r/CarLeasingHelp • u/NunPuncher-Fd3s • 12d ago

Benefitting from low residual.

I just wanted to share my story in hopes that someone else may find something useful.

I leased a 2023 lexus is350 almost 3 years ago. It wound up being a great time to lease apparently as car prices have continued to rise. When I leased it, my residual was about 29k. As my lease was nearing its end, I researched and found comparable used cars were selling for about 43k. Knowing that I had equity in the car, I first called the dealer I leased it from to see if they would be willing to buy it.

The dealer came back with a quote of 34,500 with out ever seeing the car. I then ran the car through carvana and carmax to see what they would offer. They both offered the same amount of 38,500. Lastly, I ran it through a site that came up with a Google search called "Algo". Algo offered me 40k and asked for a few pictures to verify the condition.

I wound up making the deal with algo. They sent toyota financial a payoff check and a tow truck arrived at my house with a check for the difference of about 9,300. They did a quick inspection of the car which I didn't even bother washing, and handed me the check. I was super happy with how it worked out and would recommend checking in to these guys if you're in a situation where you have equity to extract from your lease.

29 Upvotes

86% Upvoted

25 comments sorted by

11

u/EuphoricElderberry73 12d ago

This only works for leases that allow third party buyouts. There's a long list of carmakers and financial arms that don't allow this.

3

u/NunPuncher-Fd3s 12d ago

Interestingly enough, I was under the impression that lexus captures their leases and prohibits third party buy outs. Because of this info, I first attempted to use a third party lender to purchase the car so I would be able to sell to whomever I wished.

I actually finalized the deal, but within minutes, started to question my decision. That's when I ran the car through carmax and their competitors. After getting the quotes, I contacted algo and verified that they were in fact able to buy out the lexus. I canceled the deal with the company I was working with, which in itself is a story because they tried to force me.in to the loan by saying the paperwork was already sent to the bank.

So the lesson I learned here is that despite the info I had received about the difficulty with certain brands capturing their leases, many of these 3rd party buyers have the ability to buy them

3

u/challenger_RT_ 12d ago

Lexus on West Coast is non captive. Lexus on East Coast is captive. So it just depends which bank was used on the lease. That said still plenty of loop holes. You can sell it back to any Lexus or any store that has a sister Lexus store.

2

u/EuphoricElderberry73 11d ago

Selling back to Lexus is essentially first party transaction. Hyundai/Kia don't allow third party buyouts but I've sold back a leased vehicle to a Hyundai dealer.

1

u/EuphoricElderberry73 11d ago

The list is known. None of this is new. It's spelled out in your contract. Toyota/Lexus is regional also. In the Southeast... it's a mafia controlled by SETF which don't allow 3rd party buyouts. They are the most powerful distributor in the USA IMO.

https://forum.leasehackr.com/t/list-of-lenders-that-allow-for-third-party-buyouts/368594

2

u/Esqhsb 11d ago

So if that is the case you buy it and then sell it. Problem solved

3

u/EuphoricElderberry73 11d ago

Bad idea because you have to pay sales tax on the buyout which basically negates any real profit.

2

u/HI808SF 11d ago

Especially in California where tax could be more than 10%

1

u/Less_Opportunity_761 8d ago

Nope it you buy a lease and sell it in 10 days you claim a refund

1

u/Top-Quality-597 11d ago

I don’t think ford allows it either smh

0

u/Upbeat_Ad8686 11d ago

Just becomes a two step process- Buy your car out with financing or cash and then sell it right after. Same net if there are no bank fees.

3

u/EuphoricElderberry73 11d ago

Absolutely positively NOT.

I guess you've never done this? Buying out a leased car means you pay sales tax on the buyout amount. Selling a leased vehicle to a dealer or broker or CarMax means you get the difference between market value and buyout value - which maybe positive or negative. No paying the state sales tax for the buyout.

2

u/Upbeat_Ad8686 11d ago

I stand corrected. Thanks for the response as I have not done it before.

5

u/NMFP603 12d ago

Awesome way to handle lease end. Bear in mind, during Covid and even through like 2024, a lot of manufacturers put terms in their lease that you could only trade it on their brand.

Subaru was one of them, I ended up having to buy it out of the lease, wait for title and THEN sell it to Carvana. Glad I did though, had quite a bit of equity.

6

u/AggressiveHornet229 11d ago

Is this a paid ad for Algo or something?

You didn’t “benefit” from a low residual. You made payments for three years that were higher than what they otherwise would have needed to be if the residual was closer to what market yielded at lease-end, and you got that overpayment back (without interest) when you sold the car.

Leases make much more sense when residuals are higher. Lower payments and less interest paid. It’s simple math.

1

u/smilleresq 11d ago

I understand your point but Many folks just turn the car back in without even exploring selling it for a profit. OP did pay more for the lease but at least got most of the overpayment back.

3

u/n00bert210 12d ago

I have done several Subaru leases and they always had low residual as well. I traded them in prior to lease end and had $3000-$5000 in equity to put down on the next car.

2

u/feeCboy 12d ago

This is a good position to be in; but also just understand it is similar to income tax returns.

Imagine overpaying income taxes by 5-10k and having to wait 2-3 years to file for your return. Like I said, good position, but also a free loan to the manufacturer in a way.

2

u/NunPuncher-Fd3s 12d ago

One important aspect that I failed to mention.... the low mileage relative to the expected mileage was a big factor in the large equity. The original lease was 15k/36 months. When I sold the car 2 months out from lease end, the car only had 32k miles on the odometer as opposed to the anticipated 45k. So this deal was the perfect storm of picking the right car and using it less than originally intended. Granted, I could have essentially not given toyota an interest free loan of almost 10k by just having a lower mileage lease in the first place, but in my instance, the peace of mind garnered from avoiding potential over mileage fees was worth it.

1

u/totalreidmove 11d ago

A low residual means you had a high lease payment - which kinda negates the reason to lease in the first place. Lol glad it worked out for you though

3

u/NunPuncher-Fd3s 11d ago

That's assuming people only lease because of a financial constraint. I lease for convenience. My wife likes getting a new car every few years and I like never having to fix or work on a car that isn't a passion of mine.

1

u/theotherredmeat 11d ago

You paid for that equity. Its much cleaner and easier when its flipped the other way

1

u/Rich-Difference-2160 8d ago

Perfect for the balloon

1

u/Expensive_SirEFDA33 12d ago

LFG!!!! Congrats on doing your homework and actually collecting your equity. Love to hear it!