Al Hearn

Matt:

Great response. But I'll add a bit of reality that can often discourge
or prevent lease transfers...

First, for "sellers" of leases, many lease companies simply don't
allow transfers. Others restrict the periods during the lease term in
which transfers can take place. Furthmore, many (most) lease companies
make the original lessee responsible for maintaining the lease if the
new lessee defaults -- not a good thing to have hanging over your head
for a couple of years if you're a "seller."

Second, for "buyers" of leases, even with incentives, the good
assumption deals are only those in which the orginal lease was a good
deal (good discount, good money factor, and good residual) -- and the
original lessee made a hefty down payment and/or made a valuable
trade-in with no negative equity.

It's a fine point, but I have to disagree with the point about an
incentive paying for remaining interest on the lease. Technically, the
way that lease payments are calculated, interest is paid at a flat
rate across the entire lease term. Each monthly payment is made up of
"principal" (depreciation), interest (money factor), and sales tax (in
most states). Each of these components is exactly the same each month
-- unlike with a car loan. However, if the lease is terminated early,
the lease company recalculates the amount still owed -- and uses an
amortized method of allocating interest and principal. The result is
that there's more of the principal still remaining than the lessee
expects. It's in the fine print of the lease contract, so it's
perfectly legal.

Cheers.

Al Hearn
www.LeaseGuide.com


"Matt" <matt@matt.com> wrote in message news:<Pm0sb.122840$9E1.610626@attbi_s52>...
> Actually, the details of buying and selling leases really vary from car to
> car. Everybody here is correct to a certain extent. Sometimes it is in the
> sellers best interest, sometimes the buyer. If the negotiation is
> acceptable to both parties, then it's a win-win.
>
> For sellers, the ability to exit their lease car is a nice benefit. Life
> does throw some curve ***** so perhaps somebody is financially challenged
> and would like to get out from under their expensive car lease (rather than
> default). Other times, the seller is just looking to move to a different
> car (addition to the family or wanting a different type for commute car,
> etc.).
>
> Here's a typical seller example: A lessee has a two seater car and signs a
> 48 month lease. One year into the lease, he finds the love of their life,
> gets married and has kids. Well, the 2 seater just doesn't fit the
> lifestyle anymore so they decide to sell the lease car. With a fair
> residual, an acceptable seller incentive payment, and a car in excellent
> condition, it would be a good deal for a buyer to assume.
>
> For buyers, usually the assumption of the original down payment and often a
> seller incentive payment (cash) make it a very worthwhile transaction. If
> the lease residual is right (either equal to market value or below market
> value), the buyer will come out ahead as there is some built-in equity in
> the vehicle. If the lease residual is higher than the current value, the
> buyer can essentially just use the car and return it to the bank at the end
> without problem.
>
> Here's a typical buyer example: A buyer wants to get into a late model BMW
> M3 and wants to own it but can't quite purchase it outright quite yet. So,
> s/he finds an M3 in good condition with 14 months to go, a residual that is
> showing $1,000 in equity and a small cash incentive payment that covers a
> single lease payment. The incentive payment covers the majority of interest
> on the remaining monthly payments (as lease interest is often front-end
> ammortized) and thus has become an inexpensive 0% financing while paying
> down principle over the next 14 months. Perhaps the seller incentive
> payment gives the deal a negative interest rate (and yes I've seen this).
> At the end of the 14 months, the buyer can afford the low residual and
> decides to buy the car outright.
>
> So for both seller and buyer, their are advantages and disadvantages. Any
> number of factors can make it a win-win. Market conditions are a little
> weird right now but I think the recently adjusted residuals will open up all
> sorts of opportunities for buyers and seller.
>
> Matt
>
> "Scott" <spam784@spam.spam> wrote in message
> news:rla0rvs0cdmt54n97ln1v02abl8dh9pff9@4ax.com...
> > On Mon, 10 Nov 2003 22:17:38 GMT, "DS" <spam_me_not@buzz_off.net>
> > wrote:
> > >I'd certainly never pay a dime to assume a lease, unless I were in the
> >
> > It usually works the other way around. Someone is looking to get out
> > of a lease and is willing to offer a deal to make it happen. I have
> > seen offers of X months pre-paid, $$$ cash up front to assume the
> > lease, any number of other such options.
> > The person assuming the lease gets a nice car for a short lease term
> > with no money down and some free months or some cash at a monthly rate
> > lower or equal to what they would pay if they had to go start a new
> > lease from scratch.
> >
> > Scott
> >

Matt

Al,

Some excellent additional points. Yes, this market is changing quickly and
companies like LeaseTrade.com are beginning to work with the lease companies
to show them the benefits of lease transferability.

Al, you and I should definitely talk.

Matt

"Al Hearn" <ahearn@leaseguide.com> wrote in message
news:e3d31c56.0311111017.26e4cb89@posting.google.c om...
> Matt:
>
> Great response. But I'll add a bit of reality that can often discourge
> or prevent lease transfers...
>
> First, for "sellers" of leases, many lease companies simply don't
> allow transfers. Others restrict the periods during the lease term in
> which transfers can take place. Furthmore, many (most) lease companies
> make the original lessee responsible for maintaining the lease if the
> new lessee defaults -- not a good thing to have hanging over your head
> for a couple of years if you're a "seller."
>
> Second, for "buyers" of leases, even with incentives, the good
> assumption deals are only those in which the orginal lease was a good
> deal (good discount, good money factor, and good residual) -- and the
> original lessee made a hefty down payment and/or made a valuable
> trade-in with no negative equity.
>
> It's a fine point, but I have to disagree with the point about an
> incentive paying for remaining interest on the lease. Technically, the
> way that lease payments are calculated, interest is paid at a flat
> rate across the entire lease term. Each monthly payment is made up of
> "principal" (depreciation), interest (money factor), and sales tax (in
> most states). Each of these components is exactly the same each month
> -- unlike with a car loan. However, if the lease is terminated early,
> the lease company recalculates the amount still owed -- and uses an
> amortized method of allocating interest and principal. The result is
> that there's more of the principal still remaining than the lessee
> expects. It's in the fine print of the lease contract, so it's
> perfectly legal.
>
> Cheers.
>
> Al Hearn
> www.LeaseGuide.com
>
>
> "Matt" <matt@matt.com> wrote in message
news:<Pm0sb.122840$9E1.610626@attbi_s52>...
> > Actually, the details of buying and selling leases really vary from car
to
> > car. Everybody here is correct to a certain extent. Sometimes it is in
the
> > sellers best interest, sometimes the buyer. If the negotiation is
> > acceptable to both parties, then it's a win-win.
> >
> > For sellers, the ability to exit their lease car is a nice benefit.
Life
> > does throw some curve ***** so perhaps somebody is financially
challenged
> > and would like to get out from under their expensive car lease (rather
than
> > default). Other times, the seller is just looking to move to a
different
> > car (addition to the family or wanting a different type for commute car,
> > etc.).
> >
> > Here's a typical seller example: A lessee has a two seater car and
signs a
> > 48 month lease. One year into the lease, he finds the love of their
life,
> > gets married and has kids. Well, the 2 seater just doesn't fit the
> > lifestyle anymore so they decide to sell the lease car. With a fair
> > residual, an acceptable seller incentive payment, and a car in excellent
> > condition, it would be a good deal for a buyer to assume.
> >
> > For buyers, usually the assumption of the original down payment and
often a
> > seller incentive payment (cash) make it a very worthwhile transaction.
If
> > the lease residual is right (either equal to market value or below
market
> > value), the buyer will come out ahead as there is some built-in equity
in
> > the vehicle. If the lease residual is higher than the current value,
the
> > buyer can essentially just use the car and return it to the bank at the
end
> > without problem.
> >
> > Here's a typical buyer example: A buyer wants to get into a late model
BMW
> > M3 and wants to own it but can't quite purchase it outright quite yet.
So,
> > s/he finds an M3 in good condition with 14 months to go, a residual that
is
> > showing $1,000 in equity and a small cash incentive payment that covers
a
> > single lease payment. The incentive payment covers the majority of
interest
> > on the remaining monthly payments (as lease interest is often front-end
> > ammortized) and thus has become an inexpensive 0% financing while paying
> > down principle over the next 14 months. Perhaps the seller incentive
> > payment gives the deal a negative interest rate (and yes I've seen
this).
> > At the end of the 14 months, the buyer can afford the low residual and
> > decides to buy the car outright.
> >
> > So for both seller and buyer, their are advantages and disadvantages.
Any
> > number of factors can make it a win-win. Market conditions are a little
> > weird right now but I think the recently adjusted residuals will open up
all
> > sorts of opportunities for buyers and seller.
> >
> > Matt
> >
> > "Scott" <spam784@spam.spam> wrote in message
> > news:rla0rvs0cdmt54n97ln1v02abl8dh9pff9@4ax.com...
> > > On Mon, 10 Nov 2003 22:17:38 GMT, "DS" <spam_me_not@buzz_off.net>
> > > wrote:
> > > >I'd certainly never pay a dime to assume a lease, unless I were in
the
> > >
> > > It usually works the other way around. Someone is looking to get out
> > > of a lease and is willing to offer a deal to make it happen. I have
> > > seen offers of X months pre-paid, $$$ cash up front to assume the
> > > lease, any number of other such options.
> > > The person assuming the lease gets a nice car for a short lease term
> > > with no money down and some free months or some cash at a monthly rate
> > > lower or equal to what they would pay if they had to go start a new
> > > lease from scratch.
> > >
> > > Scott
> > >

Somebody

"Al Hearn" <ahearn@leaseguide.com> wrote in message
news:e3d31c56.0311111017.26e4cb89@posting.google.c om...
> Matt:
>
> Great response. But I'll add a bit of reality that can often discourge
> or prevent lease transfers...
> > Here's a typical buyer example: A buyer wants to get into a late model
BMW
> > M3 and wants to own it but can't quite purchase it outright quite yet.
So,
> > s/he finds an M3 in good condition with 14 months to go, a residual that
is
> > showing $1,000 in equity and a small cash incentive payment that covers
a
> > single lease payment. The incentive payment covers the majority of
interest
> > on the remaining monthly payments (as lease interest is often front-end
> > ammortized) and thus has become an inexpensive 0% financing while paying
> > down principle over the next 14 months. Perhaps the seller incentive
> > payment gives the deal a negative interest rate (and yes I've seen
this).
> > At the end of the 14 months, the buyer can afford the low residual and
> > decides to buy the car outright.
> >
> > So for both seller and buyer, their are advantages and disadvantages.
Any
> > number of factors can make it a win-win. Market conditions are a little
> > weird right now but I think the recently adjusted residuals will open up
all
> > sorts of opportunities for buyers and seller.


I leased a demo once, list $23k, for $18k with 9600km on it. My residual
after 3 years was to be someting like $8k or so. After 2 years I needed to
get out, I called and the buyout was essentially the residual plus remaining
payments. Easy enough. At the time it was about $12000, if I made another
payment in the meantime it would decrease by about that much. So I
advertised the car, sold it to somebody for $13,500 plus both taxes. The
buyer I had found then bought it from the dealership, the dealership handled
the transaction and paperwork, and cut me a cheque for the difference after
funding a brake job required for certification. I ended up walking away
with a cheque for $1200 and no strings. Smooth and easy transaction.

GMAC was the lesee. (yeah I know, I drive a bimmer now though!)

-Russ.

Al Hearn

Russ:

Good deal. Unfortunately, this situation doesn't happen very often --
that the vehicle's market value is more than the payoff on the lease.
It's usually the other way around, because of making little or no
initial down payment and having low monthly payments.

Lease companies often set residuals high to make their payments more
attractive. But, again, the price of a high residual is a high buyout
cost if you decide to end the lease early.

My point is that anyone who wants out of a lease shouldn't always
count on having the same experience as you. However, they should do
the homework to find out for sure, as you obviously did.

Cheers.

Al

"Somebody" <somebody@nospam.russdoucet.com> wrote in message news:<x1rtb.107222$PD3.5514505@nnrp1.uunet.ca>...

> I leased a demo once, list $23k, for $18k with 9600km on it. My residual
> after 3 years was to be someting like $8k or so. After 2 years I needed to
> get out, I called and the buyout was essentially the residual plus remaining
> payments. Easy enough. At the time it was about $12000, if I made another
> payment in the meantime it would decrease by about that much. So I
> advertised the car, sold it to somebody for $13,500 plus both taxes. The
> buyer I had found then bought it from the dealership, the dealership handled
> the transaction and paperwork, and cut me a cheque for the difference after
> funding a brake job required for certification. I ended up walking away
> with a cheque for $1200 and no strings. Smooth and easy transaction.
>
> GMAC was the lesee. (yeah I know, I drive a bimmer now though!)
>
> -Russ.