Question:  How do I go about trading in a leased vehicle?

Sept. 6, 2001

Hi Tony,

I stumbled upon your site looking up internet car information and I must say that I am very impressed with it. It has provided a great deal of information that I never knew about before, and you can be sure that I'm going to use this information quite soon as my wife and I are both starting to look for new vehicles. I do have a couple of questions, however, about the purchasing a new vehicle.

1. I am currently in a lease (my first which I'll NEVER do again), and am looking to purchase a new vehicle. Am still debating with myself over brand new, left over, or used 1 year old.

Anyway, other than selling my lease to someone else, what is the best way to go to a dealer and trade in my leased vehicle for a new one, or how should I go about doing this?

2. When purchasing a "new" used car, is it better to go to corporate dealerships or small dealerships that deal primarily in used cars?

Thanks for your help, and again, thanks for the advice and information on your website!

Sincerely,

David

Answer:

Hi David,

I appreciate your kind comments about my web site. Thank you!

In answer to your first question . . .

Here's what happens when you want to trade-in a leased car: Since you don't actually own the vehicle you're not technically trading it, rather the dealer is going to buy it from the lease company. However, for all practical purposes it works out the same.

You'll need to get your payoff from your lease company. This will tell you what it will take to get the dealer to take the car in.

Then of course, the dealer will appraise the car and figure out how much it is actually worth to him. I can tell you he will not allow you more than wholesale value for it. After all, he can always go to a dealer auction and buy a car like yours for wholesale. So why would he give you more than that?

Now, if the payoff is greater then the ACV (Actual Cash Value) then the difference between the two will have to be added to your new loan on top of the selling price of the new car, the sales tax, the title fees and so forth, This is called having "Negative Equity."

On the other hand if the payoff is less than the ACV the difference gets subtracted from your total selling price. This is called having "Positive Equity."

I'll tell you David, it's very unusual to have "Positive Equity" when you're trying to get out from under a lease. That doesn't mean that you can't put a deal together. It just depends on how much you owe and so forth.

You're going to have to keep the dealer honest, so I would advise you to go in and negotiate a deal without a trade. Don't even mention it. Then after you have a firm deal to your liking - in writing - and signed by the sales manager, spring the trade on them.

They won't like it, but this is the only way you'll be able to see exactly what they are offering you for the lease car. Explain to the dealer that you understand that they are only going to give you ACV, and you're doing it this way because you want to be sure you know what you're getting!

Then it all depends on the payoff, and how much of a "Beating" you're willing to take on the lease car, if any!

One more thing David, don't lose track of the Rebate if there is one. With some dealers - not all - the Rebate has a way of vanishing into thin air!

Another alternative you may want to consider is going to SwapaLease.com. This is a website where people can find others to take over their lease, or find leases to take over.

OK! Question #2 . . .

When you refer to a "new" used car I assume you're talking about a Program Car or a so- called Factory Demo which is the same thing.

It's hard to say where you can get the best deal. I suppose it depends on who has what you want. Just follow the advice on my web site and you'll do just fine. Don't forget to get a Free CARFAX Record Check before you sign anything.

Good Luck,

Tony Iorio