CarTalk.com Blogs Car Info Our Show Deals Mechanics Files Vehicle Donation

Camry Lease Buyout

My lease is up in December and I’m considering buying out the lease at that time. I need help figuring out if it’s a good deal. I think I’ve taken most of the facts into account, but help me see if I’m missing anything.

I have a 2010 Toyota Camry LE 4 cyl automatic with 21,900 miles. The car is in very condition and has had no problems. I’ve performed all regular maintenance on the car.

Lease Details:

Down $2,000
Payments $192/m for 36 months = $6,912.00
Buyout = $14,325.00

Value Details:

Edmunds lists values of: Trade - $ 14,251; Private Party - $15,938; Dealer - $17,317

Kelley lists values of: Trade - $15,165; Private Party - $16,815; Dealer - $19,215; and Certified Pre-Owned - $19,655

Financing Details:

I’d put $3K down on the financing. I’m assuming I can get a 1.99% interest financing at Pentagon Federal for either 26 or 48 months. Factoring in the sales tax of 6.5%, the total paid would be $12,636 for 36 months or $12,768 for 48 months.

I worked out complete totals for the total leasing plus financing costs, but I’m not sure if that’s needed to figure out if the buyout is a good deal. I think it’s more a matter of comparing the buyout price to the values. I’m thinking the buyout is a good price based on the values. Am I missing anything that I should be looking at?

If I don’t buyout the lease, I will either buy another vehicle either new or newer than my camry or lease again to keep a lower payment.

When you decide to do the buyout, try negotiating the buyout price with the lease company. There is a lot of wiggle room since the lease company can save the aggravation of processing the returned car and re-selling it. Figure out the maximum milage allowance on the lease. When they ask how many miles are on the car, give a milage close to, but not over, the allowance.

The allowed mileage for the lease is 36,000, so I’m well under the mileage at 21,900. If I understand you correctly, I should try to negotiate with the lease company and overstate my mileage to closer to 36,000 to get a better deal from them?

Is the buyout a good deal? Well, from what you’ve provided us, you could buy out the vehicle for $15,256, including tax. You could then turn around and sell it private party for $15,938 at a minimum. I’d bet you could get closer to the $16,815 mark, seeing what insane prices used cars are going for.

In other words, you could buy out the lease, turn around and sell the car yourself, and make a profit. That makes buying out the lease a good idea even if you decided not to keep the car. Of course, the resale values may drop significantly by december, as they get pushed down thanks to the 2013 models hitting showroom floors.

Whatever you decide to do, though, do NOT lease again. You’ve paid a total of $8,912 for this car through the lease, and buying it out would push the total, including financing charges (for 48 mo), taxes, and lease payments, to $24,680 according to the numbers you provide.

A Camry LE purchased new in 2010 would likely have cost you just barely over $23,000 using the same financing rates and prices you quote, with the same down payment.

You know the car’s history, the buyout price is less than the trade-in value and signifcantly less than what you’d pay a dealer or private party to buy the car. If you like the car, it seems like an ok deal. You’d either have to pay more for an equivalent car to replace it, or opt for another lease on a new one.

I’d recommend a higher monthly payment and go for a 24 months financing. Making payments on a 6-7 year old car isn’t something I’d recommend. Go for 24 months, then when repair bills start to come along you won’t be making monthly payments too. A 4 year old Camry with less than 50K miles should would be a good car to own outright. It would have decent trade value, but I’d figure another 6 more years with no monthly payments and only a few substantial repair bills along the way to 10 years of ownership.

Sounds like a good idea to buy your Camry, I’d strongly recommend the 36 month loan, that is like you bought the car with a 72 month loan, too long for me. Any way you could do it in 24 months, then own it payment free for, say, 5 more years while saving up a larger down payment on your next car purchase? Leasing is the expensive way to go.

I’d ideally like to finance it for the shortest time possible. I think right now I can swing the 24-month payment ($521), but I’d hate to commit to that and then have my circumstances change. So I’d probably finance it for 36 months ($351) and then pay extra along the way.

Sounds good.

That’s right, candicem. The buyout price assumes that you will be near the allowance. The lease company will put a higher value on the car if they think it has low miles. Call and tell them you have 33,500 miles on it.

eraser1998 is correct about a lease being a bad deal. The up front costs of a lease make it unattractive financially. That said, you have to consider the position you are in right now. Is it better to buy a new car or buyout the lease? It’s your decision, but if you are happy with ther car, its probably worthwhile to keep it instead of taking the hit on depreciation of a new car as well as more sales tax. The Camry is very reliable car and should give you many years of service.

I would also check on car loan rates. Sometimes, the interest rate is higher on a used car. The 1.99% you are counting on may only be for new cars.

I think your idea of the 36 month loan with extra paid is a good one - just be sure there are no prepayment penalties.

Actually, my credit union offers the same financing rate on 2010s whether it is for 12 months or 75 months. If you’re disciplined, in that case, I would go for the 75 month and pay whatever it took to keep from getting underwater on the loan. If you have any credit card debt (hopefully not), it would be better to pay that off than a car loan, as the interest rate would be higher. If you have no other debt, I would focus on making sure you had emergency savings, then pay off the loan as quickly as possible, but with the knowledge that you had financial flexibility to go to a lower payment if possible.

Same advice I gave to a family member who was at risk of losing their job - they weren’t all that eager to refinance their house… they were paying near 6%, but didn’t understand that conforming loans had no prepayment penalty. If they refinanced and kept their payments the same, they were set to cut about 1 year and $2000 off their payments, even considering the refi fees. OTOH, if they were to lose their job, they then had the flexibility to cut their monthly payments nearly in half without any risk of foreclosure. That was a BIG deal to them, having that flexibility.

@markmast Sorry man, this is bad info… While it was possible a few years ago, it will not happen now… The used car market is too hot, and they have NO problems taking there chance at that auctions. In most cases they get more. Also the dealer where the car is turned in has first crack at the car, and in most cases get offered the car $2-300 less then the customers buy out… Any toyota dealer would buy this car at this price with out thinking twice, becasue its low mileage and late model, and easy/low cost to certify it… So there will be no negotiating on this car at all… Like I said 3-4 years ago yes (depending on the company), not today…

As too the OP, IF you like the car AND it suites you needs then its a good price and you would do well to buy it. @eraser1998 is 100% right… I also STRONGLY advise going as long term as you can, and paying the car off early… I work mostly commishion and when I got my wifes Van we did a 78 month loan and paid it off in right around 42… We had the low payments for the bad months, and sent in extra when we could. They cant charge you interest on money you did not borrow, so if you pay it off early you dont pay all of the interest.

Thanks for all the advice/suggestions. I talked with my husband and I think we’re agreed that we’ll buy the camry. Now I just have to see what it would take to buy it now rather than wait until December.

Line up financing before you talk to the leasing company. That will give you time to shop for the best rate. Since you are looking at the Pentagon Credit Union, I assume you live in the DC area. You might also consider Tower FCU in Laurel if you live MD in or close enough to Laurel. I understand that they have great programs for members.