Buy out my lease or wait?

Did you miss the part about OP rolling in $6k in negative equity? Not so sure he would have any equity at the end of the least with that much rolled in.

 

Same here.

But man I love this damn truck.

 

Everyone is allowed one vehicle mistake. I broke my own rules of buying my last truck already modded and lost yuge. I love my taco too though.

 

Given the negative $6k equity rolled into the deal...if he doesn't have GAP insurance, he'll most likely have to fork up the money in that situation.

 

Title isn’t in his name, bank assumes the liability in a lease. GAP is only for a purchase.

 

Wrong.

 

On my lease GAP insurance is mandatory

 

Most leases have GAP built into them. Remember, the bank 'owns' it, not the leasee. The bank will protect their asset.

 

99% of leases require it

 

The $6k negative will be gone by the end of the lease. The residual is the same regardless of how much negative got rolled in. Theoretically, nobody has equity at the end of the lease, but sometimes you do, sometimes you don't. Either way, it's better for the leasee. If you have equity (residual was set too low), you can buy it out and sell it for profit. If it's upside down, it's not your problem.

 

Um, no they don't. If you are being sold GAP on a lease, the dealer is just ripping you off and pocketing that money for no good reason.

The title is in the banks name on a lease, remember it is a LEASE not a PURCHASE - so the title is in the BANK'S name thus they assume the responsibility and it is their asset to protect...it is not the lessees problem if the vehicle gets totaled.

 

If you bought GAP then you got ripped off and should go back to the dealer to get a 100% reimbursement. The lease should have GAP built it - go read your lease and you will see.

Remember you are the lessee not the owner. The bank has to assume the liability in the event of a total loss (your fault or not).

 

Nope, all set and no doubling up. I had a volkswagon lease that did not have it, which was very odd.

 

How the hell is a lease $200 more than what I pay a month (5 year loan)? I thought lease was roughly half buying price per month, guesstimating.... not trying to be a dick just curious and zero lease knowledge.

 

Probably because of the $6k in negative equity rolled into the lease.

 

Ahh.. so it would be the negative plus the monthly rate of guessing 3-400 a month, splitting the negative into what 2 or 3 years?

 

Exactly. Leases are a great way to bury negative equity with a reasonable monthly payment. In a normal lease, you are only paying the depreciation + interest (money factor) + taxes. The biggest advantage is the reduction in taxes, which is what makes lease more attractive as the price of the car goes up.

In my professional opinion, assuming you qualify for a good money factor, every new car should be leased vs. buy. Unless you know you will exceed the miles, or are 100% sure you will keep the car more than the lease term. Even then, I would still lease just because you can save on taxes (essentially spread your tax liability over a longer term), have a lower payment, and if the car turns out to be problematic, you can turn it in. Also, if you get in a wreck, have hail damage, or other unforseen events that lower the value.

That being said, my truck was a purchase. Only because I traded straight across for my diesel, which I didn't lease because of mileage.

Also, unless you have no other options, I would not recommend leasing through the mfg, with a few notable exceptions (Mercedes, and BMW from personal experience). Most MFG leases have higher fees, and higher residuals. The high residual gives you a nice low payment, but if you buy it out, you'll pay more. Credit union leases usually have better terms, fewer hidden fees, but lower residuals...which are typically more realistic. YMMV

 

Negative equity is even more of a reason to buy it out now,that's $6k MORE he's paying in additional interest.

When it comes to financing ANYTHING the bigger the loan amount the more you stand to save by refinancing to a lower rate. In this case that's just 6,000 more reasons to finance it NOW at a lower rate. I'll explain:

If he's leasing through Toyota which I'm 99% sure he is, he's money factor is (at best) .0020 which is equivalent to a 4.8% APR. On a $40k loan that's over $3k in interest alone just on the 3 year lease! If he refied right now to a 60 month loan at 1.9% on that same $40k loan he's only paying $1,900 in interest and he'll own the car outright in 3 additional years. If we waits until the end of the lease to finance it he will have already paid $3k+ in interest PLUS the interest of financing the residual value at the end (about $28k) which will be another $1,300+ in interest if he gets a 1.9% at that point.

So if he finishes his lease THEN finances it (assuming you can even still get a 1.9% loan two years from now, central fed rates are rising so not likely) he'll pay $4,400 in total interest

If he finances it right NOW he'll own the truck in 5 years and only pay $1,900 in interest.... that's why I said he'll save "thousands" by buying it now, now that I've done the math its pretty much $2,500 on the dot he'll save by buying it out now.

Also negative equity only raises your lease payment, it does NOT effect your residual value which is what any equity will be based on. So if he has equity at the end of a normal lease he'll have the EXACT same amount of equity when rolling in $6k negative, the only difference the negative equity makes is his payment in the meantime.

Not trying to be a dick and argue with people for the sake of arguing, I've been doing this for a living for 8 years and even though there's plenty of salesman with a decade of experience that still don't know shit... I actually moved up because I'm really good at it

 

Toyota leases do NOT include GAP insurance, it needs to be purchased separately at an additional cost. But if he rolled $6k negative I sure hope he got GAP :/

Edit: misread what you said. Yeah if he bought gap through the dealer it probably cost $600+ and he should cancel it and buy it through his insurance instead.

But first part still applies the lease does not come with GAP so he does need to buy it from someone (best through his own insurance)