Trading in a lease on a cheap car, possible?

[Skrilla]

So a friend of my wife and her husband are in a bit of a pickle. They have a 2016 4Runner limited that is coming off lease next month. The Toyota dealer called them and asked if they want to come in early and upgrade as they have equity in it apparently. The unit has approx. 35k kms on it, and the last time I seen it it was immaculate. They however fell victim to the downturn over the last year and have struggled with payments, and some other stuff so they are certain they would not get approved for another lease, nor do they want to struggle with extra payments that aren't necessary.

Question is, can you trade in a lease the same as a finance and use the equity to get a cheap car that a dealer has on the lot? She told me that their payout is $29k, and the dealer offered them $35k for it. Looking online they seem to list in that 39-44k range for ones with similar or more mileage, same year etc. Can they just use the 5-6k equity and get a cheap ass car like a used Yaris or Corolla or something? They cant afford to buy the lease out and sell privately, so I wasn't sure what to offer for advice other than try the above?

[C4S]

Yup!

Sure they can, especially Toyota, and their lease is almost up!

But if they want lower payment, used car won't be best choice, as the interest rate is higher, shorter term etc,

They can probably trade in to a new C-HR, new Corolla Hatch sport etc, probably 1.9% rate whatever to lease ..

[Mitsu3000gt]

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So a friend of my wife and her husband are in a bit of a pickle. They have a 2016 4Runner limited that is coming off lease next month. The Toyota dealer called them and asked if they want to come in early and upgrade as they have equity in it apparently. The unit has approx. 35k kms on it, and the last time I seen it it was immaculate. They however fell victim to the downturn over the last year and have struggled with payments, and some other stuff so they are certain they would not get approved for another lease, nor do they want to struggle with extra payments that aren't necessary.

Question is, can you trade in a lease the same as a finance and use the equity to get a cheap car that a dealer has on the lot? She told me that their payout is $29k, and the dealer offered them $35k for it. Looking online they seem to list in that 39-44k range for ones with similar or more mileage, same year etc. Can they just use the 5-6k equity and get a cheap ass car like a used Yaris or Corolla or something? They cant afford to buy the lease out and sell privately, so I wasn't sure what to offer for advice other than try the above?

I can't speak for all dealers but I know some will do that for sure. I can at my dealership when my lease is up.

Another thing they can do is find a private buyer to meet them at the dealer and buy out their lease + whatever the negotiated premium is paid back to your friend (the $5K or whatever). You're just on a bit more of a timeline that way because it has to be done before the lease is up. I bought one of my cars like this.

[Misterman]

Used market is soft, but their best bet is to list it private and try to sell it for more than the dealer will give them. Then pay cash for something cheap like a 2008 Honda Accord. If they can't sell by the time the lease is up, they can always go in and take the dealers offer.

[Hallowed_point]

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Used market is soft, but their best bet is to list it private and try to sell it for more than the dealer will give them. Then pay cash for something cheap like a 2008 Honda Accord. If they can't sell by the time the lease is up, they can always go in and take the dealers offer.

This right here. That is an easy vehicle to sell provided the buyer has good credit.

[Skrilla]

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Yup!

Sure they can, especially Toyota, and their lease is almost up!

But if they want lower payment, used car won't be best choice, as the interest rate is higher, shorter term etc,

They can probably trade in to a new C-HR, new Corolla Hatch sport etc, probably 1.9% rate whatever to lease ..

I mentioned that, but they thought of getting a 5-6k vehicle free of lien with using the equity. She just needs basic a-b transportation for now. I am going to list it for sale for them in the meantime for a little more than the dealer offered and see what happens.

[HiTempguy1]

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I mentioned that, but they thought of getting a 5-6k vehicle free of lien with using the equity. She just needs basic a-b transportation for now. I am going to list it for sale for them in the meantime for a little more than the dealer offered and see what happens.

If they sell privately, they'd be able to get a $10k vehicle. If it truly is "basic" A-B, brand new cars can be had for $10k cash (thinking Nissan Micra, Hyundai accent, Chevy Spark, Mitsu mirage).

All pretty big piles of junk, but with full warranty, who cares? And if they only put 35k kms on their Toyota, its not like she drives much.

[Tik-Tok]

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I mentioned that, but they thought of getting a 5-6k vehicle free of lien with using the equity. She just needs basic a-b transportation for now. I am going to list it for sale for them in the meantime for a little more than the dealer offered and see what happens.

I don't think they understand the sales pitch they are being given. They don't have "equity" in the vehicle, as they don't currently own it, Toyota does. They'll get nothing for it if they return it to Toyota, unless they "upgrade" to a more expensive vehicle. It's just a sales pitch to get money off of a more expensive car.

They can either buy it out, and THEN they'll have equity in it and will profit once they sell, or they can find a buyer to buy it out, in which case they have cash immediately.

[Skrilla]

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If they sell privately, they'd be able to get a $10k vehicle. If it truly is "basic" A-B, brand new cars can be had for $10k cash (thinking Nissan Micra, Hyundai accent, Chevy Spark, Mitsu mirage).

All pretty big piles of junk, but with full warranty, who cares? And if they only put 35k kms on their Toyota, its not like she drives much.

good point, well I guess hopefully it sells in a month

[ExtraSlow]

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I don't think they understand the sales pitch they are being given. They don't have "equity" in the vehicle, as they don't currently own it, Toyota does. They'll get nothing for it if they return it to Toyota, unless they "upgrade" to a more expensive vehicle. It's just a sales pitch to get money off of a more expensive car.

They can either buy it out, and THEN they'll have equity in it and will profit once they sell, or they can find a buyer to buy it out, in which case they have cash immediately.

Yup, the only possible way to have equity in this thing is to sell private. Then, use that money to buy used with cash, that's a big win.

They won't win doing anything at the dealership.

[Misterman]

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I don't think they understand the sales pitch they are being given. They don't have "equity" in the vehicle, as they don't currently own it, Toyota does. They'll get nothing for it if they return it to Toyota, unless they "upgrade" to a more expensive vehicle. It's just a sales pitch to get money off of a more expensive car.

They can either buy it out, and THEN they'll have equity in it and will profit once they sell, or they can find a buyer to buy it out, in which case they have cash immediately.

Not always totally true. The dealer is going to lowball them on what it's really worth, so they make money regardless. If it's a hot used vehicle, then with some greasing the dealer might be happy to give them 6k credit towards a shitty old used trade in that they'll have a real hard time selling anyway. Dealer makes 10k on the 4runner, pays the leasee 6k, then sells them a car they would've got 2000$ for at auction for 6k, and it's all a wash for the dealer as they got their 10k either way.

[jaylo]

I think the problem with private sale is that the price will be close to a brand new 4Runner that people may as well get new.

Not a lot of smart people has $40K sitting in the bank for a vehicle, especially these days.

[Kavy]

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Not always totally true. The dealer is going to lowball them on what it's really worth, so they make money regardless. If it's a hot used vehicle, then with some greasing the dealer might be happy to give them 6k credit towards a shitty old used trade in that they'll have a real hard time selling anyway. Dealer makes 10k on the 4runner, pays the leasee 6k, then sells them a car they would've got 2000$ for at auction for 6k, and it's all a wash for the dealer as they got their 10k either way.

It doesn't matter, a lease is a lease with a buy out amount and a residual value. You can't take a lease in and say car is worth 10k my buyout is 8k so please give me my 2k....it doesn't work that way.

Getting a new cheap vehicle the dealer might be inclined to give a favourable trade in value to offset some of the price but there is no requirement for the dealer to do so. This dealer is just trying to use a catchy word to draw in an expiring lease to get them into a new lease to get more $$$$$$.

TikTok hit the nail on the head for how every single lease has gone for me in the past. I will normally sell it if the value is above what I owe and give it back if its below or has had something go wrong with it. I have been offered loyalty discounts and all kinds of magical discounts but never have i been offered a discount do to equity.

Disclaimer : I stopped doing leases in 2016 so maybe something has changed in the last 2 years I don't know about.

[Misterman]

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It doesn't matter, a lease is a lease with a buy out amount and a residual value. You can't take a lease in and say car is worth 10k my buyout is 8k so please give me my 2k....it doesn't work that way.

That's actually exactly how it works. You do not lease vehicles directly from a dealer, the lease is through Toyota Canada. If the lease is returned to Toyota Canada, dealer gets nothing. However, dealer can choose to buy out your lease from you, and then sell the vehicle as used inventory on their lot for more than the residual buyout was on the lease to make that profit margin. The only case where a dealer doesn't want to buy it out from you at the end, is if it has accidents or a bunch of damage. Obviously the dealer will still try and swing whatever they can in their favor though, so they generally try and force you back into a new lease or purchase for them to buy your lease out. But to rope you into this, they "forgive" the KM overage or damage costs. Even though there is nothing to forgive as you only pay those penalties when you return the lease to Toyota Canada.

Lexus and Toyota are the only vehicles I have seen this happen though. Because most other brands aren't worth shit when you bring them back.

[Rocket1k78]

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If they sell privately, they'd be able to get a $10k vehicle

Agreed. If they only owe 29k on that vehicle they should be able to walk away with a pretty good chunk if they sell private. I would suspect there arent many newish runners for sale and even at $40k i think thats still not a bad deal for a limited.

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I think the problem with private sale is that the price will be close to a brand new 4Runner that people may as well get new.

I just checked and these are close to $55k new so $40k's not bad.

[Skrilla]

so I talked to a dealer elsewhere and they said they would pay 35k for it as is, no trade just a buy and it will go to the US. So I think ill put it up for 38k for a quick sale, which is still IMO a great deal. I did get a look at it over lunch, and its still in great shape, so shouldn't be a hard sell, but in this economy who knows thanks again for all the input, its a shitty situation for them, but seems like the right move to try and get ahead a bit.

I wish my wife needed a new rig, I wanted to buy it out, but have no use for it.

[tonytiger55]

Is it just me or am I missing something here..?

What is this bollocks of the vehicle having 'equity' bullshit? OP tell your friends that this is the dealer talking a load of wank just to get them in the door. This is no HELOC.

Sure the vehicle may have a higher value than the buyout. They don't own the dam vehicle.
The couple mentioned are having financial difficulties. They don't want a lease or payments. The dealer is a business of making money, not charitable giving of wapping vehicles. Even if they did, does the couple want to take the risk of the dealers trade in/auction junk given their financial situation?
The dealer gives zero fucks, he wants them on another payment plan.

Sure they could buy the vehicle and sell it. Make some moola of $6k. Then use that money to buy a civic.
That would be a option if they were in a position of financial stably to take the risk of buying a depreciating asset and selling.

But wait.. if they had the money to buy it out then would they just not use that money to buy a $6k vehicle in the first place?

To answer OP's question. I don't think your friends are in a position fiscally to take that kind of risk. If they have friends that are willing to 'move money around'. Maybe.
But if they are not doing great financially. Thats a red flag right away. They need to cut out the monthly outgoings and get a bus pass till they can save enough for a Civic, Fit or a Yaris and eat porridge till they financially stabilise a little.

That might not be the answer they want to hear, but its a answer that should be on the table.

[Skrilla]

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Is it just me or am I missing something here..?

What is this bollocks of the vehicle having 'equity' bullshit? OP tell your friends that this is the dealer talking a load of wank just to get them in the door. This is no HELOC.

Sure the vehicle may have a higher value than the buyout. They don't own the dam vehicle.
The couple mentioned are having financial difficulties. They don't want a lease or payments. The dealer is a business of making money, not charitable giving of wapping vehicles. Even if they did, does the couple want to take the risk of the dealers trade in/auction junk given their financial situation?
The dealer gives zero fucks, he wants them on another payment plan.

Sure they could buy the vehicle and sell it. Make some moola of $6k. Then use that money to buy a civic.
That would be a option if they were in a position of financial stably to take the risk of buying a depreciating asset and selling.

But wait.. if they had the money to buy it out then would they just not use that money to buy a $6k vehicle in the first place?

To answer OP's question. I don't think your friends are in a position fiscally to take that kind of risk. If they have friends that are willing to 'move money around'. Maybe.
But if they are not doing great financially. Thats a red flag right away. They need to cut out the monthly outgoings and get a bus pass till they can save enough for a Civic, Fit or a Yaris and eat porridge till they financially stabilise a little.

That might not be the answer they want to hear, but its a answer that should be on the table.

They are not saying it like that, the way I take it is, sell it privately for say 36k as a figure. Payout the lease for 29k and pocket the 7k, or am I missing something? And maybe I am, I don't lease other than our company which is under a fleet program.

[tonytiger55]

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They are not saying it like that, the way I take it is, sell it privately for say 36k as a figure. Payout the lease for 29k and pocket the 7k, or am I missing something? And maybe I am, I don't lease other than our company which is under a fleet program.

What you are saying is fine.
If a person who is financially stable then that is a sound idea.

If they can sell while they are on the lease and make moola then Kudos to them.

But if they have to buy it out to sell it it might be different. The point im making to that is when someone is going through financial challenges. Something as simple as that may be a higher risk to them not worth taking vs someone who is financially stable.

[Rocket1k78]

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so I talked to a dealer elsewhere and they said they would pay 35k for it as is, no trade just a buy and it will go to the US. So I think ill put it up for 38k for a quick sale, which is still IMO a great deal. I did get a look at it over lunch, and its still in great shape, so shouldn't be a hard sell, but in this economy who knows thanks again for all the input, its a shitty situation for them, but seems like the right move to try and get ahead a bit.

$38k should be an easy sell for sure if its mint. I would list that thing asap. Shitty situation for sure to go from a limited runner to an econobox but they got their priorities right, i can guarantee you most wouldnt be able to swallow that