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Ask Dave

Plan To Lose The Lease

Lisa has a car lease that she wants to get rid of, and asks Dave's thoughts on a lease trade program.

QUESTION: Lisa and her husband had a car lease, and traded it in. Her husband was misinformed, and the auto lease is for longer than they anticipated; it’s another 6 months at $399 a month. What are Dave’s thoughts on lease trading programs?

ANSWER: They are bad deals. They either leave you liable on the note, which is really scary, or they take huge potential losses into consideration. We’ve basically got another $2,400 that you are going to pay out to rent this car.

My guess is that, given the car market, you probably won’t get enough out of the car to where you would lose more than $2,400 were you to try and get out now. Anyone who tells you different is probably trying to get you. The way you can tell that is you can call for an early buyout on the lease, where you ask what you’d have to pay if we gave the car back today, and that equals the closed-end value at the end of the lease, or the residual value.

Let’s use $17,000 as the base figure here. If we have $2,400 in payments left, then $19,400 is your total exposure. If that car will only sell for $16,000, then you’d lose $3,400 by getting rid of it now. Call them and ask them for the early lease termination, and compare that number to what you could sell the car for on a private sale. Then ask if you would lose more than $2,400 there.