As my mind has been on getting another vehicle lately, I’ve been on the prowl for deals in the compact SUV market. One resource that I didn’t know about until a reader mentioned it, was leasebusters.com. I’m not affiliated with them, but I think it’s a great service for car shoppers.
Basically what they do is list leased vehicles that leasees want to get out of. If you don’t know how car leases work, let me tell you that they are very expensive to get out of should that situation arise. So lease busters provides a means for leased vehicles to be listed, some even with cash incentives to have the lease payments taken over.
As a frugalist who likes to pay cash for everything to avoid paying interest, leasing a vehicle didn’t cross my mind as an option. But after seeing all the motivated lease holders offering cash incentives to get out of their lease, I had to take a closer look.
If I were to assume a car lease, I would buy out the car at the end of the term as I like to drive my cars for as long as possible. In addition, the car would have to be late model, low kilometers, and the seller would have to take care of the lease transfer fees. After working out the numbers on a few listings, typically the ones with cash incentives/down payments unsurprisingly work out to be the best deals.
If you’re the type to drive a car for the long term, then buying out the car at the end of the term may make sense. To figure out the total cost of the vehicle:
(After tax lease payment x number of months remaining) + (After tax purchase option price) – (Cash incentive)
Just recently, I found a 2007 CRV (latest generation) in Ontario with 45,000 kms. There are 21 months remaining on a $408 payment (taxes in) with an end purchase price of $16,100 (taxes in). The seller will pay the lease transfer fees.
Even though there’s no cash incentive for this listing, the seller had a down payment on the vehicle. Doing the math, it works out to be a total cost of: $24668 (taxes in). If I were to buy a 2009 CRV new, it would cost about $35,000 on the road.
The question remains, is the $10k (or 28%) in savings worth it for a 2 year old vehicle with low kilometers? It would depend on the condition of the vehicle, but to me, it’s at a pretty tempting price.
Note though that most of the listings don’t work out as nicely as my example above. Some even work out to cost more than the same vehicle brand new, so make sure to run the numbers carefully.
Pros of Taking Over a Lease
- If you look hard enough, you can find some really good deals.
- Leased vehicles are generally well maintained and have low mileage because of restricted km’s.
- Great for those who like to lease vehicles as they can be paid cash upfront for doing so and simply give the car back to the dealership at the end of the term.
Cons of Taking Over a Lease
- Buyer is now responsible for the remainder of the lease.
- Careful calculations need to be made as some of the listings are just plain expensive.
My car shopping adventures are taking me to all types of car purchasing options and never before would I have considered a lease. However, if you can find the right deal with a motivated seller, it can work out quite nicely providing due diligence is completed.
Have you ever taken over a lease?If you would like to read more articles like this, you can sign up for my free weekly money tips newsletter below (we will never spam you).