Cruising in Calgary – A Real Life Purchase Story
Bill L. from Calgary, Alberta was in the market to purchase (not lease) a late model Toyota FJ Cruiser. Bill is quite technologically inclined and was prepared to pull out all the stops to find the ideal FJ. The FJ was the ultimate truck with the right stuff for Bill given its off-roading capabilities, trailer-tow capacity, good looks and a modern ride (but it suffered from a severe shortage of inventory supply).
Bill checked all the major vehicle online properties such as Auto-Trader.ca and Driving.ca but found that there was limited or no inventory of this type of sport utility vehicle.
The main reason attached to this inventory shortage is due to a couple of very significant reasons. Firstly, the FJ Cruiser unlike the Toyota Corolla is not a “huge” seller for Toyota at the new car level. The truck appeals to a certain market segment and the members of this market have no intention to sell or trade-in their FJ Cruisers within the first year or two of ownership. Secondly, many FJ Cruiser customers lease their Cruisers through Toyota Financial and, as a result, these trucks wouldn’t be up for sale and found on a popular online classified property.
Using Google, MSN and Yahoo’s powerful search engines, Bill was able to quickly discover that Leasebusters.com had more FJ Cruisers available than most of the classified dealer portals sites. As mentioned, the FJ has a very high lease penetration and when a customer has to get out of their lease, Leasebusters.com is the most dominant and powerful choice to expose the vehicle to the marketplace. The challenge however was that Bill was not interested in leasing his next vehicle, he wanted to purchase his FJ Cruiser.
On a whim, Bill decided to call the Seller of the FJ and make arrangements to see the Toyota and to see if buying it was a viable option. Bill was impressed with the condition of the vehicle; the Seller took very good care of the truck and was able to produce all the service records for Bill’s review. The service records consisted of 4 oil service repair orders and 2 minor warranty repairs but nonetheless, Bill had all the information to assist him in his decision making process. The Seller allowed Bill to road test the vehicle and offered to permit him to have the FJ independently inspected; Bill respectfully declined the request since the vehicle was in such excellent condition and the service history was in full view.
Note: The decision not to have the vehicle independently inspected was perfectly acceptable given the reasons cited however the Buyer should have ordered the inspection anyway due to the fact that the FJ may had previously been in an accident which would have been detected (and the Buyer would be responsible should poor workmanship/repair manifested itself 5 or 6 years down the road). This inaction is exacerbated if the Buyer is going to keep the vehicle for the long term and problems occurred it would cause the owner to repair the affected areas and will have a negative influence on the resale value. If the Buyer was taking over the lease, the same liabilities could apply since the leasing company would hold the lessee of record responsible for any poor workmanship that was detected at the end of the lease.
It was now time to negotiate a price on the FJ and clearly the Seller was not prepared for this action; the Seller was prepared for a customer to take over the lease. The Seller called his Leasebusters lease-take-over sales analyst in order to get some advice. The sales analyst assessed the situation and determined, with the assistance of the Seller, that the Seller simply wanted to get of the lease “clean” without having to provide any cash incentives. The Seller was instructed to call Toyota Financial and get the current payout of the lease contract (i.e. the amount it would cost to buyout the lease contract and subsequently collapse the lease). Toyota Financial advised the Seller that he would have to get this information through his original selling dealership (despite the fact that Toyota Financial would be supplying the information to the dealer).
Note: The reason for Toyota Financial requesting the Seller to deal through their dealership is due to the fact that the dealer is equipped and licensed to transact the retail sale of the vehicle to the Buyer; Toyota Financial, albeit a registered motor vehicle dealer, is not a registered and licensed retail dealer (i.e. they are unable to sell directly to the public).
As it turned out, the FJ’s payout was higher than Bill was prepared to pay for the vehicle and the price negotiations began between the Buyer (Bill) and the Seller. In the end, Bill and the Seller agreed on a price that required the Seller to subsidize (“kick in”) approximately $1,500.00 (which was the difference between the lease payout and the agreed upon selling price).
The Seller instructed his dealership to sell Bill the FJ for the agreed upon amount and indicated that he would pay the difference between the sale price and the current payout (plus a modest administration fee for service for the dealer’s participation in the transaction). The transaction went smoothly but there was a slight hiccup that developed due to the fact that a lease payment was due and debited from the Seller’s bank account prior to the closing of the transaction. The dealership was not overly experienced at these types of 3rd party transactions and confused both the Buyer and the Seller because of the payout change caused by the payment being made.
At the end of the day, if a lease payment is made during the course of a buyout transaction, it must not change or affect the negotiated selling price (period). The only amount(s) that will change is the Seller subsidization amount or the Seller equity amount (in the event that the sale price was higher than the lease buyout amount).
As mentioned, after the minor hiccup was rectified by a dealership staff member that completely understood the 3rd party lease buyout protocol, Bill was on his way down the road in his brand new used Toyota FJ Cruiser. The dealership paid out the lease contract, the Seller wrote a subsidization cheque and paid the dealership for their participation services – everyone was satisfied.
The only (perhaps) dissatisfied participant was Toyota Financial since they lost the Seller as a customer and the lease contract came off their books. Having said that; Toyota Financial as well as all the other factory leasing companies offers the same buyout services for their customers which offsets the lease contraction by way of a positive customer experience.
The Leasebusters “Real Life Real Lease Story is a regular feature on Zack Spencer’s www.motormouth.ca, Leasebusters.com’s LeaseBlog and will also be an on-air feature on Zack Spencer’s Driving Radio Program aired nationally on the Corus Radio Network. |