Informed Buyers Always Get The Best Deal.
Getting out of a lease or finance contract early is an issue that comes up frequently and one that buyers should be well-informed about before making a decision.
There are a lot of misconceptions out there about getting out of a lease early. Years ago some leased vehicles could be terminated early as they had equity, meaning that the vehicle was worth more than what the current end value was. With very few exceptions those days are over. Unless the original lease manufacture has an incentive to drop off your lease early, the cost is being transferred to the new vehicle which is a bad idea. The only time I recall an early termination incentive was Chrysler about 6 years ago and they did it for about 2 months. There are dealer ads that say “We will get you out of your lease early”. Nonsense! They are simply adding the cost to the new vehicle and even with 0% financing, when you add a shortfall from a previous vehicle to the next vehicle right at the start you add 13% tax to that shortfall unnecessarily.
Update on this article: There are now quite a few models that potentially have equity due to market conditions and weather related events that have destroyed large quantities of vehicles. Call me for details 1-877-61X-PLAN
If the reason you want out of your lease is because you are over the allowed kms or you anticipate you will be, you need to calculate the amount of kms you drive per month and how many you will be over by your lease end and compare the total penalty including tax to the cost of paying the remaining payments. If the cost of the over kms penalty exceeds the remaining payments then, for those who can do so, just writing a cheque to the manufacture for the payments is the way to go. Alternatively, you can order a vehicle and in doing so use up approximately two months of the old lease and then payout the km charge and the payments when the vehicle arrives.
If you are using cash backs or dealer credits to get out of your lease early, you are negating the benefit of those incentives and will hence have a higher monthly payment then you would if you came in without a lease.
The same applies to the shortfall on a finance but you won’t have the km charges. When looking for a new vehicle you need to see your XPlan price and the payments without any extra money added on. Seeing the XPlan price and the cost of getting out of your lease or finance early gives you a clear indication of what the true cost will be.
Sometimes when you look at the costs involved in getting out early you may realize that this is not the right time for you to be buying a new vehicle.
So the next time you hear an ad or someone says “we’ll get you out of your lease or finance”, be careful.
If you live in Toronto or the York Region area. Call me to arrange the purchase of a vehicle
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