Paying off a lease early

Now there is a great example of an oxymoron.

 

DO IT, DO IT

I love my Off Road!

 

Definitely. It depends on the lease/lender, the only reason I think this is because we're led to believe he's only 9 months into it. If there's a termination or a buy out and he has equity, then it can be a good decision. Typically there are less desirable terms for people just starting in their credit, but Tacomas are hot these days. And everything is negotiable.

 

I would NEVER simply return a vehicle at the end of a lease until I investigate if the market cost is higher than the buy-out figure. If it is, buy it. If it isn’t, return it and walk.

Just as an example. If you can outright purchase the vehicle at the end of the lease for $15,000 but the street value is $20,000 why would you leave the $5,000 to the dealer to scoop?

 

I think you are right about his terms being less desirable.
He did say he owes $12k remaining payments for the next 4-6 months.
That equals to $2k per month !!!!!

The math does not calculate right.

 

Loan/Lease coverage through your auto insurance company is a lot cheaper than buying GAP insurance through your dealership or lender.

 

OP,

Check your lease agreement to see to the total amount of the truck you paid and the total amount you agreed to pay over your lease. Then check KBB or wherever for the current value of your truck.

If your truck is work more than it was when you bought it, you've got equity. Probably not 12k, but some to offset that amount. You could buy a new truck and roll that into the loan or get a loan for the truck you have and roll that into the loan and pay it off and keep it.

Vehicles are depreciating asset, always require money (gas, insurance, repairs, ect). So think about your financial goals long term. You'll lose a lot more over time if you keep buying new cars than if you keep your sr5 for a while.

Of course, you could always ride out the remainder of the lease and then buy it or trade it for a TRD. Do what works for you.

 

It’s actually a $490 per month it’s just I am lucky enough to afford substantially more in order to accelerate.

didn’t think this post would get this big but thanks for all the advice everyone!

 

I sold a leased car to Carvana with about a year left on a 3 year lease. It actually worked out pretty well for me. So like others said, you might want to check out Carvana, Vroom, or Getmorecheddar.

 

See there's nothing to accelerate in a lease. You're just making advance rent payments. There's no reduction in interest cost. Theres no benefit. It's not a term loan.

Imagine you rent an apartment. Tell your landlord, hey I'm gonna give you one years worth of rent today. Landlord goes. Okay! You're out whatever $12k in cash that you could have used more productively. Meanwhile, your landlord can go invest that money or whatever.

 

When I was his age I was driving a clapped out ford ranger that had rod knock and overheated on the highways....

 

I was driving a 1991 Chev Cavalier with around 95 hp and 3 speed auto.

 

Pretty sure the cavalier was every suburban kids first car. I knew so many people with them, and every single one had a dent on the door handle where a deer ran into it.

* I say suburban because city kids rode public transit and country kids drove dads old k5

 

Pretty much how leases work. You're locked in at the amount you agreed to for the term of the lease. Only a few ways out of a lease.

1. Pay off that balance in advance and return the vehicle. (dealer's not going to give you any credit for extra equity when they can sit back and collect your 12k balance over the next however many months)

2. Get a loan for the leased vehicle to buy it out right (you'd still owe the 12k plus the remainder of whatever the truck is worth)

3. Buy a new vehicle and roll negotiate equity into new vehicle loan (still doubt a dealer will give you much if any credit if leased vehicle has increased in value since buying the truck)

4. You could try https://www.leasetrader.com (you'd have to find someone qualified to take over the lease, at the agreed on upon payment term and mileage. Toyota financial or whoever the finance company is would have to agree and sign off on the whole deal.

5. find a buyer of your leased vehicle who agree to finance or pay off the vehicles value plus whatever you owe in lease payments. You might be able to offer the buyer some cash as incentive to buy your truck as the loan with the remaining lease payments and the total vehicles value will likely be more than it's worth. (similar to step 2)

6. wait until you have about 4-6 months left on your lease, inquire another dealer about buying a new vehicle, mention you have a few months left on the lease and want out, see what they'll offer as far as what you still owe vs. if the truck increased in value since your lease began. (kind of similar to step 1)

how to break a car lease

 

A car is not an investment.
1) Pay cash or finance at a rate below what else the $ is doing for you. (Net over time positive opportunity cost)
2) If not 1, get less of a car.

 

Will be keeping it for another year, I’m sure the 2023s will come out by then.

 

Hi OP. Maybe I missed it, but I don't see what the remaining duration of your current lease is?

As for the financial benefits of paying off your lease early in order to immediately buy(?) a new TRD Pro or OffRoad... I am assuming that you mean to buy out the lease, take ownership of the truck, and then sell it / trade it towards the new Pro or OffRoad? Sure, you might get a favorable delta on selling the SR5 versus the lease buyout, but that won't offset the premium markup on the Pro or OffRoad as well as the first years depreciation on the new vehicle that you'd be enduring on top of the depreciation from the first one.

If it were me, I'd buy out the lease then run the SR5 into the ground. By then, the supply chain issues will be resolved, prices will have normalized, and you will have had those additional years to bank / invest that extra cash flow from not making payments.

JMHO. But FWIW, I have a MBA with a concentration in finance, and I had over 230,000 miles on my previous DD before I bought my Pro 3 years ago.

 

If you're keeping the lease, stop making double payments. Invest that money. As others have stated, there is absolutely no reason to make early payments on a lease.