for them.
If they take possession, they’re going to take it to auction and get a well-known price for it, which is the Kelley Black Book price (not “Blue Book”). You can easily obtain all the information related to this. Since their other option is known to you, negotiating is easy. They’ll get $x at auction, minus a bunch of fees and transport costs and the like, so if you offer just $x you’re already doing them a favor.
(I’m teaching you how to negotiate, hang in there - especially those of you who are drooling about the “residual” or “buy-out price” below)
Now, on your side there are costs, too. If you just give the car back you probably have to go get another one. That takes time, probably money. These costs are far more difficult to really quantify, but they’re real. I don’t enjoy car shopping, plus I already have this car that I liked a few years ago and I know it well and I’ve maintained it to perfection, etc. There’s value in all of that, but it’s impossible to really pin an exact dollar value on it.
Back to the lessor - they also have a big incentive to keep people thinking that they have to pay the buy-out price. See below. They would much rather get the buy-out at thousands more, and they want people to think they have to pay it.
Ultimately, the lessor and you will have to come to a price that you both like. If you can’t, then walk away and go get another car.
I don’t suggest leasing, anyway. My wife did it for a really good reason - she was going to leave the country after a few years, anyway, so it just made sense. We just buy cars for cash now.
 

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Explain to me how paying $22k for a $24k car was a great deal? I got my new $44k MSRP volt for $21k. I’ll probably never be able to repeat it (Governor who instituted the state rebate is in prison, tax credit is running out for GM, and GM is making just enough volts to no longer offer $5k rebates)

The question is: should you even be leasing at all? I like the 100% down, $0 per month, unlimited miles, unlimited term lease with no money factor, no cost of capital, nor residual.
 

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Excellent information on how to buy out a lease at the lowest cost. Having the cash to pay outright is the one thing big ticket lenders (cars, homes, etc.) absolutely hate because it puts them at a major disadvantage.
 

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Explain to me how paying $22k for a $24k car was a great deal?
RAV4's aren't usually discounted so any overall reduction in sale price below MSRP is actually good on them.

My Volt was an even better deal than your's with 100% down. I got 0% financing for 100% of the car and rolled in the remainder of an 11% credit card. Thanks to my Volt my wife and I have no revolving finance debt. We're still paying a student loan (7 years left) and mortgage (11 years left) however, but I'm working on being able to pay both off by the end of 2019. It's damn liberating to not be shelling out finance charges month after month.
 

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RAV4's aren't usually discounted so any overall reduction in sale price below MSRP is actually good on them.

My Volt was an even better deal than your's with 100% down. I got 0% financing for 100% of the car and rolled in the remainder of an 11% credit card. Thanks to my Volt my wife and I have no revolving finance debt. We're still paying a student loan (7 years left) and mortgage (11 years left) however, but I'm working on being able to pay both off by the end of 2019. It's damn liberating to not be shelling out finance charges month after month.
How do you finance 100% of a car and also roll some credit card debt into the loan then have no revolving finance debt? Or did you pay off the Volt?

I'll race you to the goal of being completely debt free as I only have 5 figures of mortgage left (down from $342K of total debt 3 years ago). I'm pretty certain I can polish it off in 3 years, but I'm working like a gazelle to do it faster. I was fortunate enough to graduate without any student loans thanks to a great part-time job throughout the year and some summer computer consulting I did. It was amazing how helping out one insurance agent with his computers blossomed into jumping all around town helping a bunch of them as they all needed similar help.
 

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How do you finance 100% of a car and also roll some credit card debt into the loan then have no revolving finance debt? Or did you pay off the Volt?

I'll race you to the goal of being completely debt free as I only have 5 figures of mortgage left (down from $342K of total debt 3 years ago). I'm pretty certain I can polish it off in 3 years, but I'm working like a gazelle to do it faster. I was fortunate enough to graduate without any student loans thanks to a great part-time job throughout the year and some summer computer consulting I did. It was amazing how helping out one insurance agent with his computers blossomed into jumping all around town helping a bunch of them as they all needed similar help.
I had about 11 grand in credit card debt. My insurance payout from my Cruze was $10,600 so I financed 100% of the the Volt at 0% and used the insurance payout to pay off the credit card, effectively rolling my credit card into the Volt's payment. The Volt payment is actually right about what I was paying on my credit card plus the cost of gasoline for my Cruze so the Volt payment was a wash. My wife had about 11 grand in credit card debt as well (she had lost her job and we were paying her credit cards down at minimum monthly payments as mine had a slightly higher interest rate) and we took the $12,500 we got in tax credits and paid off her credit card.

Yes, I'm still paying on the Volt but every single dollar goes to principal - none to the bank's profit margin. In addition the Volt will be paid off before we would have paid off the credit cards. Our monthly payment on the Volt is significantly lower than the previous credit card payments combined, and the $80 in monthly fuel savings (gas - electric bill increase) has enabled us to pay cash for everything and create a buffer for occasional or unexpected expenses as well as make extra payments on the Student Loan and Mortgage. So no, I'm not to the cash only nirvana that I want to be but I'm a hell of a lot closer.

I have four years left on the Volt and a 2 and half years left on a Furniture Row 0% finance for our bedroom set (it took us 30 years to replace our bedroom furniture). I calculated my current interest bearing debt load works out to be a little over $30K in pre-tax income. I want this gone and my wife and are working on how to eliminate it. The 0% loans will be paid out as scheduled.
 

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I had about 11 grand in credit card debt. My insurance payout from my Cruze was $10,600 so I financed 100% of the the Volt at 0% and used the insurance payout to pay off the credit card, effectively rolling my credit card into the Volt's payment. The Volt payment is actually right about what I was paying on my credit card plus the cost of gasoline for my Cruze so the Volt payment was a wash. My wife had about 11 grand in credit card debt as well (she had lost her job and we were paying her credit cards down at minimum monthly payments as mine had a slightly higher interest rate) and we took the $12,500 we got in tax credits and paid off her credit card.

Yes, I'm still paying on the Volt but every single dollar goes to principal - none to the bank's profit margin. In addition the Volt will be paid off before we would have paid off the credit cards. Our monthly payment on the Volt is significantly lower than the previous credit card payments combined, and the $80 in monthly fuel savings (gas - electric bill increase) has enabled us to pay cash for everything and create a buffer for occasional or unexpected expenses as well as make extra payments on the Student Loan and Mortgage. So no, I'm not to the cash only nirvana that I want to be but I'm a hell of a lot closer.

I have four years left on the Volt and a 2 and half years left on a Furniture Row 0% finance for our bedroom set (it took us 30 years to replace our bedroom furniture). I calculated my current interest bearing debt load works out to be a little over $30K in pre-tax income. I want this gone and my wife and are working on how to eliminate it. The 0% loans will be paid out as scheduled.
Congrats on making great progress on reducing interest. Now you just need to resist the urge to borrow more money on anything, even at 0%. I don't intend to borrow another dime for the rest of my life.
 

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I had about 11 grand in credit card debt. My insurance payout from my Cruze was $10,600 so I financed 100% of the the Volt at 0% and used the insurance payout to pay off the credit card, effectively rolling my credit card into the Volt's payment. The Volt payment is actually right about what I was paying on my credit card plus the cost of gasoline for my Cruze so the Volt payment was a wash. My wife had about 11 grand in credit card debt as well (she had lost her job and we were paying her credit cards down at minimum monthly payments as mine had a slightly higher interest rate) and we took the $12,500 we got in tax credits and paid off her credit card.

Yes, I'm still paying on the Volt but every single dollar goes to principal - none to the bank's profit margin. In addition the Volt will be paid off before we would have paid off the credit cards. Our monthly payment on the Volt is significantly lower than the previous credit card payments combined, and the $80 in monthly fuel savings (gas - electric bill increase) has enabled us to pay cash for everything and create a buffer for occasional or unexpected expenses as well as make extra payments on the Student Loan and Mortgage. So no, I'm not to the cash only nirvana that I want to be but I'm a hell of a lot closer.

I have four years left on the Volt and a 2 and half years left on a Furniture Row 0% finance for our bedroom set (it took us 30 years to replace our bedroom furniture). I calculated my current interest bearing debt load works out to be a little over $30K in pre-tax income. I want this gone and my wife and are working on how to eliminate it. The 0% loans will be paid out as scheduled.
I remember you from Cruzetalk along with a couple others on this forum. We still have our Eco. I recall you saying your Cruze was totalled from hail damage.

Anyway, we are retired now, so it helps a great deal having the mortgage paid off. Those who still have mortgages, you will enjoy the day you can burn it.

We did take out a heloc though to do some needed work on the house. The heloc was cheaper than taking extra $$ out of an IRA and bumping us into a higher tax bracket. We couldn't get 0% on the Volt but got a rate (2.49%) that was about half the heloc rate, so took out a larger than needed loan on the Volt and paid off the heloc.

As for leasing, for the first time ever I considered it with the Volt, but this car is a keeper for 8 years at least, so buying was the way to go. Also it's what I know.

Jon
 

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Anyway, we are retired now, so it helps a great deal having the mortgage paid off. Those who still have mortgages, you will enjoy the day you can burn it.

We did take out a heloc though to do some needed work on the house. We couldn't get 0% on the Volt but got a rate that was half the heloc rate, so took out a larger than needed loan on the Volt and paid off the heloc.

Jon
I plan to do a naked happy dance in the rain (or snow) when the house is finally paid off.

So you didn't pay off the HELOC, you moved it. The debt is still there. I intend to be totally debt free before 55 then pile on like crazy to the savings and investments. I still have a HELOC from when my daughter was in college, but we have a $0 balance, so it's just a super rainy day fund if anything exceeds our $40K emergency fund. All I need is another $200K to the nest egg and I can be done and figure out which rule to use (rule of 55 or 72(t) to touch the retirement without penalty before 59.5. Above and beyond that would just be greedy. Oh, and then there's healthcare (Trumpcare/Obamacare)
 

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Congrats on making great progress on reducing interest. Now you just need to resist the urge to borrow more money on anything, even at 0%. I don't intend to borrow another dime for the rest of my life.
Agreed. I can actually pay off the Furniture Row in six months but I'd rather keep that money for future needs. This is also why I put a 5 year 100,000 mile zero deductible bumper to bumper service contract on my Volt - no repair costs while I'm paying on the car. I drive 19 to 20K miles a year so I'll have the Volt paid off before it incurs any repair costs - what's not under warranty will still be covered. My Volt just rolled 21K miles yesterday so I'm taking it in to get the second free oil change at the end of this month, right before I hit the road for my annual trek from Denver to New Hampshire and back. The next routine service charge will be in two years for either oil or tires. I have a tire rotation, balance, and repair contract for the life of my OEM tires - Discount Tire for the win here and this contract has already paid for itself in rotations and balances.

My goal is to never pay interest again in my life. I'll borrow but pay off on the first due date - my credit card gives me 1.5% cash back so borrowing actually saves me a little as long as I pay it off immediately. This limits the amount I can borrow each month to what I can actually afford to pay in that month and is how I started adulthood. Having a Type 1 diabetic kid threw a monkey wrench in that plan. I did manage to put one of my two boys through college with zero debt. The other will have his student loans paid off by the end of this year and will be debt free at that point as well.
 

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I remember you from Cruzetalk along with a couple others on this forum. We still have our Eco. I recall you saying your Cruze was totalled from hail damage.

Anyway, we are retired now, so it helps a great deal having the mortgage paid off. Those who still have mortgages, you will enjoy the day you can burn it.

We did take out a heloc though to do some needed work on the house. The heloc was cheaper than taking extra $$ out of an IRA and bumping us into a higher tax bracket. We couldn't get 0% on the Volt but got a rate (2.49%) that was about half the heloc rate, so took out a larger than needed loan on the Volt and paid off the heloc.

As for leasing, for the first time ever I considered it with the Volt, but this car is a keeper for 8 years at least, so buying was the way to go. Also it's what I know.

Jon
The Volt seems to be the preferred car for former Cruze ECO MT owners. There are four or five former Cruze ECO MT owners who have purchased Volts (Gen 1 or Gen 2).
 

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Agreed. I can actually pay off the Furniture Row in six months but I'd rather keep that money for future needs. This is also why I put a 5 year 100,000 mile zero deductible bumper to bumper service contract on my Volt - no repair costs while I'm paying on the car. I drive 19 to 20K miles a year so I'll have the Volt paid off before it incurs any repair costs - what's not under warranty will still be covered. My Volt just rolled 21K miles yesterday so I'm taking it in to get the second free oil change at the end of this month, right before I hit the road for my annual trek from Denver to New Hampshire and back. The next routine service charge will be in two years for either oil or tires. I have a tire rotation, balance, and repair contract for the life of my OEM tires - Discount Tire for the win here and this contract has already paid for itself in rotations and balances.

My goal is to never pay interest again in my life. I'll borrow but pay off on the first due date - my credit card gives me 1.5% cash back so borrowing actually saves me a little as long as I pay it off immediately. This limits the amount I can borrow each month to what I can actually afford to pay in that month and is how I started adulthood. Having a Type 1 diabetic kid threw a monkey wrench in that plan. I did manage to put one of my two boys through college with zero debt. The other will have his student loans paid off by the end of this year and will be debt free at that point as well.
I'm totally against extended warranties. The national average is 12% for claims against extended warranties. So there's an 88% chance you flushed that money down the toilet. You'd often be better off putting that money in a bank account and using that in the event of a repair that is needed.

I too put about 20k miles per year on my Volt. I just rolled over 100k miles a few weeks ago.

I don't rotate my tires according to the user manual recommendation. When the OEMs wore out, I put 4 new tires on, wore out the fronts after 40K miles, then moved the rears to the front and put the new tires on there rear. I'm getting about 60k miles with the once-in-a-tire's-lifetime rotation. I also don't switch sides to keep them spinning the same direction.

I too play the credit card points games and plan to get a free iPhone X as soon as I collect up enough Apple Gift Cards (Barclaycard with iTunes or Apple Rewards). I'm at $875 at the moment. The bills are autopaid out of my checking account so I won't ever forget and incur interest. But I treat it more like a debit card than a credit card - don't buy anything unless you have the money for it - push everything through it to maximize the points. I also have an original GM card which gets 5% capped at $500 per year for 7 years. In 2 more years, it will be maxed at $3500 and maybe the planets will align and GM will make a Voltec/Boltec Subyukonade or Equinox.

My first two got through college debt free. The last child has the money sitting in an account, ready to go, as long as she doesn't go to some uber expensive prestigious east coast school.
 

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The Volt seems to be the preferred car for former Cruze ECO MT owners. There are four or five former Cruze ECO MT owners who have purchased Volts (Gen 1 or Gen 2).

Or maybe it's the other way around, the Cruze Eco is the car of choice for folks who want a Volt but cannot afford it at the time, so they use the Cruze as a stepping stone to the Volt. A close friend of mine fits that category - wants a volt, settled for the Cruze.
 

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This is an article that is not with an ADDY to locate. So sorry for not posting an ADDy to read this.
I have always had questions about leasing and was told YOU HAVE TO BUY AT THE CONTRACT PRICE???
This article counters that.... hope this can be helpful....................R

When you chose to buy a car at the end of the lease, does the DEALERSHIP sell it to you at the current value or at the price you will owe if you bought the car from the beginning (instead of leasing)?


When I met my wife she was leasing a RAV4 on a standard 3 year lease. The car was $24,000 or so new, and the total of all payments (downpayment + monthly) was probably around $14,000 (I don’t remember exact numbers 17 years later). The buy out on the contract was $11,000.
The only problem with your negotiating tactic is that what happened to you 17 years ago simply doesn't happen today. Your wife leased this car very cheaply due to the inflated residual value on the contract. Dealers and banks used to do that all the time, but no more. The more likely scenario today is that the residual value is even lower than the black book value of the car. That's how they get their money upfront in the lease payments. If you lease a good car and maintain it well, your car might be worth more than the residual value and you can extract that value in a new lease, or by buying the car and reselling it.
 

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Or maybe it's the other way around, the Cruze Eco is the car of choice for folks who want a Volt but cannot afford it at the time, so they use the Cruze as a stepping stone to the Volt. A close friend of mine fits that category - wants a volt, settled for the Cruze.
I actually test drove a 2012 Volt while waiting for my Cruze to be dealer prepped. I fit that category - couldn't swing the car payment.
 

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The only problem with your negotiating tactic is that what happened to you 17 years ago simply doesn't happen today. Your wife leased this car very cheaply due to the inflated residual value on the contract. Dealers and banks used to do that all the time, but no more. The more likely scenario today is that the residual value is even lower than the black book value of the car. That's how they get their money upfront in the lease payments. If you lease a good car and maintain it well, your car might be worth more than the residual value and you can extract that value in a new lease, or by buying the car and reselling it.
The EV fed tax credit throws a monkey wrench into this too. Many times, the resale value of a used Volt requires the $7500 tax credit to be baked into the deal, and when you lease, you often only get a fraction of the tax credit (if anything - early Volt owners got nothing, thus the residual was horribly inflated). Just search for Ally in this forum and you'll see lots of moaning and groaning about people who wanted to buy their off-lease volts and were forced to buy someone else's off-lease volt at the end of their lease.
 

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I'm totally against extended warranties. The national average is 12% for claims against extended warranties. So there's an 88% chance you flushed that money down the toilet. You'd often be better off putting that money in a bank account and using that in the event of a repair that is needed.
Extended service contracts (they aren't warranties) have saved my piggy bank on more than one occasion so for me they've been worth it. I do see both sides of this argument.

It's also why I just paid cash for a spare tire for my Volt (and for my Cruze ECO MT before that). The Cruze was the first car I had that didn't come with a spare and guess what, it was the first car I ever needed a spare tire for. Fortunately my dealership parts department and I had already gone through the brain damage of figuring out the needed parts so I had the spare when I needed it. I've had a lot of slow leaks before but never a "blowout". I look at these contracts as a time and mileage limited insurance policy.
 

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I actually test drove a 2012 Volt while waiting for my Cruze to be dealer prepped. I fit that category - couldn't swing the car payment.
I'm driving my volt because I cannot swing the Tesla car payment - but in a different way. Tesla will happily finance it, and I can easily pay $800-1000 per month, but my rules are the 100% down, 0% interest, $0 per month, unlimited mileage, unlimited term deal. I won't buy my next car until I have the cash in hand to buy the car outright. This changes the game to waiting until you can REALLY afford it.

In your scenario, a job loss or health scare puts you at risk of financial pain and possibly a repo. My scenario has zero risk.
 

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Extended service contracts (they aren't warranties) have saved my piggy bank on more than one occasion so for me they've been worth it. I do see both sides of this argument.

It's also why I just paid cash for a spare tire for my Volt (and for my Cruze ECO MT before that). The Cruze was the first car I had that didn't come with a spare and guess what, it was the first car I ever needed a spare tire for. Fortunately my dealership parts department and I had already gone through the brain damage of figuring out the needed parts so I had the spare when I needed it. I've had a lot of slow leaks before but never a "blowout". I look at these contracts as a time and mileage limited insurance policy.
I don't see much difference between an extended service contract and an extended warranty. Both repair your car if something breaks. I guess the service contract also covers normal service like brake jobs and oil changes - both are rare on the Volt.

As for spare tires, I totally lucked out as my other vehicle is a Cadillac CTS, the exact vehicle which Volt owners look for in junk yards for spare tires. I don't carry a spare, but have on more than one occasion slapped on the CTS spare or one of my snow tires when replacing tires. I refuse to have them put my volt on a lift and over tighten the lug nuts with their impact wrench. I bring in the wheels, they change them, and I bolt them onto the car. I've had too many warped rotors and ruined lug nuts from prior grease monkeys that it's well worth the extra effort.
 

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I'm driving my volt because I cannot swing the Tesla car payment - but in a different way. Tesla will happily finance it, and I can easily pay $800-1000 per month, but my rules are the 100% down, 0% interest, $0 per month, unlimited mileage, unlimited term deal. I won't buy my next car until I have the cash in hand to buy the car outright. This changes the game to waiting until you can REALLY afford it.

In your scenario, a job loss or health scare puts you at risk of financial pain and possibly a repo. My scenario has zero risk.
I have enough long term savings to pay off everything. The problem is doing so would eliminate the benefits of compound interest on my savings. This is actually why I'm not too interested in paying off the 0% loans early.
 
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