The Expert Podcast

…If you leased a vehicle in the last three years you may have found that that turned out to be a very very smart money move And here's why. When you lease a vehicle. For two or three or sometimes four years you pay payments But at the end of that term, you can just walk away from the vehicle rather than having another two or three years worth of payments. Where now the car is out of warranty may have high miles, or you may just want another car. Most people only keep cars for two or three years Anyways. And flip it to a new car If you financed it, you probably would owe more money than it's worth But if you lease the vehicle. The end of that three years you walk back you drop off the keys you walk away. Now. You also have an option to purchase the vehicle…at the beginning of the lease you are given. A written, documented contracted etched in stone option where you can buy it for a fixed amount. Usually for a three-year lease It's about half of what the original price was So if you buy a $50,000 car at the end of three years after you've made your payments you can either walk away. Or…pay half the value of the car and. Own it…Up until the last couple of years, the lease companies guessed pretty well as to what the value is going to be in three years And it was almost a breakeven So if your bio option was 25,000, the car was probably worth 25,000 In fact in some cases, the buyer option was more than the. Current value because lease companies and manufacturers sometimes artificially goosed up that number to give you a lower payment. In a way that discounted the car without making it seem like it was bargain. For example, if you're leasing a BMW or you're going to buy a BMW And they had big stickers in the window that said $2,000 rebate 0% financing and all kinds of balloons and carnival acts. You might not think that BMW is really that. Prestigious of a brand If they have all these discounts flying around and a lot of manufacturers even the disk at the lower end cars I got away from this. Circus act discounting What they did instead was they put the discount built into a lease so they could just offer you a lower payment. And it was a way to discount the vehicle without have to make it look like blue light special, right. So what that did was artificially raised up the residual and the advantage of the manufacturer is if you didn't. If you bought off the vehicle they never lost that money. Right…But here's the thing…Over the last two years or so year and a half used car values have gone through the roof So many people get to the end of their lease and realize that their buyout is way less than the market value. In fact that car that you have a buyer out of 30,000 or $25,000 might be worth 30 or 31 or 32. So if you buy it you're already making money. Even if you don't want to keep the car if you buy it and then resell it you could pocket the difference. Or if you are going to get a new car anyways, instead of doing a lease turn in, do a least. At least trade in. Little bit different. Scenario which is one word. At least turn in is you walk away, drop off the keys and you're done. At least trade in is you use that lease. Residual. As a trade in towards your next car. So if it's worth 30 and the buyout was 25. That $5,000 equity goes towards your next car. So. Buying out that lease is a very smart financial move. If the residual value is lower than the market value And in many cases it is with this current market Now going forward, if you lease a car today, that might not be the case three years from now So don't make this. A motivation to lease a new car right now might not be the same thing in two or three years but right now is a sweet spot If you lease the car from 2000. Let's say 18 19 or 20. And your lease is up or coming up. Definitely check out residual and make sure the paperwork is done Right There's a little bit of a tricky. Scenario of buying out your lease because it's not a lien where you do a lien payoff you're doing a lease buyout where it transfers ownership, and you have to make sure that's done correctly, but at least by out. Could be a way to add equity to your next purchase or just simply put cash in your pocket.