Can I Negotiate A Car Lease Buyout?
The short answer is "yes", but the approach that you take will most likely determine whether or not you are successful at purchasing your vehicle for a lower price than the amount listed in the lease agreement. When you lease a car, the lease agreement typically includes an amount that you can purchase the car for at the end of the lease. That amount is
The short answer is "yes", but the approach that you take will most likely determine whether or not you are successful at purchasing your vehicle for a lower price than the amount listed in the lease agreement. When you lease a car, the lease agreement typically includes an amount that you can purchase the car for at the end of the lease. That amount is essentially a guess by the bank that is providing the financing for the lease as to what the future value of your vehicle will be at the end of the lease.
Lease Buyout Calculation
Step number one in the negotiation process is to determine what your vehicle is worth. Did the bank guess right or wrong? If the purchase amount in your lease agreement is $25,000 but you find that the vehicle, based on current market conditions, is only worth $18,000, you probably have room to negotiate the purchase price of your vehicle but you have to do your homework. Compare your vehicle's purchase price to the retail value of local auto dealers. If you can show the bank that there is a local auto dealer trying to sell the exact make and model of your leased car with similar mileage, the bank will be more likely to accept a lower purchase price realizing that they guessed wrong.
Deal Directly With The Bank
You may have noticed that I continue to reference the "bank" in the negotiation process and not the "dealer". This is intentional. Some leasing banks allow dealers to increase the cost of the lease buyout to make a profit. Dealers can also charge document fees, which are taxable in most states. It may also be advantageous to line up your own financing for the lease purchase amount before entering into the negotiation process. If the dealer arranges the financing for you, it can sometimes increase your interest rate to make more money on the purchase. By dealing directly with the leasing bank you can cut out these additional costs.
You Make The Offering Price
Start by making an offer to the leasing bank based on your market research. Also make sure you contact the leasing bank well in advance of the lease "turn-in date". The bank may not be able to provide you with an immediate response to your offer so give yourself plenty of time for the negotiation process to work.
About Michael.........
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog. I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
The Fiduciary Rule: Exposing Your 401(K) Advisor’s Secrets
It’s here. On June 9, 2017, the long awaited Fiduciary Rule for 401(k) plans will arrive. What secrets does your 401(k) advisor have?
It’s here. On June 9, 2017, the long awaited Fiduciary Rule for 401(k) plans will arrive. The wirehouse and broker-dealer community within the investment industry has fought this new rule every step of the way. Why? Because their secrets are about to be exposed. Fee gouging in these 401(k) plans has spiraled out of control and it has gone on for way too long. While the Fiduciary Rule was designed to better protect plan participants within these employer sponsored retirement plans, the response from the broker-dealer community, in an effort to protect themselves, may actually drive the fees in 401(k) plans higher than they are now.
If your company sponsors an employer sponsored retirement plan and your investment advisor is a broker with one of the main stream wirehouse or broker dealers then they may be approaching you within the next few months regarding a “platform change” for your 401(k) plan. Best advice, start asking questions before you sign anything!! The brokerage community is going to try to gift wrap this change and present this as a value added service to their current 401(k) clients when the reality is this change is being forced onto the brokerage community and they are at great risk at losing their 401(k) clients to independent registered investment advisory firms that have served as co-fiduciaries to their plans along.
The Fiduciary Rule requires all investment advisors that handle 401(k) plans to act in the best interest of their clients. Up until now may brokers were not held to this standard. As long as they delivered the appropriate disclosure documents to the client, the regulations did not require them to act in their client’s best interest. Crazy right? Well that’s all about to change and the response of the brokerage community will shock you.
I will preface this article by stating that there have been a variety of responses by the broker-dealer community to this new regulation. While we cannot reasonably gather information on every broker-dealers response to the Fiduciary Rule, this article will provide information on how many of the brokerage firms are responding to the new legislation given our independent research.
SECRET #1:
Many of the brokerage dealers are restricting what 401(k) platforms their brokers can use. If the broker currently has 401(k) clients that maintain a plan with a 401(k) platform outside of their new “approved list”, they are forcing them to move the plan to a pre-approved platform or the broker will be required to resign as the advisor to the plan. Even though your current 401(k) platform may be better than the new proposed platform, the broker may attempt to move your plan so they can keep the plan assets. How is this remotely in your employee’s best interest? But it’s happening. We have been told that some of these 401(k) providers end up on the “pre-approve list” because they are willing to share fees with the broker dealer. If you don’t share fees, you don’t make the list. Really ugly stuff!!
SECRET #2:
Because these wirehouses and broker-dealers know that their brokers are not “experts” in 401(k) plans, many of the brokerage firms are requiring their 401(k) plans to add a third-party fiduciary service which usually results in higher plan fees. The question to ask is “if you were so concerned about our fiduciary liability why did you wait until now to present this third party fiduciary service?” They are doing this to protect themselves, not the client. Also, many of these third party fiduciary services could standardize the investment menu and take the control of the investment menu away from the broker. Which begs the question, what are you paying the broker for?
SECRET #3:
Some broker-dealers are responding to the Fiduciary Rule by forcing their brokers to move all their 401(k) plans to a “fee based platform” versus a commission based platform. The plan participants may have paid commissions on investments when they were purchased within their 401(k) account and now could be forced out of those investments and locked into a fee based fee structure after they already paid a commission on their balance. This situation will be common for 401(k) plans that are comprised primarily of self-directed brokerage accounts. Make sure you ask the advisor about the impact of the fee structure change and any deferred sales charges that may be imposed due to the platform change.
SECRET #4:
The plan fees are often times buried. The 401(k) industry has gotten very good at hiding fees. They talk in percentages and basis points but rarely talk in hard dollars. One percent does not sound like a lot but if you have a $2 million dollar 401(k) plan that equals $20,000 in fees coming out of the plans assets every year. Most of the fees are buried in the mutual fund expense ratios and you basically have to be an investment expert to figure out how much you are paying. This has continued to go on because very rarely do companies write a check for their 401(k) fees. Most plans debit plan assets for their plan fees but the fees are real.
With all of these changes taking place, now is the perfect time to take a good hard look at your company’s employer sponsored retirement plan. If your current investment advisor approaches you with a recommended “platform change” that is a red flag. Start asking a lot of questions and it may be a good time to put your plan out to bid to see if you can negotiate a better overall solution for you and your employees.
About Michael……...
Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.
