Auto balloon loan vs lease

[295566]

Do you mean it's a bad idea to purchase a lease return? Why? I'm curious because that's something we were thinking of doing in the future: buy a 2 or 3 year old lease return vs. buy a new vehicle. We figured that a lease return would be low miles, with a decent maintenance history...is that an incorrect supposition?

It's like rental cars, some people don't take care of them cause they know in a few years they won't have to deal with them anymore.

 

[Abacinator]

Warranty shmarranty. Cars are so damn reliable these days and you can pay for a heck of lot of repairs and still not touch the extra you pay with a lease. You can own a 6 year old car and pretty much know all you have to do is pay for maintenance and tires. 6 year old cars also have good resale value. You have to look at the long game, not the shiny chrome.

You know how I know you've never owned a German car?

 

[asdfghwy]

Do you mean it's a bad idea to purchase a lease return? Why? I'm curious because that's something we were thinking of doing in the future: buy a 2 or 3 year old lease return vs. buy a new vehicle. We figured that a lease return would be low miles, with a decent maintenance history...is that an incorrect supposition?

I think he means doing the buy-out at the end of the lease term. If that's your original intention you will more than likely get a better rate at financing as a purchase

 

[madsen203]

lease interest rates are usually 5-6% whereas private loans range from 1-4%

 

[TheRobSJ]

Do you mean it's a bad idea to purchase a lease return? Why? I'm curious because that's something we were thinking of doing in the future: buy a 2 or 3 year old lease return vs. buy a new vehicle. We figured that a lease return would be low miles, with a decent maintenance history...is that an incorrect supposition?

It's like rental cars, some people don't take care of them cause they know in a few years they won't have to deal with them anymore.

Most CPOs are lease returns. They’re the right age, mileage, and condition to qualify as a CPO.

I have a lease. Am I putting Mobil 1 synthetic oil in before every change is actually due? No. There is a bit of ain’t my car mentality. But I’m not bombing it over speed bumps or eating big greasy meals inside the car either.

Just like with a rental car, if you damage, neglect, or excessively funk up a lease vehicle, they’ll just send you a bill for anything beyond what the security deposit (if one was even paid up front) doesn’t cover.

 

[madsen203]

Most CPOs are lease returns. They’re the right age, mileage, and condition to qualify as a CPO.

I have a lease. Am I putting Mobil 1 synthetic oil in before every change is actually due? No. There is a bit of ain’t my car mentality. But I’m not bombing it over speed bumps or eating big greasy meals inside the car either.

Just like with a rental car, if you damage, neglect, or excessively funk up a lease vehicle, they’ll just send you a bill for anything beyond what the security deposit (if one was even paid up front) doesn’t cover.

That's why you buy a CPO of a car some cheap ass wouldn't afford and find one with dealer service records. Lexus is a good example of that.

 

[fast4d]

yes. don't BUY the car you were leasing for the last 3 years....

CPO is good but watch out BMW just reduced the warranty for CPO.

previous it was 2 extra years up to 100k miles beyond original 4 yrs/50k

german car makers are not doing well profit wise the last couple years. dieselgate?

so many fucking models it makes your head spin.

 

[madsen203]

Lexus CPO is an additional 2 years on top of existing warranty with unlimited miles bumper to bumper. I had them adjust the parking brake and replace a CV boot well beyond the normal warranty time. Good on them for standing behind their products!

If I bought another car--I would seriously consider another CPO Lexus.

 

[TheRobSJ]

That's why you buy a CPO of a car some cheap ass wouldn't afford and find one with dealer service records. Lexus is a good example of that.

All of my turned in leases show no actual dealer service records, because of course I do the work myself off the books. Just warranty claims for software updates and so on is all you’ll see. Based on the records one could see, you’d think any of my former cars are basket cases that never had their oil or filters changed.

 

[madsen203]

All of my turned in leases show no actual dealer service records, because of course I do the work myself off the books. Just warranty claims for software updates and so on is all you’ll see. Based on the records one could see, you’d think any of my former cars are basket cases that never had their oil or filters changed.

Of course, as most people on this forum are handy and won't fall into the majority who get serviced at the dealer. Most dealers offer free oil changes for new cars (at least one or two) which should get you close to the end of your lease. I'm sure that dealers are incentivized to offer full maintenance package for their lease vehicles as it'll increase their ability to sell them after they are turned in at end of term. Being able to state "dealer serviced" is lucrative and confidence inspiring--even if it's sort of an empty statement.

 

[bojangle]

Just the name, balloon loan, sounds like something to avoid.

 

[Kornholio]

BMW's 3ASY plan is a balloon payment lease...for motorcycles. I've used it twice and am quite happy to do it again.

 

[TheRobSJ]

Wow BMW does leases on motos? Don’t think I’ve ever heard of leases on bikes.

 

[Kornholio]

Wow BMW does leases on motos? Don’t think I’ve ever heard of leases on bikes.

They don't call it that, but on paper, that's basically exactly what it is. It's an open-ended lease.

 

[TheRobSJ]

They don't call it that, but on paper, that's basically exactly what it is. It's an open-ended lease.

GM has a thing like that a while back when they had GMAC as their finance division. Smart Buy is was called. Lower than typical finance deal monthly payment, then the final payment was a balloon payment. Sounds like a lease. But you had the option to just sell the car to pay off the balance at any time and keep whatever equity you had. And that final balloon payment was not as high as residual would have been if the car had been leased. Actually not a bad deal...but it was usually done on stuff like Cavaliers and S-10s to younger buyers who didn’t get a great APR.

 

[B-mtrd]

GM has a thing like that a while back when they had GMAC as their finance division. Smart Buy is was called. Lower than typical finance deal monthly payment, then the final payment was a balloon payment. Sounds like a lease. But you had the option to just sell the car to pay off the balance at any time and keep whatever equity you had. And that final balloon payment was not as high as residual would have been if the car had been leased. Actually not a bad deal...but it was usually done on stuff like Cavaliers and S-10s to younger buyers who didn’t get a great APR.

That's very similar to what Credit Unions are offering now. The payment is lower than a conventional loan but a tad higher than a lease, but car is on your name and at the end of the term you can refinance the remaining amount.
I'm still not sure if that is a good idea or just go with a lease.

 

[Kornholio]

I’ve sold every leased vehicle I’ve had. In fact, I don’t know why anyone would returned a lease vehicle. There’s no reason to. You’re not punished for selling it and furthermore, you can trade it in just like any other vehicle at any time during the lease.

 

[TheRobSJ]

I don’t know why anyone would returned a lease vehicle. There’s no reason to.

If the residual is higher than actual value at the time, then that’s a good reason to walk away.

For awhile, residual was much lower than market value on our SUVs. People would turn them in, and we’d gladly take them. They could’ve bought the residual, and immediately flipped it to pocket $5k.

Our sedans have been getting high residuals to get lease payments more attractive. But that winds up putting the car way upside down at lease end. I expect my 2018 TLX to be worth about $4k less than the residual. And I’ll just walk right the hell away from that and let AHFC eat that loss.

 

[clutchslip]

.......... It's the most expensive option but you will always have a "reliable" car in new condition. If you can afford it, it's ideal. Leases usually come with gap insurance which you may have to pay extra for with a balloon loan.

The financially smart decision is to get a very low APR loan and finance whole thing. Even paying cash isn't wise as you can get more in the market returns than you will spend on interest. That's if you need a new car. The ultimate would be to buy used, private party.

Ideal may be a demo/manager car that is a year old. Or a one-two year old lease return with a 12-15k mile limit. We can run spread sheets all day long and you will do best taking out a low interest loan (usually factory financed), and keep the car for years and years. Most cars are so good now, that even if you have a problem out of warranty, the amortized cost makes the car inexpensive. The same applies for more expensive motorcycles, too. I know there are a couple of long term car owners on barf. They can verify all this stuff. Hell, I think this may work for phones.

 

[Kornholio]

If the residual is higher than actual value at the time, then that’s a good reason to walk away.

I should clarify...my reasoning was that dealerships ALWAYS ding you for shit. That's why I always just traded mine in preemptively or sold them outright.