How to purchase a car with a lease on it
11-03-2011, 01:42 AM
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How to purchase a car with a lease on it
So - found a car that I am interested in.
We've agreed on a price etc..
However, the seller has a lease - and still owes money on it. What ways are there to handle this. My take is we sit down, get on the phone, and speak to PNA financial - figure out the payoff and fedex a check to PNA for the proper amount, and any remainder goes to the seller.
Thoughts? Problems others have run into?
Thanks for the advice everyone.
We've agreed on a price etc..
However, the seller has a lease - and still owes money on it. What ways are there to handle this. My take is we sit down, get on the phone, and speak to PNA financial - figure out the payoff and fedex a check to PNA for the proper amount, and any remainder goes to the seller.
Thoughts? Problems others have run into?
Thanks for the advice everyone.
11-03-2011, 01:48 AM
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Why is the guy negotiating to sell a car he doesn't own? PNA owns this car and leases it to this guy. You can take over his lease and then buy the car at the end of the lease of PNA.
Either way, I would step very carefully here.
Either way, I would step very carefully here.
11-03-2011, 01:53 AM
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He shouldn't get any money at all. the premise of a lease is that the lessee pays just the depreciation of the car. they are never in an equity position. I would just ask PNA how much they want to let their Lesee walk away, and give you the title to the car. The Lesee is not entitled to any money, unless you are willing to pay more than PNA is asking, and the Lesee says that he needs to be paid to walk away from the lease.
11-03-2011, 09:55 AM
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He shouldn't get any money at all. the premise of a lease is that the lessee pays just the depreciation of the car. they are never in an equity position. I would just ask PNA how much they want to let their Lesee walk away, and give you the title to the car. The Lesee is not entitled to any money, unless you are willing to pay more than PNA is asking, and the Lesee says that he needs to be paid to walk away from the lease.
Only safe way to do it as far as i know. Is for him to pay off the lease and get the pink slip etc. Then you pay him and buy the car. Any thing else and you would need to speak with Porsche Financial about the exact way to do the same thing.
11-03-2011, 11:36 AM
#5
Three Wheelin'
Another forum member and I went through this process a few months ago (I was the seller). First, the lessee has the right of first refusal to purchase the car at the end of the lease (I can't recall what section of the PFS contract that is, but it is there). That being the case, if the lessee thinks he can get more for the car than the payoff then he is free to do so. I'll outline below my experience but if you search the archives under my handle you'll probably find a more extensive write up because I know I've posted it before (and just don't have the time to search myself and attach a link)
More to the point, buying a leased car is both a simple and difficult process through PFS. First, forget about lease assumption. PFS structures their leases so that the original lessee is never taken off the lease when it is assumed by another individual. This is okay if you are transferring the lease to oe of your kids or family member I guess but when you do it with a stranger then the problem becomes apparent. You remain on the hook, as it were, when transferring the lease to a stranger so if that person bails, totals the car w/o insurance, etc, PFS will, ultimately come after you. So, the only option, really, is to have the owner buy out the lease and then sell it to you.
But, PFS will allow a third party (you) to pay off the lease. Unfortunately, you must rely on your seller to follow through with the sale because PFS will provide the original lessee w/ the cleared title in their name. So there is a faith issue. If your seller screwed you would probably prevail in court based on the facts but that would be a long process.
My wife, who is an attorney advised me to handle this process in the following way. I purchased the lease on my car from PFS but before doing so I had my buyer sign an agreement (contract that my wife drew up) that, contingent on me purchasing the car he would, within 10 days buy the car from me at the agreed upon price. There were included in the agreement remedies for both of us if either party breached the terms. I trusted my buyer so the contract was a formality but it gave both of us some reassurance. In the end, everything went off w/o a hitch.
Obviously, I don't know the circumstance of your agreement but you could modify the model I used if you had to. For example, if your seller doesn't have the buyout cash at his disposal you could always give him the cash up front to buy out the lease and have him sign some type of agreement that he will transfer the Title to you within some reasonable period of time. The bottom line here is that there has to be some level of trust in this type of transaction. The amount of trust dictates how much paperwork and how "legal" you want to get. I would think, however, that at a minimum, you and your seller might want something written out so there is a certain degree of comfort built into the process.
As I mentioned, my sale went through without any problems. The PPI was fine, I paid off the lease, my buyer paid me. I got a new GTS and he got a very nice 08 S (that I still miss!) at a price we were both happy with. Everyone won.
More to the point, buying a leased car is both a simple and difficult process through PFS. First, forget about lease assumption. PFS structures their leases so that the original lessee is never taken off the lease when it is assumed by another individual. This is okay if you are transferring the lease to oe of your kids or family member I guess but when you do it with a stranger then the problem becomes apparent. You remain on the hook, as it were, when transferring the lease to a stranger so if that person bails, totals the car w/o insurance, etc, PFS will, ultimately come after you. So, the only option, really, is to have the owner buy out the lease and then sell it to you.
But, PFS will allow a third party (you) to pay off the lease. Unfortunately, you must rely on your seller to follow through with the sale because PFS will provide the original lessee w/ the cleared title in their name. So there is a faith issue. If your seller screwed you would probably prevail in court based on the facts but that would be a long process.
My wife, who is an attorney advised me to handle this process in the following way. I purchased the lease on my car from PFS but before doing so I had my buyer sign an agreement (contract that my wife drew up) that, contingent on me purchasing the car he would, within 10 days buy the car from me at the agreed upon price. There were included in the agreement remedies for both of us if either party breached the terms. I trusted my buyer so the contract was a formality but it gave both of us some reassurance. In the end, everything went off w/o a hitch.
Obviously, I don't know the circumstance of your agreement but you could modify the model I used if you had to. For example, if your seller doesn't have the buyout cash at his disposal you could always give him the cash up front to buy out the lease and have him sign some type of agreement that he will transfer the Title to you within some reasonable period of time. The bottom line here is that there has to be some level of trust in this type of transaction. The amount of trust dictates how much paperwork and how "legal" you want to get. I would think, however, that at a minimum, you and your seller might want something written out so there is a certain degree of comfort built into the process.
As I mentioned, my sale went through without any problems. The PPI was fine, I paid off the lease, my buyer paid me. I got a new GTS and he got a very nice 08 S (that I still miss!) at a price we were both happy with. Everyone won.
11-03-2011, 02:10 PM
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Another forum member and I went through this process a few months ago (I was the seller). First, the lessee has the right of first refusal to purchase the car at the end of the lease (I can't recall what section of the PFS contract that is, but it is there). That being the case, if the lessee thinks he can get more for the car than the payoff then he is free to do so. I'll outline below my experience but if you search the archives under my handle you'll probably find a more extensive write up because I know I've posted it before (and just don't have the time to search myself and attach a link)
More to the point, buying a leased car is both a simple and difficult process through PFS. First, forget about lease assumption. PFS structures their leases so that the original lessee is never taken off the lease when it is assumed by another individual. This is okay if you are transferring the lease to oe of your kids or family member I guess but when you do it with a stranger then the problem becomes apparent. You remain on the hook, as it were, when transferring the lease to a stranger so if that person bails, totals the car w/o insurance, etc, PFS will, ultimately come after you. So, the only option, really, is to have the owner buy out the lease and then sell it to you.
But, PFS will allow a third party (you) to pay off the lease. Unfortunately, you must rely on your seller to follow through with the sale because PFS will provide the original lessee w/ the cleared title in their name. So there is a faith issue. If your seller screwed you would probably prevail in court based on the facts but that would be a long process.
My wife, who is an attorney advised me to handle this process in the following way. I purchased the lease on my car from PFS but before doing so I had my buyer sign an agreement (contract that my wife drew up) that, contingent on me purchasing the car he would, within 10 days buy the car from me at the agreed upon price. There were included in the agreement remedies for both of us if either party breached the terms. I trusted my buyer so the contract was a formality but it gave both of us some reassurance. In the end, everything went off w/o a hitch.
Obviously, I don't know the circumstance of your agreement but you could modify the model I used if you had to. For example, if your seller doesn't have the buyout cash at his disposal you could always give him the cash up front to buy out the lease and have him sign some type of agreement that he will transfer the Title to you within some reasonable period of time. The bottom line here is that there has to be some level of trust in this type of transaction. The amount of trust dictates how much paperwork and how "legal" you want to get. I would think, however, that at a minimum, you and your seller might want something written out so there is a certain degree of comfort built into the process.
As I mentioned, my sale went through without any problems. The PPI was fine, I paid off the lease, my buyer paid me. I got a new GTS and he got a very nice 08 S (that I still miss!) at a price we were both happy with. Everyone won.
More to the point, buying a leased car is both a simple and difficult process through PFS. First, forget about lease assumption. PFS structures their leases so that the original lessee is never taken off the lease when it is assumed by another individual. This is okay if you are transferring the lease to oe of your kids or family member I guess but when you do it with a stranger then the problem becomes apparent. You remain on the hook, as it were, when transferring the lease to a stranger so if that person bails, totals the car w/o insurance, etc, PFS will, ultimately come after you. So, the only option, really, is to have the owner buy out the lease and then sell it to you.
But, PFS will allow a third party (you) to pay off the lease. Unfortunately, you must rely on your seller to follow through with the sale because PFS will provide the original lessee w/ the cleared title in their name. So there is a faith issue. If your seller screwed you would probably prevail in court based on the facts but that would be a long process.
My wife, who is an attorney advised me to handle this process in the following way. I purchased the lease on my car from PFS but before doing so I had my buyer sign an agreement (contract that my wife drew up) that, contingent on me purchasing the car he would, within 10 days buy the car from me at the agreed upon price. There were included in the agreement remedies for both of us if either party breached the terms. I trusted my buyer so the contract was a formality but it gave both of us some reassurance. In the end, everything went off w/o a hitch.
Obviously, I don't know the circumstance of your agreement but you could modify the model I used if you had to. For example, if your seller doesn't have the buyout cash at his disposal you could always give him the cash up front to buy out the lease and have him sign some type of agreement that he will transfer the Title to you within some reasonable period of time. The bottom line here is that there has to be some level of trust in this type of transaction. The amount of trust dictates how much paperwork and how "legal" you want to get. I would think, however, that at a minimum, you and your seller might want something written out so there is a certain degree of comfort built into the process.
As I mentioned, my sale went through without any problems. The PPI was fine, I paid off the lease, my buyer paid me. I got a new GTS and he got a very nice 08 S (that I still miss!) at a price we were both happy with. Everyone won.
11-03-2011, 02:29 PM
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As Tim mentioned above - search for our discussions, as it has most of the details. Additional Items to consider are as follows:
1. PFS will not allow a lease assumption if there are less than 180 days (6 months) on the lease.
2. There are tax implications on Lease assumptions - get familiar with the tax impact depending on your deal ( ours was a California/Texas deal).
3. If you purchase tax implications still apply - if its in the same state, this process should be much simpler
taxes can turn a good deal into a fair deal or worse - Good luck
1. PFS will not allow a lease assumption if there are less than 180 days (6 months) on the lease.
2. There are tax implications on Lease assumptions - get familiar with the tax impact depending on your deal ( ours was a California/Texas deal).
3. If you purchase tax implications still apply - if its in the same state, this process should be much simpler
taxes can turn a good deal into a fair deal or worse - Good luck
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11-03-2011, 02:51 PM
#8
Taxes can be an issue but can be avoided if you have the dealer step in - his fee will generally be less than tax.. ask the seller to get the used car manager at his dealership involved or any dealer you might have a relationship with.
11-03-2011, 11:20 PM
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PasPar2 - What are the Tax issues?
From what I understand - in CA - I am going to have to pay sales tax (use tax) regardless of whether I purchase from a dealer or an individual?
From what I understand - in CA - I am going to have to pay sales tax (use tax) regardless of whether I purchase from a dealer or an individual?
11-03-2011, 11:42 PM
#10
Three Wheelin'
The tax liability is applicable to the seller. In California, if you purchase a car with the intent to re-sell you do not incur a tax on that purchase. That is, you have ten days to re-sell the vehicle without having to pay sales tax. Of course, if you buy out your lease for $100 and sell the car for $150 within those ten days then you will have a gains tax to pay on the $50 but not a sales tax.
11-03-2011, 11:45 PM
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Not true. In recent years with low residuals and the high prices of second hand cars, many people have "equity" in a lease. For example, he owes $50K to pay off the car, someone is willing to pay him $55K to buy it.
Only safe way to do it as far as i know. Is for him to pay off the lease and get the pink slip etc. Then you pay him and buy the car. Any thing else and you would need to speak with Porsche Financial about the exact way to do the same thing.
Only safe way to do it as far as i know. Is for him to pay off the lease and get the pink slip etc. Then you pay him and buy the car. Any thing else and you would need to speak with Porsche Financial about the exact way to do the same thing.
11-04-2011, 12:27 AM
#12
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True, but the seller will also have to pay taxes when he purchases the car from the lease because he didn't pay sales tax when he leased it.
11-04-2011, 11:58 AM
#13
Three Wheelin'
I agree with your statement. The lease is initially set up though so that the lesee is supposed to have a "pay as you go" arrangement. They make lease payments concomitant with the vehicle's depreciation. If the vehicle retains more value than predicted, then, yes, the Lesee could make a deal by selling the vehicle and getting some of that equity out of the vehicle, but he won't see any of that money if he returns the car back to it's owner (PCS or the lessor) at the end of the lease agreement.
On a related note, if you were to buy out your lease seven months early you don't pay PFS the seven remaining payments plus the residual. Instead, you only pay PFS for seven months of lease charges (you are buying the car so the use and tax components are not calculated into the figure. I guess the point is that if you know you are going to buy out your lease several months before its end you can save some money by doing it earlier rather than later. This is something that is also buried in the fine print of the lease and PFS doesn't seem predisposed to really make you aware of it.
Sorry to be long winded but this is one of the few topics on the Board that I actually have first hand knowledge about.
