Just because you've lowered your monthly payment, that doesn't mean you're "winning." You're buying a new vehicle, with inherent new car depreciation, and paying money for 3 years to cover that depreciation. You may be able to sell it for more than the buyout after 3 years, so that's some silver lining, but you're not "winning" anything; you're out money. On top of that, you're paying them an extra $820 to make the $2600 you're in the hole go away over the 3 years.
The TFL perspective is if you can't cover $2600 of negative equity in cash, you shouldn't be buying a $30k+ new vehicle. You've made poor financial decisions leading up to this, and this is another one. The smart thing to do would be keeping the Outback a touch longer to pay the gap down somewhat (extra payments if allowed to, or saving up the negative equity in cash), and sooner or later trading it in on a used Ody farther along in its depreciation curve.
I wouldn't be harsh like this in a "hey, look at my new car!" thread, but you asked for our advice. Having purchased two cars brand new, and having sold one with negative equity myself to downsize to one vehicle, I know firsthand that sometimes 'dumb decisions' can be worth it because you really want that car or whatever. I'm not saying don't do it. Just recognize it for what it is: another dumb financial decision. This isn't a fix or getting you out of a negative equity hole. This is a new car you're buying because you want it, and new cars cost money.
the decision I am making is financial but moreso for necessity. the need for a minivan is absolute. We need it for family travel and for picking up grandma. While I wouldn't mind keeping the outback, it doesn't make sense "financially" in terms of monthly payment to keep the vehicle that is no longer of use to us. I'd rather offload it, cut my losses, lease the odyssey, tie the negative equity into the outback and come out even at the end with 0 negative equity to give me time to renegotiate a new lease in 2.5 years - 3 years.
Last edited by dieselraver; 10-03-2012 at 10:28 AM.
That's what you thought would happen when you signed the papers for the GTI. That's what you thought would happened when you signed the papers for the Outback. Why is this time going to be any different? Just because it's a lease doesn't mean you're going to hold onto the vehicle for the term of the commitment.
GTI was when i was single
Outback was the wifes decision, i told her to get a minivan. she refused to "succumb to a minivan"
after 2 and a half years of the outback, shes come to terms and understands that its a necessity.
We will use the odyssey for the full 3 years. unless we plan on becoming the next John & Kate plus 8 I don't plan on buying a Mercedes Sprinter Van.
12,000 miles a year, 35 months (they covered the first month.) I'm in Florida.
We went in Sunday interested in the LX lease, which was advertised as 310/mo, nothing out of pocket. I didn't realize that was without tax and about 1300 in various "fees." Plus they didn't have an LX on the lot, only 3 or 4 EX's. So I made a stink and left. They called me back and said they would get me an EX for nearly the same price - taxes and fees rolled into the payment, and it was something like 361 a month. I said thanks but no thanks. Monday was the last day of their sales month, I guess they just wanted to deal. I was able to talk them down to the 324.99 price I previously mentioned.
The lease price was based on a purchase price of something like 26 or 27 and change, MSRP was 33 I think. Lease buyout is 18500 or so, I don't know the money factor (don't completely understand how that works), but the finance guy multiplied it by 2400 (or whatever) and it came to be less than .5% interest if I recall correctly. Hope this helps.
Very, VERY wrong.
You can sell both financed and leased cars, and in each case, the only thing holding you back is what you owe.
Leasing is like financing in that its one more way to finance a car.
Leasing makes complete sense to me in that you know you will own a car for X years, and are only paying for the portion of the car you are using (miles and depreciation, which is basically the same thing in a lease). You are not putting a down payment down, that's still in the bank. On a loan, you are putting a huge downpayment down, paying the entire amount in monthly payments, and if you sell the car before the end of the loan, how is that any different than leasing?
2016 Honda Accord Sport CVT w/ HondaSensing, Crystal Black Pearl/Black
You still have negative equity, it's just built into your lease and inflated in the payoff amount. You are now underwater (or will be if you got the Honda) by the $2500 (or whatever) to that, plus whatever depreciation you are subjected to when you drive off the lot. You still pay that negative equity too, in the form of higher lease prices for the new car. You didn't think the bank would just pay it for you, did you?
If you can stick it out for the terms of the lease at your $366/month (or whatever), then what you are doing is saving money in CASH FLOW, which The Financial Lounge here does not generally get, and is a serious practical consideration in daily finance decisions.
But don't for a second think you are off the hook for that negative equity. You just packaged it up and disguised it as something else. And you are pretty well locked into this Honda till the end of the lease, like it or not.
And one more thing.....
WHAT'S THE RESIDUAL????
WHAT'S THE MONEY FACTOR?!?!?!!
You didn't research this deal well enough if you cannot answer those two questions.
2016 Honda Accord Sport CVT w/ HondaSensing, Crystal Black Pearl/Black
here are my numbers just to show you
my price = 30804
35025 x .54 = 18913.5
30804- 18913.5 = 11890.5
30804 + 11890.5 = x .00064 = 26.90
Total = $330.29 + 26.90 = $357.19
Plus tax = $357.19 x 1.8875 NYS Tax rate = $388.89
Lets not forget the DMV $240 for NYS, plus whatever else, "finance, doc fees etc"
this is a TRUE sign and drive, i pay $0.00 when i pick up the van, nothing due at lease end, nada.
my first months payment is in 30 days when they mail me a statement.
so you see. i really am getting a spectacular deal.
1 - Get the van. Don't dildo around and trade in until the lease is up in 36 months. All will be well.
2 - Post a write-up in 6 months or whatever to let us all know how you and your lady friend like the car, etc.
3 - ???
4 - Profit!!!!
As far as Lojack goes? It's 90% profit. Don't buy it unless you are actually worried the car will be stolen; and in this particular case, you want it to be. Get gap coverage though. And maybe ibex if your kids are messy.
thanks man! the MF is even lower than the one i used, 0.00032
the negative equity is rolled into the monthly but honest, its still a damn good price. just received the paperwork yesterday via overnight express UPS. sending it back and i'll have my van by next weekend (they have to get it registered in NYS and plated which takes time)
and proof i am not leading TCL on another tire kicking adventure!
Nice new car. My wife wants a Sienna and I am trying to talk her into the oddy. Is you paper work dated in august? And what is a rent fee? I know nothing about leases, so is a rent fee a common charge?
yeah i noticed the 8/27 date also, but that has no bearing on the deal at hand. the day we take delivery of the vehicle is when the lease begins so no biggie. also the rent fee is basically your finance fee. typically its your (Net Cap Cost + residual Value) x Money Factor
i highly encourage you to drive both. the dynamics are night and day. Sienna is squishy and not very communicative, think a firmer boat of a caddy,
the odyssey is more of a drivers van.
Tax savings that dealer mentioned probably deal with you only pay taxes on the amount leased, not on the full amount of the purchase price as you would on a financed car. That's the case with most states at least.
Only been through the leasing process once, and that was helping a friend out. Worked in her case. Needed very reliable transportation when starting a new career, and had low amount of cash savings.