Author Topic: Should I sell my leased car?  (Read 2052 times)

tcase08

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Should I sell my leased car?
« on: July 01, 2016, 07:01:57 AM »
I have recently started down the path to FI, I have always been somewhat frugal but I made a HUGE mistake right before I decided to get serious about FI.

I leased a BMW, at 24 yrs old. However, even with that I'm still able to stock away around 30% of income. So here is the big question, I could "sell" the leased car for about 30k and then owe BMW 36k for it. Would it be wise to roll that money into a new car that costs 8-10k, bringing the total cost to  14-16k owed? My current lease payment is ~450 monthly and there is 24 months left on it. I'm really torn with how to move forward from this.

Rewdoalb

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Re: Should I sell my leased car?
« Reply #1 on: July 01, 2016, 07:33:07 AM »
I don't understand leases enough to give a good answer on the math.

However...a principle that may help now or elsewhere - if a mistake is made more painful, you'll do a better job avoiding other mistakes later in life.

neo von retorch

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Re: Should I sell my leased car?
« Reply #2 on: July 01, 2016, 07:35:34 AM »
Assuming your numbers on market value are accurate, quitting the lease right now will cost you $6000. Continuing to the end in 24 months will cost you $10,800 (ignoring opportunity cost.)

Can you provide a car for yourself for the next 24 months for less than $4800?

(Hint: Almost certainly - buy a $5000 or even $8000 car and drive it for 3 5+ years.) If you absolutely need to borrow money / roll the difference of the underwater lease contract into the loan on the replacement car, but it still saves you money overall, then it's a good idea to do so.

Choices

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Re: Should I sell my leased car?
« Reply #3 on: July 01, 2016, 09:00:09 AM »
Assuming your numbers on market value are accurate, quitting the lease right now will cost you $6000. Continuing to the end in 24 months will cost you $10,800 (ignoring opportunity cost.)

Can you provide a car for yourself for the next 24 months for less than $4800?

(Hint: Almost certainly - buy a $5000 or even $8000 car and drive it for 3 5+ years.) If you absolutely need to borrow money / roll the difference of the underwater lease contract into the loan on the replacement car, but it still saves you money overall, then it's a good idea to do so.
+1
It will also save you money on insurance and you can likely drive the car you buy for much longer than two years while you ivest and save up for a better car if you still want one.

tcase08

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Re: Should I sell my leased car?
« Reply #4 on: July 01, 2016, 12:41:14 PM »
Good points made overall. I also just thought about doing a cost per mile calculation too... and it tells the same story.

With the 10,800 due over 24 months, I only have 24k miles I can drive... That comes out to 45 cents per mile. Much higher than the 28 cents per mile I calculated (includes oil and maintenance, not fuel) after rolling my negative value into a new to me car. 28 cents per mile is still very high, but I don't think I can get that much lower in my current situation. I carpool with my wife and we drive about 24k miles per year so I need a long lasting, reliable car.

Metric Mouse

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Re: Should I sell my leased car?
« Reply #5 on: July 02, 2016, 02:27:45 AM »
Good points made overall. I also just thought about doing a cost per mile calculation too... and it tells the same story.

With the 10,800 due over 24 months, I only have 24k miles I can drive... That comes out to 45 cents per mile. Much higher than the 28 cents per mile I calculated (includes oil and maintenance, not fuel) after rolling my negative value into a new to me car. 28 cents per mile is still very high, but I don't think I can get that much lower in my current situation. I carpool with my wife and we drive about 24k miles per year so I need a long lasting, reliable car.

Math is a powerful force for good!

ikonomore

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Re: Should I sell my leased car?
« Reply #6 on: July 02, 2016, 04:16:12 PM »
If you really want out of it you could do a lease transfer at a site like leasetrader or swapalease.  This way you could get rid of the car without spending $6k.  you might have to incentivize the payment but that should be less than $2k.