Anyone want out of their 550/575 lease?

sorry, i have to call BS on that theory. what type of premiums are 599 trading at ? +100K???

1) the majority of exotic car leases are OPEN ended with co's like premier, chase or putnam. in the event that they would be under water, You'd be in the exact situation by assuming that same lease. unless, of course, you over paid and bailed them out.

2) anyone that has access to a 599GTB:

a) is a "GOOD" customer that can purchase the car for MSRP. instant equity.

b) has the bankroll to pay the $100k+ premium over MSRP. in which case, it doesn't sound like they'd be concerned with small change and would likely ride out the remaining short term of their existing 550/575 lease.

i'd love to hear more about "taxes" and "ferrari leasing". keep us up. i'd be interested to hear what type of offers you receive.

 

Who would have leased a 575 in the last few years and not expected it to depreciate like keys falling out of a Learjet? I don't think most Ferrari owners are that dumb.

 

Taking over leases is done all the time but the lien holder will not remove the original lessee even if they add the new guy. They have no reason to let someone off the hook even though someone new is added. They are the ones with something to lose and could care less what agreements the original lessee makes as long as he is still on the hook. There are websites that list leased cars available to assume. My only concern if I was the original lessee would be insurance implications and having to trust a complete stranger is making your payments.

 

fair enough - but i think your whole analysis relies on the premise that the lease is a closed end type. in which case, you are correct. the costs and liabilities are definable.

i believe the vast majority of the leases on these cars will be open ended. an assumption of an opened end lease will just serve to transfer any equity (plus or minus). who is going to eat the negative equity upon transfer ? someone is responsible for the residual.

anyone that has access to a 599 at MSRP has better options and a good relationship with their dealer. otherwise, $20-30k is chump change is chump change in the world of $400-500k toys. judging by the mileage on many of these cars - all the do is sit and take up space.

 

If your proposition is a good one for the party assuming the lease, I must not understand leasing as well as I thought. I think the OPEN ended lease is a major consideration. My understanding is that with an open ended lease, the risk of depreciation rides with the lessee. In a closed ended lease, the lessor maintains the risk of depreciation (for which they are compensated in theory in the lease payment). Why would you assume an open ended lease on a vehicle that has depreciated far more than was contemplated in the lease? You would then be stuck with that "balloon" payment at the end of the lease, making up the amount of additional depreciation not caputured by the prior lease payments.

I have only personally leased one vehicle. It was a CLOSED end lease and I was very glad because the car was only worth $9,500 at the end of the term, but the payoff was $11,500. Not only did I not excercise my option to buy, but I also paid less for the car than I would have, otherwise. I only financed the $14,000 it was expected to depreciate, rather than the $16,000 it actually did. Therefore, I'm not sure of the value in assuming a closed end lease, either. If the payoff is greater than the value of the car, why not just buy it for less money from the lessor after it gets turned in by the original lessee?

I definitely see the advantage to the original lessee, but not to anyone who assumes an upside down lease, whether open or closed ended. The only way this makes any sense is for your undisclosed tax reasons, right?

 

The way many auto leases are written (notice I did not say "all" leases) is very much one-sided to the leasing company.

Say that you lease a $12,000 car (to make the math easy). If you put $2,200 down (Cap cost reduction) and lease a car with a residual value set at $5,000, then you are paying off $4,800 over the life of the lease. On a 5 year lease, this would equate to $100 per month in amortization (and, I know it is not a linear equation, but this is an example). Now, let's assume the interest rate (but leasing companies never quote an interest rate, they quote a money factor) is 12% per year. This would indicate a monthly payment of $176.40 per month. Of this $176, about $100 is paying down the balance.

The leasing companies then calculate your payoff as follows: They take the $176.40 per month and multiply by 48, giving you about $8500 in payments. Remember, your residual is $5000, so the day you drive off in that car, you will owe $13,500 (which is $8500 plus $5000) to pay off the lease--that's more than you paid for the car.

Unlike a home mortgage, where you simply pay off the unamortized balance when you pay the loan early, the lease is not an amortizing instrument. It is a payment stream.

Some companies out there have phantom income (that is income taxable by the IRS, without receiving the cash) that they want to offset with legitimate expenses. Leasing allows for this.

While it is probably a bad use of money, the tax issue described in this thread is very much plausible.

I personally, think prices will continue to decline, so the guy might get stuck--but that's his problem.

 

I was under the impression that open ended leases were illegal (at least in my state --VA).

Also, not sure how well leasing a Ferrari would go down during an audit (may be hard to justify as legit business expense)?

Best,
dsd

 

Found it. However, 40K advance.

http://www.cars.com/go/search/detail.jsp;?tracktype=usedcc&searchType=21&pageNumber=0&numResultsPerPage=50&largeNumResultsPerPage=0&sortorder=ascending&sortfield=PRICE+ascending%2CPRICE+descending&certifiedOnly=false&criteria=K-%7CE-%7CM-_51_%7CD-_1400_%7CN-N%7CR-10000%7CI-1%7CP-PRICE+ascending%2CPRICE+descending%7CQ-ascending%7CZ-92604&aff=national&paId=134803771&recnum=0&leadExists=true

 

Ketel: I strongly urge you to carefully read the terms of any lease you wish to assume. There is a huge difference between closed and open ended lease terms. Your explanation above differs from my understanding of the difference between the two types of leases being discussed. My understanding is that Closed gives you the OPTION to buy. Open means you MUST buy (or pay the difference between the lease value and market value in many leases) at the end of the lease term. An open end lease is great if the car depreciates less than anticipated. You are screwed if it depreciates more. Under your scenario, you are looking for a car that is upside down on its lease. Assuming an open end lease in this case would be buying a disaster. Unless you have some creative tax reasons for doing so, don't.

From Forbes:

Closed-End Lease

A rental agreement that puts no obligation on the lessee (the person making periodic lease payments) to purchase the leased asset at the end of the agreement. Also called a "true lease", "walkaway lease" or "net lease".

Since the lessee has no obligation to purchase the leased asset upon lease expiration, that person does not have to worry about whether the asset will depreciate more than expected throughout the course of the lease. Thus, it is argued that the closed-end leases are better for the average person.

For example, suppose your lease payments are based on the assumption that the $20,000 new car that you are leasing will be worth only $10,000 at the end of your lease agreement. If the car turns out to be worth only $4,000, you must compensate the lessor (the company who leased the car to you) for the lost $6,000 since your lease payment was calculated on the basis of the car having a salvage value of $10,000. Basically, since you are buying the car, you must bear the loss of that extra depreciation. But, if you have a closed-end lease, you don't buy the car so you don't bear the risk of depreciation.

Open-End Lease

A rental agreement that obliges the lessee (the person making periodic lease payments) to purchase the leased asset at the end of the agreement. Also called a "finance lease".

Since the lessee must purchase the leased asset upon lease expiration, that person bears the risk that the asset depreciates more than was expected by the end of the lease. Of course, at the same time, the lessee stands to realize a gain if the asset depreciates less than expected.

For example, suppose your lease payments are based on the assumption that a $20,000 new car will be worth only $10,000 at the end of your lease agreement. If the car turns out to be worth only $4,000, you must compensate the lessor (the company who leased the car to you) for the lost $6,000 since your lease payment was calculated on the basis of the car having a salvage value of $10,000. Basically, since you are buying the car, you must bear the loss of that extra depreciation. Conversely, if the car is worth more than $10,000 at the end of the lease, you receive a refund from the lessor.

 

your descriptions, differences on open/close end leases differ from any that i have seen. i would consider there to be major financial differences between the two.

the lessee in an open end lease assumes all financial risks in relation to the residual regardless of whether you purchase the car at term end from the lessor. in a closed end lease, u have no residual risk.

the forbes description is dead on with the exception of your obligation to purchase at final term which may or may not exist. you should be free to (if your an idiot) return the vehicle and assume any financial risk of liquidation of the assets by the lessor. when they puke your 575 at auction at $65k ($75k residual) you'll be getting a bill for $10k.

 

people who REALLY COULDNT afford one to begin with and were just looking at the here and now. Good for them though they enjoyed a ferrari at a very high premium....much like most of the housing market....wait a little while maybe some govt agency will come along and bail them out of their stupidity in an unfair gesture to those that really work hard to afford their life style.

(sorry for the rant)

 

YOU ARE DEAD ON! This has been the subject of many of my posts. I cannot fuc***g believe that the Bush Administration is talking about a 900 Billion bailout of the subprime mess. I would have expected this from Hillary--let's give every child $5,000--but a Republican? This could turn out to be the most socialistic program in the history of the world. I was smart enough to buy a house I could afford and lock an interest rate--and now those idiots who bought too much and financed things to their eye teeth are getting bailed out??? There is even word that credit card debt is going to be a bailout. Hank Paulson is nuts!!

I will tell you this, though, their consumer debt is going to get them. Ferraris they can't afford on leases that are under water. I know guys selling one-year old gold Rolex watches at a $7K discount to the purchase price.

GIVE ECONOMIC DARWINISM A CHANCE! If we can weed out these idiots, we will be better for it.

 

This site has lease takeovers with zero down.

This thread made me remember this site I saw years ago and thought wow I could drive a different car every 12 -18 months with zero down. Just drive it and give it back it seemed like an Ok deal. I just never did it.

If you accept that you are going to pay lets say 700 a month, can someone explain why this deal would be bad?

leasetrader.com

 

Zero down, but they do charge some fees. Other than saving the capital reduction cost, which is a trade off for a depreciated used car, what do you save? You are getting someone else's used car. Why not go lease it yourself new and get exactly the options that you want. I don't want to take over a lease, I want to buy the car from the leasing company who repossessed it and is now going to take a bath on it.

No Ferraris, btw. 3 Maseratis! One poor guy has 50 months left on a 60 month lease on a QP.

 

I would not rent someone's money to buy something I don't have to have. That would inlcude most toys. The only way this works is if you want to own the car and think it will depreciate more than the value of the lease payments. Used gold rolex watches are always available at 60 percent of list or less. You just have to know where to buy them. Most any other watch as well.