Regarding the vehicle lease renewal programs?

Question

I leased a 2005 Jeep Liberty, I have 3 months before the contract is over. The lease renewal coordinator is sending me flyers in regards to releasing early. Before I contact my dealer, what should I expect?

Answer 1

Forget Dukie there!  Apparently things in the UK are different or he is completely off base.

Here is the real scoop in the US.  I assume with a Jeep Liberty that you leased through Chrysler Credit.  This is the best time to begin looking, 3 months before your lease expires.  When your residual was calculated, I am sure CCC allowed themselves margin in the market. They are not in the business to lose money.  You said you are under mileage which is definitely in your favor.  Unfortunately, the bottom has dropped on SUV's because of gas prices, so what your vehicle is worth v. what they planned for maybe two different things.

Here's what to do:  Find out what the "wholesale" value of your vehicle really is.  Ask them directly what they are offering you in cash against your lease for your Liberty.  Shop this against a couple of dealers.  If your "wholesale" value is worth more than your residual, or lease buyout, trade early, if it is less, let the lease expire, then go after your next vehicle.  It is the best of both worlds, they took the risk on the market, but if it is in your favor, you can get the benefit if you act before lease expiration.

There maybe some tax ramifications, depending on your state and the treatment of your trade.  It does not hurt to shop.

Good luck

Answer 2

I'll give you an example of leasing and how they make money:

You see a car for £60000 in the BMW garage. You go to buy it. They have a deal with the finance company and through them they offer you a lease. They have certain lease rates given by the finance company they use and then they add their own profit on top. Let's say you say 'I can afford £2000 a month, what can I get?' They offer you a deal on a certain car and present you with an offer of £2000 oer month.

This means you lease a car for £60000 for 60 months (5 years) for example. They charge interest in %. So instead of you paying 60 installments of £1000 per month, you pay £2000 per month for example, and overall  you pay back £120,000. So they make £60,000. Some of which goes to them, some to the finance company.

So, you have gone in the garage, chosen your car and filled out the finance company's forms. BMW dealer then applies to the finance company who checks you out and say 'yeah, her credit history is good, she's good for the lease.' and the finance company give BMW the £120,000 for the car. BMW dealer makes a profit of £80,000 because he has bought the car off BMW for £40,000. You start paying the finance company back at £2000 per month.

After a certain point in the lease, normally 3/5ths of the way through, but let's say they phone you up with a quarter of the lease remaining and say:

'We'll give you a new car, and you'll only have to pay £2000 a month still, or £2100 say.'

Sounds great doesn't it? Pay the same and get a new car? But what they have done is they tie you into a new 60 month lease, and spread the remaining 20 months into that contract, so you sign a new contract for £120,000.

Then they do the same in another 40 months time. Each time they are protecting a new £120,000 deal in this example. You have used 3 £60,000 cars for nine years and they have made well-over £180,000 each. Plus whatever they get for the three cars when they sell them and so on - you get the idea.

If you decide to pay the lease off and keep the car, they win, if you decide to give them back the car and walk away, they win because the interest rate is so high it takes care of the car purchase and they make sure there is some residual value in the car still for them to sell. From you, they get all this money guaranteed. They then pay a premium to a company like Euler Hermes or an underwriters who then insure the lease (maybe it is included in the lease price). That is why they hassle you to lease, and lease early in a contract = guaranteed, secure and safe money for them.

You 'win' though if you like having a new car every three years; you lose in comparison to someone who buys their own car. Plus the car is never really 'yours'.

Hire purchase = the 'never never' (slang in England). Check out the car park for a leasing company - all Porsches, BMWs and Ferraris.

But... you do get to borrow a new car to show off to your friends.

Answer 3

i leased many times and was under the mileage and they kept calling me to turn in early and I did when the residual value  (what the car is worth at trade in time ) was more than I owed on it so that way I didn;t have to pay any other charges, just turned in and leased again.

  they want your suv for many reasons, slow sales, your car has low mileage and they want to get rid of another car. so if you turn it in with no penalty than go ahead, be sure they are not rolling any payments form your old one and made an even trade back to them.

  so ask them if you are up and not down on the car when you trade it back and if up it's ok. to do it.