What to do with leased car situation

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716God
Posts: 27
Joined: Wed Nov 02, 2016 2:48 pm

What to do with leased car situation

Post by 716God » Fri Jun 29, 2018 10:38 am

Long story short, I leased a brand new Hyundai Elantra in March 2016 with 0 miles on it, fresh off the lot. At the time I had very little money, and I had got into a fender bender with my old car (that I owned), but Progressive wouldn't cover a dime of the $3.5k in estimated repairs because I was deemed at fault. Rather than sink $3.5k into a 7 year old car that had ~100k miles on it, I went with a lease since I didn't have to put any money down.

Fast forward a few months, and I started a new career in medical device sales. My first job didn't offer a company car, so I ended up putting a ton of miles on the vehicle in a short period of time. My lease ends in March '19 and the residual value of the car is ~$14k. I paid forward the lease payments last summer to free up cash flow. I had a 12k mile/year limit totaling 32k miles at the end of the lease term. I'm currently at 40k miles and growing. They charge 0.25 cents/mile over the allotted amount. At this point around $2k plus whatever wear & tear is on the vehicle.

I'm going to be starting with a new company in August that offers a company car. This is exciting to me because I can park my personal vehicle and save a ton of gas, maintenance, etc. I'm very debt-averse so I've been thinking about my options with my car daily. As I see it, I can do one of three things:
1) Park the car until the lease term ends, and pay whatever fees to Hyundai to cover overage, wear and tear, etc.
2) Purchase the car and have it available in case I lose my job, need it for personal use, etc. - drive it into the ground essentially
3) Purchase the car and immediately try to flip it. The Kelly Blue Book value is under $11k so I'd be taking a loss, however I'd recoup most of the money that would be sunk into purchasing it outright.
I should mention that I live in the D.C. Metro area (Tysons Corner) so public transportation options are plentiful. This car is the only thing standing in my way of being completely debt-free. Any advice you can give me would be greatly appreciated. Thanks in advance!

02nz
Posts: 533
Joined: Wed Feb 21, 2018 3:17 pm

Re: What to do with leased car situation

Post by 02nz » Fri Jun 29, 2018 10:48 am

You have some time left in the lease, which will get you some certainty in the new job. So if things haven't changed by March next year, I'd get rid of the car. Agree that public transportation options are good where you are, so take advantage of them. There are so many options when you need a car - Uber/Lyft, Zipcar, or just a traditional car rental - that it really doesn't make sense to keep a car "just in case." It seems like options 1 and 3 would work out roughly the same financially, so go with 1 if it's easier.

Also, did you claim the mileage on your taxes? You can't claim mileage for getting from home to work and vice versa, but if for the last job you drove the Hyundai to get from the company to clients, for example, that can be claimed on your taxes if you weren't reimbursed by the company.

bloom2708
Posts: 4910
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Location: Fargo, ND

Re: What to do with leased car situation

Post by bloom2708 » Fri Jun 29, 2018 11:21 am

Do you have spots to park 2 cars? How much will that cost vs just selling the car and paying the difference?

Can you use the work car for non-work driving?

You will have to compare the Private Party Retail (what you could sell on your own for) to the value owed at the end + additional charges for all the overage miles. You wouldn't have to pay that if you just buy the lease out.

None of the options might jump out as "great". Having one car would sure make things easier.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

delamer
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Joined: Tue Feb 08, 2011 6:13 pm

Re: What to do with leased car situation

Post by delamer » Fri Jun 29, 2018 2:46 pm

You can take the car to CarMax, and they will give you an offer to purchase it that is good for 7 days.

This will give you a base amount for flipping it. You’ll know that you will get at least that much by selling.

You could get the CarMax offer now, because it probably won’t change much in a month or so. Or you can wait until you’re within the 7 day window for getting your new company car.

deikel
Posts: 576
Joined: Sat Jan 25, 2014 7:13 pm

Re: What to do with leased car situation

Post by deikel » Fri Jun 29, 2018 3:04 pm

you might also ask the leasing company what it would cost to extend the lease another year or another 6 months (in order to get back into the normal mileage range) - depending on what they charge you extra (or maybe just continue the monthly payments) your current overmilage of 2k dollar worth might loan you the car for a while for free (you don't say what your monthly payment is) - this might extend your decision time for no extra cost.

On the other hand you can also ask what it would cost extra to break the lease early by 9 months and drop the car the moment you get the company car and see how that works out - usually to your disadvantage, but you never know until you ask; keep in mind you will save the car insurance, which may be significant in your metro area.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.

716God
Posts: 27
Joined: Wed Nov 02, 2016 2:48 pm

Re: What to do with leased car situation

Post by 716God » Sat Jun 30, 2018 4:06 pm

deikel wrote:
Fri Jun 29, 2018 3:04 pm
you might also ask the leasing company what it would cost to extend the lease another year or another 6 months (in order to get back into the normal mileage range) - depending on what they charge you extra (or maybe just continue the monthly payments) your current overmilage of 2k dollar worth might loan you the car for a while for free (you don't say what your monthly payment is) - this might extend your decision time for no extra cost.

On the other hand you can also ask what it would cost extra to break the lease early by 9 months and drop the car the moment you get the company car and see how that works out - usually to your disadvantage, but you never know until you ask; keep in mind you will save the car insurance, which may be significant in your metro area.
At this point I just want to wash my hands of it as soon as possible. It's been hanging over for me for the past year and a half since I got into sales and started destroying the value of the car each work day. I can stomach losing ~$3-4k on the car if it means I no longer have to deal with it anymore. Moving forward, I will only be purchasing used cars with cash.

inbox788
Posts: 5669
Joined: Thu Mar 15, 2012 5:24 pm

Re: What to do with leased car situation

Post by inbox788 » Mon Jul 02, 2018 7:57 pm

You will probably get the most value (and minimize your costs) by selling it as soon as possible. You might get more in a private sale, but you may have to pay sales tax in some states. You might avoid that if you sell it to a car dealer like Carmax, so it might be a wash between sales tax vs. lower sales price.
What do you mean by "I paid forward the lease payments last summer to free up cash flow."? What do you owe each month between now and March? And besides 14k residual, what other costs are there for you to attain title? You're saying it's only worth 11k blue book today? It's most likely going down more in 8 months. Market price is likely higher than the numbers you're looking at.

Parking the car, turning it in in March and paying the 2k in extra mileage and walking away from the lease seems like the easiest thing to do if the numbers are anywhere near correct. If you could get 12-14k in a private sale, that might change the calculus.

https://www.kbb.com/hyundai/elantra/201 ... ype=retail
$12,226
Private Party Value
$11,415 - $13,036
Private Party Range

$9,500
Trade-in Value
$8,865 - $10,134
Trade-in Range

716God
Posts: 27
Joined: Wed Nov 02, 2016 2:48 pm

Re: What to do with leased car situation

Post by 716God » Tue Jul 10, 2018 5:32 pm

inbox788 wrote:
Mon Jul 02, 2018 7:57 pm
You will probably get the most value (and minimize your costs) by selling it as soon as possible. You might get more in a private sale, but you may have to pay sales tax in some states. You might avoid that if you sell it to a car dealer like Carmax, so it might be a wash between sales tax vs. lower sales price.
What do you mean by "I paid forward the lease payments last summer to free up cash flow."? What do you owe each month between now and March? And besides 14k residual, what other costs are there for you to attain title? You're saying it's only worth 11k blue book today? It's most likely going down more in 8 months. Market price is likely higher than the numbers you're looking at.

Parking the car, turning it in in March and paying the 2k in extra mileage and walking away from the lease seems like the easiest thing to do if the numbers are anywhere near correct. If you could get 12-14k in a private sale, that might change the calculus.

https://www.kbb.com/hyundai/elantra/201 ... ype=retail
$12,226
Private Party Value
$11,415 - $13,036
Private Party Range

$9,500
Trade-in Value
$8,865 - $10,134
Trade-in Range
I paid the lease amount in full last summer, meaning I paid off what I would've owed monthly for the entirety of the lease (which at the time was around $6k). So I haven't had a lease payment in a year. But I'm still on the hook for the residual value plus any random wear n tear they ding me with.

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Voltron
Posts: 90
Joined: Wed Apr 26, 2017 10:00 pm
Location: California

Re: What to do with leased car situation

Post by Voltron » Wed Jul 11, 2018 1:31 am

I am in a similar situation.

Flip the situation around. Sublease your car on a car sharing site. At least this will mitigate your losses.

https://turo.com/rentals

I do not like debt but my lease I couldn’t bear paying it in full even though I can. It is just a few dollars in. Bank interest by keeping the amount in high yield savings account but it’s the principle.

I will be looking at leasing my car out.

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