Trade in paid off vehicle for lease w/ $0 monthly payment for 4 years: what’s wrong with my plan?

[zindebaad]

Looking for some feedback on doing as per title:
- currently own paid off 2015 suv
- want to sell privately/trade in for a new suv on 4yr lease (that’s how long the manufacturer warranty is)
- prepay entire lease with proceeds of sale/trade of current suv.

The current vehicle is starting to show signs of upcoming maintenance/wear & tear expenses, as it is 7yrs old and literally has not needed anything apart from oil changes and the odd recall in the sub 90k km that we have put on it. Aaaand in another 4yrs it will be 11yrs old, worth next to nothing, and probably pretty expensive to maintain.

So if I can get enough for it to prepay the entire 4yr lease, what am I losing out on apart from future sale of the current vehicle (maybe $5000, maybe $0 if shit starts breaking down)?

I know the insurance would likely go up a little, but it does that anyway…

What else am I not considering?

 

[nina1987]

@zindebaad You say that you haven’t had to spend money on literally anything other than oil changes in the last 7 years and are taking that as a sign that you should change vehicles.
I apologize, but you do realize there are other aspects to maintaining a vehicle besides oil changes and that paying for other maintenance/ parts is a part of owning a vehicle?

You have 90,000km on it.

I’m sorry if this comes off as rude, but this is a situation where you want a new car, you have no need for one. I have owned multiple cars with 250,000+ kms on them with very little issues.

If you want to get a new vehicle that’s fine, but there’s very little chance you can objectively say it’s a good financial decision.

 

[knothat]

@nina1987 A 90,000km car on which nothing was done? No brakes, no alignement, no coolant or brake fluid top up?

OP’s a pretty bad car owner.

 

[nina1987]

@knothat Agreed. It just reinforces the fact that OP is not really aware that a vehicle that’s taken care of lasts much longer than 90k. I’ve had Hondas, acuras, and Toyotas over 250k. My parents had an Acura with 400k that had the original clutch.
A car that’s less than 10 years old shouldn’t be viewed as a “potential problem”

 

[resjudicata]

@nina1987 You say that, and many people will agree with you. Many will also not. You get what you pay for. I used to buy several year old cars with around 100k on them, out of 7 or so, the last 3 ended up costing me more than their payments would have been in the first year in maintenance. All 3 were newer, clean histories, all dealer receipts from every maintenance possible, and still, shit quits. A warranty does hold value for someone who needs reliability.

Now? Anything remotely funky happens, any weird noise, whatever, straight to the dealer, get a free ride wherever I'm going, and if the repair will take more than 4 hours, I get a loaner.

You either pay the bank or pay the mechanic, unless you can afford to pay for a new car outright.

In some situations, you'll drive a car for 200k without touching anything other than tires oil and brakes. In some situations, you'll buy a new car, do nothing for 100k, and trade it in for huge money and walk away smiling hoping to do it again. You most likely wont.

 

[nina1987]

@resjudicata So 70% of the time the older car worked out to be financially advantageous for you. If we were talking gambling it’s a no brainer.

 

[resjudicata]

@nina1987 Not factoring in having to find alternate transportation when they did break down, pay hours lost etc...

 

[joseywales1978]

@zindebaad Even if you do lease a car, never prepay for it all up front. If you crash it and write it off, you'll be out all that money. Keep the money in a HISA, put $0 down, and only make the monthly payments.

 

[drfeline]

@joseywales1978 Is this leasing or financing?

 

[wvd1]

@joseywales1978 Not necessarily all that money, but definitely a lot of it.

A while back I leased a new car and put $ down. I can't remember exactly how much but maybe about 10-12k. 7 days after taking delivery of it I was in an accident where I was not at fault (t-boned a van that ran a red light). Insurance paid for 100% of it but only up to the purchase price and I had coverage against depreciation. That insurance payout went to the leasing company who then sent the difference back to me.

Except it was all based around the purchase price. I did not get back any HST paid on the down payment, freight, PDI, other dealer fees and things that got wrapped into the deal. So I was still out a couple grand even though I was not at fault.

And in Ontario you cannot sue the other party to recover those losses. You can for medical costs but not for other losses and fortunately I was not injured.

The other benefit of a lease payment is it is easy to write-off if you are eligible for those type of deductions (T2200, comission based worker who travels, business vehicle etc...) Less down and a bigger monthly payment can sometimes work out to you advantage.

So, if you lease I suggest putting as little down as possible.

 

[rosenbloom]

@joseywales1978 I'm on my 2nd lease and both times I put 50% of the leased amount (about 25% of MSRP) as a downpayment. Couple of points here:
1) lower interest cost over the leased period
2) inability to adjust lease payment in the future - higher payment might limit your ability for future borrowing (affect TDS ratio and etc) - that's a big point in my opinion
3) my insurance company has an option where they will cover 100% MSRP in the first 2 years if car is written off.
4) I was able to put 3K of the downpayment on a credit card = points!

Overall I'm paying $173 semi-monthly for a 2022 fully loaded model.

 

[wvd1]

@rosenbloom They will likely cover 100% of the MSRP or your purchase price (whichever is lower). They will likely not cover the tax paid or any other fees that your down payement/due on delivery amount covered.

 

[reinar]

@zindebaad The main issue is after 4 years you don't own anything. Vehicles last much longer than that and you won't have anything to trade in

If it was me I'd personally put the trade in money towards owning a crossover with decent resale or reliability: CRV, Rav4, CX5, Forester for example

 

[fruitb]

@reinar

The main issue is after 4 years you don't own anything

This is incorrect. A lease is no different than a car loan. You sill have paid off a portion of the vehicle and often your lease buyout is less than what the vehicle is worth.

So many people don't understand this.

 

[jane123]

@fruitb correct, the buyout price is pretty favorable. Especially in the type of high inflation environment we're in now. But you have to buy it out, otherwise it is money thrown away on a "rental".

 

[fruitb]

@jane123 Right, but you still are left with a newer car after buying it out. Cars are an expense not an investment.

 

[zindebaad]

@reinar Yes but I’d be paying $500+ per month for 72 months potential resale value which I might not get. Four years in, i’d have paid $24000+ and still not paid it off…

 

[winning]

@zindebaad Dumb plan. 90k is a baby. Depreciation is 4-6 years. My last 4 vehicles have had over 300k km. My current one has 260k km. I paid 10k in 2013. Same model lists on kijiji for $4-7k.

If you’re getting rid of it because you have to fix the brakes or muffler, that’s just dumb.

 

[liamg]

@zindebaad Few thoughts

1. Likely not the best financial decision. Unless you know you haven't taken care of the vehicle and should expect major repairs. Even then thousands in repairs will equal months of car payments only.
2. Resale value on a gas vehicle in the coming years is likely to be very low with the yearly cost of running a gas car vs an EV. No reason to buy a vehicle that costs thousands more per year with less performance.
3. Have a look and at least test drive an EV before deciding for or against. I drive a Model Y. Best vehicle I have ever owned. Even my wife who has never cared about any vehicle in her life once it runs loves it.

 

[ebuzi]

@zindebaad Dealer can give you cash for your trade-in.

There’s no advantage to pay all these months early.