Automotive

Car Lease Ending - Negotiate the Buyout Price?

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  • Jan 29th, 2009 4:59 pm
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Newbie
Jun 4, 2006
10 posts
3 upvotes
Toronto

Car Lease Ending - Negotiate the Buyout Price?

My car lease with VW Finance is ending soon.

The car is in excellent condition and I have not gone over the mileage limit, so I could walk away if I wanted to.

I wouldn't mind keeping the car - it has been virtually problem-free, but I have doubts over whether it is worth the "residual value" stated in the lease and I do not think the leasing company could make that much if they tried to sell to the dealership, or even worse if they took it to auction.

Is there any way for me to find out the wholesale & market value of my car so I can make a reasonable offer to purchase? Lots of resources available to find these things in the USA, but I haven't found any for Canada...

Anybody ever tried to negotiate a buyout with VW Finance?
14 replies
Deal Fanatic
Jan 13, 2005
7758 posts
151 upvotes
I am in the process of doing the very same thing. I leased a suv from ford and the lease is up i was considering moving to an awd car, but my new car sales man said it would a waste of money buying a brand new car if my leased vehicle had less 35km's on it. What I am going to do is return the lease so I wouldnt have to pay the 17k buy back go back in 2 days and buy it from the used car lot for around 10k.

talk to the person that sold you the car he may be willing to help you out.

if the finance company knows you are buying it they will not lower the price.
Deal Addict
Sep 22, 2007
4599 posts
116 upvotes
Your car will probably be sent to auction so you might not simply have the option of going back and offering $10,000 for it.
Newbie
Mar 5, 2006
32 posts
3 upvotes
I just went through this with my wife's Nissan Pathfinder. It had really low mileage, but wasn't worth the residual. I tried to buy it for less but the dealership said it is actually Nissan finance that owns it. If you don't buy it back, then the dealership has the first rights to buy it. If they don't want it, it goes to wholesale auction. There was no opportunity for us to try and buy it at a better price.

I can't speak for VW Finance, but that is what happened with Nissan finance. Good luck with whatever you decide to do.
Deal Fanatic
Aug 27, 2004
6344 posts
92 upvotes
Toronto, ON
If the leasing companies knew what was good for their shareholders, they'd happily bargain over the price instead of taking a big loss sending the car to auction.

Sadly, it seems that MBAs, in their usual self-destructive wisdom, have decided otherwise.
Deal Fanatic
User avatar
Oct 5, 2008
8307 posts
1096 upvotes
Toronto
You can't negotiate the buyout. It's a set amount.

If the car is worth less than the buyout price, it's likely better to give the car back and walk away.
Newbie
May 19, 2006
58 posts
I'm in the process of considering a lease, which I would likely purchase at the end. I thought any deposit just affects payments and any buyout is suppose to reflect the market value at the time of buyout.

Is it always the case in a lease that the buyout is more than market value?

How can I tell what the market value will be in 4 or 5 years?
[OP]
Newbie
Jun 4, 2006
10 posts
3 upvotes
Toronto
MS MSP wrote:
Jan 28th, 2009 1:50 am
You can't negotiate the buyout. It's a set amount.

If the car is worth less than the buyout price, it's likely better to give the car back and walk away.
Are you talking specifically about VW Finance or leasing in general. You're certainly wrong if you're talking about leasing in general. You can find many references for this practice...
if the TMV price is less than the residual figure in the contract, don't despair. You can always try to negotiate a lower price for your leased car. Keep in mind that the leasing company really doesn't want that car back. They would like you to buy it
Deal Fanatic
Aug 27, 2004
6344 posts
92 upvotes
Toronto, ON
bby wrote:
Jan 28th, 2009 5:39 am
I'm in the process of considering a lease, which I would likely purchase at the end. I thought any deposit just affects payments and any buyout is suppose to reflect the market value at the time of buyout.

Is it always the case in a lease that the buyout is more than market value?

How can I tell what the market value will be in 4 or 5 years?
In theory, the residual (i.e. buyout price) SHOULD be the market value of the car at the end of the lease.

But... usually, it turns out that they are optimistic, so your residual is more than the market value of the car. This is good for you (you paid less than if you had bought the car and now wanted to sell it... and way way less than if you wanted to trade it in) because you can return the car, but bad for them.
If you're leasing NOW, that's less likely to be the case: most automakers have cut their residuals by 4-5% of MSRP in the past couple of months (one of a number of reasons why the current market isn't great for leasing...)
Deal Addict
User avatar
May 7, 2008
1061 posts
At the inception of a lease the residual amount is the "purchase option" at the termination of the lease.

That the market value is less, the lessee agreed to a "purchase option" at the inception of the lease. Most leasing companies have no desire to negotiate "purchase options" (residual values) with the lessee.

The lease agreement stipulates that the lessee either returns the vehicle with normal wear and tear and can walk away, or can exercise the "purchase option" for a set amount. The lessee has the option of first refusal on the purchase option, in many instances the originating dealer has the second choice of refusal on the "purchase option".

If the lessee, and/or the originating dealer do not exercise their purchase option for the residual value the vehicle goes to auction.

Nothing stops leasing companies from holding vehicles for 60-90 days for market conditions to improve prior to selling them at auctions.

Nothing stops leasing companies from "persuading" dealers to pay closer to residual and then offer financial packages, and other incentives to resell the vehicle as a CPO.

Now that the Federal Gov't is prepared to backstop leases it will get even more interesting.
Deal Guru
User avatar
Jun 12, 2007
10973 posts
1338 upvotes
See this post:

(No longer valid)

It's a broker who will go to the auctions and reacquire your old leased car for you at the market value (vs. the residual value)
Deal Guru
User avatar
Jun 12, 2007
10973 posts
1338 upvotes
cynick wrote:
Jan 28th, 2009 8:34 pm
no such post..
Looks like the guy deleted his post.
Sr. Member
User avatar
Jul 5, 2003
640 posts
44 upvotes
Mississauga
I just returned our Accord. Before we returned it, we had a DataScan inspector come in to do a lease return inspection and while he was going through our car, he mentioned to us how most people are simply returning their car because new car prices have dropped by quite a bit in the last year or so. Something else he mentioned that we didn't know before: not only is the buyout price not negotiable, apparently, the dealer is not allowed to sell it to me or my family once the car has been returned and maybe put back on the lot. I thought that was a Honda policy, but he told me it was actually a "law"... not sure how true were those statements... just thought I would share what I have learned.
Newbie
Mar 5, 2006
32 posts
3 upvotes
One other thing to keep in mind when deciding to purchase the car at the end of the lease is that you have to pay PST and GST on the purchase amount. That's an extra 13% to tack on. A lot of times the market value of the car is actually more than the residual, but once you add in the 13% tax, you lost that additional value.

The only time the tax doesn't apply is if you negotiate with the dealership for them to give you money towards the down payment on a new car based on the difference in value. eg. Your residual is $5000, the dealership would give you $6000 for the car as trade in value, you purchase the car and flip it immediately to the dealership and they give you $1000 towards the down payment on your new car. I did this with an Audi once.

Now obviously the trade-in value offered by the dealership is less than the market price of the car. This allows for another option. Say the same car ($5000 residual) you find someone who will buy it for $7000. Now normally, you would pay $5650 for the car ($5000 + 13% tax) then sell if for $7000 for a profit of $1350. By the time you add in the cost of placing an ad, getting it certified, going on test drives with strangers, etc. it doesn't seem worth it.

However, I once had a Nissan dealership broker the deal for me. The dealerships do not have to pay tax on the residual. So, I found the buyer, the dealership purchased the car and sold it to my buyer, and applied the difference as the down payment on my new car. All they charged me was a $75 admin fee. So based on the same example, you end up getting $1925 towards the new car ($7000 - $5000 - $75). This was 4 years ago, and the economy is different now, but I am sure there are still dealerships out there that might be willing to do it.
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