Topic: Residual question

[2latecrew]

Is there many cars coming back on a lease?
was it it 3 years ago when some companies stopped leasing.

ALso would the VW take a bigger hit now with the new model coming out?

As far as I know that isn't relevant.

They stick to a process.

If the lessor doesn't want the car then some offer it to the leasing dealer first (although I'm not sure at what price) if they don't want it ..goes to auction where the auction determines the "market price" for the vehicle.

The only way to get the vehicle for less than buyout is to buy it from the auction. It might make sense to think "hey the leasing company could get 16 K from me or 15 K at the auction but logistically for them it doesn't make sense.

They lease cars..they would need someone to do the negotiations on every car. That all costs $ for people overhead etc. Its possible that that overhead simply eats up and extra $ they make over simply sending the thing to auction.

[Cord]

The only way to get the vehicle for less than buyout is to buy it from the auction.

And that can only be done by those with a dealer license. Sometimes only for dealers of that specific brand.

[ArticSteve]

That VW buy won't be going to any auction.

These captive finance companies operating in Ontario have deals worked out with wholesalers the day the cars are returned to the dealer.

There is one wholesaler in Ontario that has 4000 cars at any given time.   His ppl have a fleet of transports and they pick the vehicles up, take them to a secure holding area outside of Toronto, clean them up, and then any registered car dealer can place an order and the cars are delivered.

If any vehicle is left unclaimed for X amount of time (I'm assuming 60 days) then the wholesaler has probably lost on that unit and it will go to the auction as a last resort.

A VW bug rag top will sell anywhere.

[2latecrew]

That VW buy won't be going to any auction.

These captive finance companies operating in Ontario have deals worked out with wholesalers the day the cars are returned to the dealer.

There is one wholesaler in Ontario that has 4000 cars at any given time.   His ppl have a fleet of transports and they pick the vehicles up, take them to a secure holding area outside of Toronto, clean them up, and then any registered car dealer can place an order and the cars are delivered.

If any vehicle is left unclaimed for X amount of time (I'm assuming 60 days) then the wholesaler has probably lost on that unit and it will go to the auction as a last resort.

A VW bug rag top will sell anywhere.

That is interesting info. How do they determine what those registered dealers pay for the cars they pick up?

[ArticSteve]

How do they price them?

They stick a number on them that's close to the prevailing value and then it's negotiation time just like between a dealer and a customer.  Many dealers will buy a whole truck load so there will be discounting on volume.  In addition, dealer's who are good payers probably get a discount over those that are tardy with their accounts payable. 

In addition, they're heading out west.

The residual that is printed on the customer's lease is a number reversed for that customer.  That residual has no meaning outside of that.  The residual is not the wholesale value just so ppl are informed of that.   

[ArticSteve]

Further, the captive finance companies want their money NOW.  Take Nissan Finance, they take all of dealer lease returns.  An absolutely mint 350Z could come back off lease and that dealer could not buy it then and there.  They are a operation onto themselves. Got a problem with that?  Then you're talking to some boob in India and it becomes pointless to engage further. 

[Cord]

Ford Credit's process is a little different. When a car is returned at lease end, Ford Credit comes up with what they consider wholesale market value (has nothing to do with the original residual) and offers it to the dealership where the car was returned. If it is not purchased by the dealer within 48 then it is made available to all Ford dealers online (I think for 4 days). Then it gets sent to auction.

[Wheelboy]

Thanks to all who responded but my daughter decided not to buy out her lease vehicle.  So the point of whether the lease company would entertain an offer (lower than the residual) is moot.  She didn't ask.

Yesterday she bought a 2012 Hyundai Elantra Limited Nav.

[ArticSteve]

The EVIL HYUNDAI strikes again. 

[Petzy]

Not all leasing company's are the same. I have been able to adjust dozens-and-dozens of lease buy-outs to reflect market value.

During the market collapse some of these were for $5000 +. Now-a-days it is anywhere from $500 up to $3000 or more depending on the model.

There is a HUGE opportunity for this on Saab models, typically Pontiac and Saturns also work well with my program. But depending on the buy-out amount, mileage and the market even cars like Chevy Cobalts and other common cars work well.

See link for info: http://mark-petz.com/leasebuyout.aspx

[JSCC]

Ford Credit's process is a little different. When a car is returned at lease end, Ford Credit comes up with what they consider wholesale market value (has nothing to do with the original residual) and offers it to the dealership where the car was returned. If it is not purchased by the dealer within 48 then it is made available to all Ford dealers online (I think for 4 days). Then it gets sent to auction.

Same for Mazda in 2009.
Chances were they were using the same company and software at that time.

I even remember the time counter and reps would call me, to try to make us buy before the end of the 48 hour period instead of going to the open bid.
Things were brutal when Mazda lowered the new car prices and the lease return cars had higher than market value residuals.

[Guy]

Is there many cars coming back on a lease?
was it it 3 years ago when some companies stopped leasing.

ALso would the VW take a bigger hit now with the new model coming out?

As far as I know that isn't relevant.

They stick to a process.

If the lessor doesn't want the car then some offer it to the leasing dealer first (although I'm not sure at what price) if they don't want it ..goes to auction where the auction determines the "market price" for the vehicle.

The only way to get the vehicle for less than buyout is to buy it from the auction. It might make sense to think "hey the leasing company could get 16 K from me or 15 K at the auction but logistically for them it doesn't make sense.

They lease cars..they would need someone to do the negotiations on every car. That all costs $ for people overhead etc. Its possible that that overhead simply eats up and extra $ they make over simply sending the thing to auction.

There is another way; the leaser will offer the car to the leasing dealer for the average price they get on auction. I think they use the average of the last 3 months. If you know the auction average price, then you and the dealer can work something out. My leasing dealer once offered me a car I was leasing for $500 more than the price he would pay, and that was a few thousands below the residual. I declined but if you have a good relationship with your dealer it's worth a try.

[dash]

Another option, when market value is higher then residual, it is possible to exercise the buy-out clause and sell directly to a 3rd party for a small profit, maybe not all leasing companies allow this, and obviously this is not a straigh forward transaction with some risk.

[Hammy]

The lease company wont buy it, they will take it back and charge you for excess wear and tear.  If residual is much lower than market price you can buy it out and sell privately but it is a bit of a hassle.

[blur911]

The lease company wont buy it, they will take it back and charge you for excess wear and tear.  If residual is much lower than market price you can buy it out and sell privately but it is a bit of a hassle.

If you buy it out and then sell privately taxes will be paid twice.  Make a deal with a 3rd party (as mentioned above) and have the leasing company sell directly to them instead of you.
Worked years ago for me with a Ford Probe GT. YMMV

[No H2O]

If you buy it out and then sell privately taxes will be paid twice.

I wonder how many provinces and states tax used vehicles? Do most of them?

I once wanted to buy a used vehicle in Germany and register it there. I asked about the tax. The person looked at me kind of funny and asked why anyone would pay tax twice on a vehicle. I wonder how many other countries do not charge tax on a used vehicle.

Same thing happened when I asked about multi-vehicle liability insurance. I got the same response...you can only drive one vehicle at a time. Wow, what a concept!

[johngenx]

Alberta has no tax on private used sales, but on dealer used sales, yes.

[tpl]

The way Value Added Taxes ( aka a properly executed HST) work would be that private sales of anything should not be taxed.  The person collecting the tax would become a non-taxable person and then should be able to claim back the tax they originally paid... as this would often be more than the tax collected it would lead to a refund. Silly. Even if you get around that one the private seller would need to get a tax number and be in the system for a few hundred or thousand $ of tax.  Not worth it to the government.

However if the "private person" who sells the vehicle is already running a business AND the vehicle was used as part of that business then they should collect the tax etc etc. It wouldn't matter if the seller was a car dealer or someone who designs Christmas cards, if the vehicle was used for the business then there should be tax collected.


So the way they do it is to have a third party in the middle aka the provincial government who are and always have been able to collect retail sales taxes on any thing they like as long as it is done directly.

The moral to this is that provinces and municipalities should not have taxing power apart from property taxes...they shouldn't be running health or education either.

/rant

[kenm]

If you buy it out and then sell privately taxes will be paid twice.  Make a deal with a 3rd party (as mentioned above) and have the leasing company sell directly to them instead of you.
Worked years ago for me with a Ford Probe GT. YMMV

I did exactly that when acquiring my current Corolla, except I was the 3rd party. The lease was terminated and the car was immediately transferred into my name. I paid the taxes and everybody was happy.