Selling a leased car

[Neilk]

Hi,

My girfriend's lease on her Honda Pilot is expiring at the end of June and we are looking for a new car. I saw that her buy out price is $3-4K under Edmunds' retail used pricing guide. I was thinking we could buy the car and try to sell it ourselves and make some money.

Any advice? Any gotchas so we don't screw ourselves? I am not sure if we have to pay sales tax on the buy out. Was that already paid when she leased the car? I wasn't with her at that point.

THANKS!

[MattKellett]

Neil

I would check the private value or trade in value before making this decision. Unless the car is a sought after model you will have a hard time getting anywhere near the retail value. Also check ebay to see what that model is going for, although ebay is normally the lowest value you would get.

Now here's the other thing, go to the dealer and decline the buy back at their price, then offer way lower and see what happens. My friends mother just bought her Ford Focus lease for $1500 when the buy back originally was $5600. They said make an offer and actually accepted her offer which she said more as a joke!!

Matt

[wcc]

I'm not surprised they took her offer, it's a Ford. American car dealerships I can see not wanting the car back if possible. But he's talking about a Honda. I would be surprised if they accepted a ridiculous offer like that, but all you can do is ask. They can always so no and you can always go up.

[Steve Carlton]

You should be able to line up a buyer before the lease expires and allow them to buy the Pilot for the available purchase option. If the wholesale value is actually lower than the purchase option price, some lenders will negotiate a lower one (some won't). The best estimate I've seen of a wholesale value can be gotten at www.kbb.com and find out what the "trade-in" value is in "good" condition.

You'll need to check with the lender on the lease if this is okay, and I'd recommend doing the same with the DMV to confirm you'll not have to pay the taxes. In CA this is doable.

There's likely around a $2,000 difference between the Pilot's wholesale value and what it would sell for privately.

[911boost]

You will need to pay the tax when you buy it, so take that into account. When you lease a car, you only pay the tax on the value of the car you are leasing.

Meaning, if you lease a $40K car for 3 years, and the decide the buy out is $20K at the end of the lease, you only pay the taxes on the $20K that you are "using".

I don't think it varies by state, but I may be wrong. I know in Colorado that is the way it works.

Bill

[RoninLB]

My bride is on her 5th rental. I offer it to friends as the lease is expiring because they only have about 15k mi after 3 yrs, garaged, and no accidents.. The buy out price was always the high blue book price. The wholesale price is a few thou lower. My bride gets on the phone with the buy back people and tells them she has a buyer that will pay mid way between the two, retail & wholesale, prices.

Works every time after some bs between them.

[Steve Carlton]

Originally posted by BSiple
You will need to pay the tax when you buy it, so take that into account. When you lease a car, you only pay the tax on the value of the car you are leasing.

Meaning, if you lease a $40K car for 3 years, and the decide the buy out is $20K at the end of the lease, you only pay the taxes on the $20K that you are "using".

I don't think it varies by state, but I may be wrong. I know in Colorado that is the way it works.

Bill

Not necessarily true at all. Could vary from state to state, or possibly from lender to lender as to their policy. Definately true if you buy the car at the end to keep, but not necessarily if you sell it to a third party.

When you lease a car, you pay tax on the payment, which includes principal and the lease fee (interest equivalent). Also on the cap reduction at inception (principal down payment), if any.

[1973911s]

Take it to Carmax, and see what they will give you, figure what tax you will owe, and see if you will be ahead.

Michael