11/29/2011 3:25 PM ET|
Make money on your car lease
Instead of returning your leased car when its term is up, you may be able to turn a profit by buying it back from the leasing company and selling it.
A rule of thumb in personal finance typically suggests that leasing a car is a poor decision. Generally, leasing involves throwing money toward a car that you'll have to return in a few years -- and critics claim consumers lease cars to be able to drive around in a more-expensive vehicle. But since the value of used cars has risen recently, consumers can now turn a profit when the lease is up.
The November report of the NADA Used Car Guide, which tracks used-car values, said all categories of used cars it tracks have increased in value year-over-year. Some car types have increased as much as 26% since November 2010. That means there could be money to be made by selling that car yourself instead of trading it in when the lease is up.
Consider buying the car back from the leasing company and then selling it privately for a profit. Let's say in order for you to buy back your leased car, the leasing company wants $15,000. However, you know you could sell the car for around $18,000 if you were to post an ad in the local newspaper.
Even better, if you know someone who's interested in purchasing the car you are leasing, you can close the deal while still under lease, then have the buyer pay the leasing company the $15,000 and pay you the $3,000 ($18,000 - $15,000) directly as your profit. This way you get rid of the car and get your cash at the same time, in case you don't have the ability to write a check to buy back the car with the hope of selling it later.
You may be wondering why the leasing company would be willing to sell you the car for $15,000 knowing that you can go out on your own and sell it for $18,000. The answer? The leasing company is not interested in owning cars.
Even if you didn't buy back the car and simply returned it to the company, the leasing company would most likely sell it anyway. From its perspective, in many cases it's easier for a lessee to buy back the car so the leasing company doesn't have to worry about selling it -- even if it means the company sells the car for a lower price.
After you buy back your car upon completion of the lease, if you choose to sell the vehicle (again, for a profit), that is a huge undertaking. You have to find a qualified buyer, and it will cost time and money to post an advertisement in the newspaper or online. Plus, you have to deal with the uncertainty and legwork involved in making the sale.
If selling a car on your own doesn't sound too appealing, there are businesses that specialize in these types of transactions. Michael Bor is the founder and CEO of CarLotz, a for-sale-by-owner consignment service for used cars. His firm will essentially do all of the dirty work for you, as it shields you (the seller) from the buyer. You don't have to get involved with negotiations, and CarLotz will take care of all the administrative work (DMV paperwork, warranty, etc.) -- for a fee, of course.
"The problem many consumers face in the private market is discomfort with the hassles and the potential danger associated with this type of transaction," says Bor. "That's where a business like CarLotz adds value. We enable consumers seeking a private-market value to sell their vehicle without having to deal with the hassles traditionally associated with the private market. We're a consignment store for cars."
CarLotz takes a reasonable fee from the transaction that, depending on the car, can still leave a lot of profit on the table: $199 for the mechanic check, cleaning of the car and for taking photos to be posted on websites. If the car sells, it will take another $599. Ultimately, for $800, you don't have to deal with the headaches of selling a car.
Determine your car's value
To see what your car is valued at, visit MSN Autos, then compare this value with the amount the leasing company wants for your leased car.
According to Bor, the type of car is not a big factor in whether you'll be able to turn a profit, although he notes that fuel-efficient vehicles do better due to the high gas prices and the large demand for hybrids and cars with good gas mileage. He says most people will have between $2,000 and $5,000 worth of value built up in their leases.
Additionally, if you've exceeded the mileage limit on your car lease, chances are good that you'll owe money to the leasing company -- yet another reason to try to buy your leased car back and sell it for a profit to help pay the mileage fees.
VIDEO ON MSN MONEY
It never fails to amaze me why so many lay people actually think that they have the perfect solution for coming out ahead in any automobile transaction. Dream on!!!!
This article by Mr. Gamm is a perfect example of such foolish thinking. His text is so peppered with nonsense that I don't even know where to begin in responding to any of his erroneous suggestions.
Suffice to say, if any of you believe that Gamm did an ounce of probing research, or for that matter, even bothered to read the back page of a lease agreement before writing this tripe; you my friend are, more likely than not, that type of "easy mark" every Auto Dealer and his Finance Staff yearn to serve.
I can’t speak for all Leasing company, but Ally (formerly GMAC) will only sell the lease for the predetermine price (customer buyout) to the person or persons on the lease. If the value is higher the new party wouldn’t be able purchase for that price. The leasing customer could purchase their own lease out, but unless you live in a state with no sales tax, you would have to add the sales tax to the purchase price.
I have always practiced this method with my car/truck leases, and I have closed deals at the dealer's finance dept. where I would have turned back the vehicle. I have found some cars had room for profit while others did not, but most of the dealers did not mind and cut me a check for the balance left over after paying off the pre-determined lease-end buy-out.
The best idea is to take the contract and rip out the extraneous clauses. Since the party of the first part is the party of the first part, you weren't even invited to the party.
Now, if you are the party of the second part, you probably know the party of the first part, who wasn't invited to the party,so neither were you.
Continuing down, make sure to remove the clause which states that you are in sufficient mental health to engage in a contract. This is commonly known as the "sanity clause". ANd, you no foola me- I'ma too old to believe in Sanity Clause.
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