You leased your vehicle 4 years ago with every intention of giving the vehicle back and leasing a new car when the lease expired. Two years into the lease, you changed jobs and you didn’t have to drive your vehicle to work any longer which resulted in a 4 year old vehicle with less than 60,000kms on the odometer. After careful thought, you realized that given your new driving habits, the value equation attached to leasing another vehicle was lost and the best opportunity existed with the exercising of the published buy-back.
If this scenario exists or any other reason that clearly suggests that you should exercise your lease buy-back; you would be well advised to follow all these steps prior to giving your formal commitment to purchase the vehicle.
1. Have your vehicle mechanically inspected by the original selling dealership (or a trusted mechanical facility of your choice). You will be responsible to certify (safety inspection) the vehicle prior to the closing of the transaction and you should know if there are any mechanical concerns or conditions that the car may be “suffering” from. You will also know how much it will cost you to certify the vehicle (as this expense is your responsibility).
2. Get a quote on an extended warranty package for the vehicle. If the price is reasonable and affordable, give the purchase of this product some consideration as it will protect you against some future major repair costs. Make certain that you do not purchase any overlap warranty (in other words, do not purchase power-train coverage if your vehicle still has some remaining factory power-train coverage).
3. Do a market value study on your vehicle. There are several methods of study however the two (2) best options are to (a) Do a search for a car just like yours on a used vehicle classified website; be certain to search for a similar vehicle, options, odometer reading and the same model year. Determine the “average” asking price and assume a 5% discount from that price. This pricing determination should be considered the fair retail market value of your vehicle. (b) Call the used car manager at your original selling dealership and ask the manager what he/she would pay for your vehicle today. This amount would be considered the wholesale value. This amount is typically 20% to 25% lower than the retail asking price of the subject used vehicle.
4. If the published buy-back amount of your leased vehicle is in the vicinity of (or between) the current wholesale value and the fair retail market value, then you should consider the amount to be fair.
5. You must keep in mind that you know this vehicle better than any other used vehicle in the marketplace; therefore, this adds value to the vehicle and would constitute you paying a small premium for your car.
6. If everything “adds up” and it makes sense for you to purchase your leased vehicle; you have one last piece of due diligence to complete. Call your dealership to determine if they are going to charge you an administration fee to complete the transaction for you. Dealerships are well within their right to charge a reasonable fee for service but you must know what that amount is in advance. In this author’s opinion, an administration fee between $150.00 and $200.00 is very reasonable and should be expected. If you elect to finance the vehicle through the dealership’s finance source (or purchase the extended warranty through the dealership); the dealership will earn a commission from the extended warranty company and the financial institution for the sale of the product.
7. Make an appointment with the dealership’s business manager to complete this transaction. Business managers are (normally) very busy and you cannot expect them to have your file prepared if you do not make the previous arrangements. Moreover, every dealership has their own lease buy-back procedures that they follow.....become informed of this process in order to make the transaction seamless.
If you have any questions or comments about my end of lease buy-back tips and advice; feel free to submit your thoughts and I will provide you with my response(s).