Buy out my lease or wait?

OP, I, too, am leasing. I just got mine last month. While I love my truck and am telling myself that I wont get another, I never know. There are a lot of things that can happen to it between now and the time the lease is up. Others have mentioned potential damage to the truck. I pose this...

What if.... What if by the time your lease is up, you find another truck that you really like. Additional options that yours doesn't have that you are really interested in? As time goes on, vehicles in the same line and trim get upgraded options to keep their sales up.

I know with me, if in 2020 they have my exact truck with the only difference being HID lights as a standard option, then I am trading up for a new truck with better options. My 2 cents...

 

Hearing this, I would pay down to where you are even on the truck and get out of it. Get something cheap for a few years and use the savings to pay down debt. Once you get out of debt for school is when you buy toys.

 

Dont mean to thread jack or anything but im kind of in the same situation but my payments are lower. I traded in an old 2000 honda civic and got 5k for it.

I put 5k down on my tacoma on a 3 year lease. Payments are $350.00 a month. The residual value after 3 years is 27k. Should I buy out the lease now or wait till the 3 years is up? I know if i keep the mileage under 45,000 the car will be worth more than the residual but i will have a total of 8 years of payments vs if i buy out the lease now. I guess i leased to keep payments low but 8 years seems long if i buy out the lease at the end.

 

If you know you're going to keep it forever, and run it into the ground, no harm in buying it now. My best guess is you'll nee a 60+ month term to get the same payment you have now. There are online loan calculators you can use to figure it out. But, you'll need to get your pay-off, and see what rates and taxes will be.

 

I briefly thought of leasing one of these and buying it at the end (because I know I'll blow through the mileage allowance in no time), but realized I didn't want to have 8 or 9 years of payments just to save $100/month as opposed to just buying it in the first place.

Maybe I'm thinking of this backwards, but to me it makes sense to lease something with a low residual at the end f you're going to buy it. Like with a Taco, 3 years worth of lease payments and then you're still at a damn near 30k buyout. The numbers just didn't make sense to me.

 

The flip-side of this point is if you know you're not going to keep it. The residual may be high, but that means you had a low payment for your time with the car, and you only paid a fraction of the taxes. Think of it like this, if you were buying a $100k car, and your tax rate is 8%, you're paying $8k in taxes right off the bat. With a lease that has a 50% residual, you'll only pay $4k in taxes. The numbers work better as the cars get more expensive. With a Tacoma, it's more of a wash since the residuals are high, and the initial price is relatively low.

For another example, I always want my wife to have a car under warranty so that if I'm away, she can simply take it in to be fixed. Every 3 years I lease her something new. The extra advantage for me is then I get to sell the car as a dealer.

 

I bought my '16 OR at the end of my 2 year lease. Buyout was less than any same year, same mileage truck. When I did all the math with my trade-in, lease payments & now actual truck payments, I'll be into it for about $1200 more than I could've bought it for at the rates they offered me 12/16. My financial situation was a lot tighter then so I leased. That's including the tax & all. I was actually hoping to roll my equity into a 2017 with .9%, but no deal could be made.

 

The residual on mine was wayyyy less than market value for the truck. I did a really low mileage lease to keep the payment low, knowing that I was never going to turn the truck back in because of how they holdtheir values

Btw psa to anyone in this thread leasing your taco: do NOT turn it back in end of lease. Trade it, sell it, buy it. But if you turn it in you're just throwing away money

 

2 things I learned when starting my life journey. If you can
1. avoid leasing
2. Never borrow for your 401k
I know people will do both, but not me

Like others have said, borrow the 40k and fix the issue now.

 

I thought when you lease, you are paying off a portion of the car, lets say half. or a quarter. so if a truck is 36k and your lease payments are 500.00 a month for 3 years would be 18 grand, you would only owe another 18 grand at the end of the lease, not buy the truck for what its worth which would be around 30k depending on the milage..... People lease to have lower payments due to that reason, usually trading it in after the 3 years..

 

1. Only people who say that know nothing about leasing. Vast majority of people out there never pay cash for their car, and buy every 3 years. Why not have a lower payment, and a brand new car that's always under warranty, no negative equity at the end, and no down payment? Leasing is a great option for a big part of the population.

A lot of wealthy people lease cars because it doesn't make sense to tie up liquid capital in a depreciating asset

 

I am not pushing my statements on anyone. The advice was provided to me by my finance professor. I have studied it and agree with him. If you want to do that, please do.

 

This has nothing to do with wealth.

 

Only part of what I said had to do with wealth

 

Ok i was only making statements, everyone's situation is different. These are my life rules

 

In my case I leased several cars (one corolla and two Jetta's) since I knew I didn't want to keep them and benefit from the warranty. I got great deals and wasn't locked in. Now, I have my truck and I went with a lease because A) I had been away from Toyota for a while and wanted to feel out the quality again, B) this is my first truck since borrowing my parents' and C) I wanted a way out if A and B sucked. I am by no means wealthy, but all have very good points.

 

I bought my truck in October 2017. The buy out price is $33,252.50. I do want to keep the truck at the end but seems like my payments are going to be a lot higher.

 

That's your current buyout. Your residual is probably in the low 20s

 

My residual is actually $27,000. Quite high actually. Is it worth to buy out the lease now?

 

If you know you're going to keep it, buy it now, as long as you can swallow the payment.