Joeb427

iTrader: (1)

Toyota doesn't care what the value will be is as their leased vehicles are insured at a certain value they're happy with.
That's why they won't negotiate the residual number.

JDR76

The dealers actually have nothing to do with the residual values. Those are set by Lexus Financial, and are a percentage of the MSRP. They are typically not negotiable.

Most manufacturers use the ALG (Automotive Lease Guide) to help set values, but often add a few points (basically subsidizing the leases) to make them more competitive and lower payments.

tmf2004

iTrader: (15)

thanks guys.. I didn't mean Lexus/Toyota specific but cars in general... My co worker had leased a Honda accord and already knows what the buy out is at the end of 3yrs.... Couldn't that change in 36 months based on car values and economy?

JDR76

Yes, the value can change, but the buyout does not. The buyout is in the contract when you sign at the time of delivery.

For example, on my 2011 Tacoma lease, the buyout was around $18.5k. It was Toyota's estimate of the value of the truck after 3 years and 36k miles. However, their buyoff estimate was quite a bit off and it was worth much more than that at lease end (though that was helped by low miles of around 24k). Blue book trade in on it was around $25k, which is what I got for it. I was able to pocket the $6,500 when I traded it in. Or, had I decided to keep the Tacoma, even though the value was $25k, I could have bought it for $18,500 per the contract.

If the trade in value had been less than the buyout of $18.5k, I would have just turned it in, without having to pay anything but the disposition fee.

wasjr

No. The residual value (purchase price at end of lease) and any disposition fees are established on the front end and outlined in the lease.

Residual values, while estimates, seem to be much more conservative and accurate these days. I used to lease GMC Yukons back in the 1990s as GM had set unreasonably high residual values to make the leases attractive to move vehicles. Now it seems the good lease deals are based on factory incentives toward the capitalized costs (also money factor to some degree, but cheap financing on purchases are available as well).

Sulu

Residual values (also known as the buyback value) are set by the company offering the lease from values that are published by firms such as ALG. The values are not arbitrary values but are based upon market conditions and historical values; they may (as I understand it) change a bit from month to month so they do fluctuate. But leasing companies are in the business to make money so they will set the residual value to guarantee a good return on investment (i.e. setting the residual value lower than they believe the car is worth at lease-end); companies that do not make money on leasing will get out of it, as some did during the 2008/2009 recession.

Hondas and Toyotas hold their values well (higher values after 3 or 4 years than American makes) so they are good cars for longer term leases -- the higher the residual value, the lower the monthly cost.

I have some experience with leasing Toyotas in Canada and been offered twice a buyout of my lease by the dealer before the end of the lease. The first I took. Two-and-something years into a 4-year lease, the dealer bought out my lease and I made a profit (they paid me more than what I would have owed on the remaining monthly payments plus the buyback), rolling it in on the replacement car. The second I did not take. That proves that used car dealers can buy out a lease, clean up the car and sell it for more than the value they paid to buy out the lease, as long as the car is in good shape.

wasjr

As I have posted before, a buddy that leases an MDX for his business has leased four and each time does a three year lease and at the end of year two will roll into a new lease for no money and typically similar (in one case less) than his then current lease payment. So rolling into a new lease on a vehicle that maintains a high resale value is certainly doable.

Re buying the car at the end of the lease and then immediately selling it.....when you buy the car at the end of the lease you will pay sales tax on the purchase so you need to consider sales tax if you are thinking about such a transaction.

SW17LS

These business leases may not be ordinary closed end leases like you or I would be able to get. There are open ended business leases with low residuals (in a business context high payments can be a good thing for tax reasons). Whether or not this is doable depends on the vehicle, resale, and the resudual. If the residual is 50% and the thing is worth 60%, sure. But if the 3 year residual is 60% and its worth 60%, you won't be able top get out of it a year early without negative equity.

Depends on the state. In MD (and several other states) you pay sales taxes when you lease on the whole value of the vehicle, not just the lease amount. So, if you buy it out of the lease you owe no sales tax, and if you trade it rather than turn it in you get a sales tax credit on the tax you'd pay on the new car.

Daspyda

iTrader: (1)

If you are not putting your son on the lease, you may have to deal with a bad circumstance if he totals it - regardless if he is on the insurance. IIRC, a lease contract forbids straw purchases, and you must have an "interest" in the liened vehicle to have insurance coverage.

Joeb427

iTrader: (1)

I believe your insurance covers any licensed driver lease or own.

FastTags

No need to buy out the car, just simply sell it, and the TAX is paid by the buyer.

SW17LS

This is not the case...

wasjr

His leases are the typical lease. He had made this work through the high resale value of an MDX, plus factory incentives at end of model year. When he rolled into a 2014 MDX last fall, it was the new model and there were no incentives so he ended up with a higher lease payment, which was offset to some extent by an outlay for tires he did not have to make and the much better mpg on the 14 vs his 12.

It does depend on the state. In TN tax on entire vehicle is not due up front, so if purchase option exercised, sales tax on residual is paid at that time.

SW17LS

But if you sell or trade the car without taking title first you don't have to pay the sales tax.

Thats how your friend rolls his leases. They are able to get him on trade at least the residual plus the remaining payments.

wasjr

My buddy rolls his leases around the end of year 2 of a 3 year lease (Another factor for him that I did not mention above is that he is usually over his allotted miles, for which any charge is also waived). My comment to which you responded related to someone who is buying the car outright at the end of the lease term.

Something that I am curious about, given that in TN (and some other states) sales tax is paid on the purchase at the end of the lease, does the lease contract allow the lessee to assign the purchase right to someone else, basically sell that right? Otherwise if a lessee were going to sell the vehicle, they would first have to buy and pay sales tax, and then sell, with that buyer also paying sales tax. Do Lexus leases allow for this assignment of the purchase right?