Lease Buyout vs New Lease

[TheOldObiWan]

I am looking for advice on next steps and curious to see if anyone can share their experiences. I have never leased a vehicle before this one and I did so because for the past 10 years I have traded my vehicle in for something newer every 2 to 3 years. I just never seemed to be satisfied with the vehicles I've bought in the past. But I have completely fallen in love with my Tacoma and feel like I should have financed it instead of leased.

I am not due to return my leased 2024 TRD OR Premium Hybrid till January 2028.(19mo from now, leased started January 2025)
The MSRP was just under 60k with all the options it has. I had about 9k down on it from my trade in. So final adjusted capitalized cost was 50.9k. My monthly payment is $550.
Right now I could buy out my lease for around 46k and my end of lease buy out is 42k.

Now I have been looking at the used market for similar to my truck and finding them sell at around 37k.

Who knows what it will look like in January2028 but if the used market is selling them for around 37k and my buyout is 42k can I negotiate to buyout my lease for closer to the market 37k?

My understanding is that when it comes time to return it and I'm looking to get into something new if the value of my taco is not above that 42k I won't have any "trade value" to go towards my next lease or purchase. Is this correct?

So with all of this in mind. I'm thinking do I buy out now at 46k? Do I wait to see if I can negotiate a lower price once it comes to term? And if I don't have residual value I think it would be hard to get into a new truck that has all the options I currently have without a considerable down payment or a hefty monthly payment.

19months at $550 is $10,450.
46k financed over that same time with a similar payment around 5% interest would bring my principal close to 38k by January 2028(rough estimate)

I Just don't know what the best way to save money in this situation is and I definitely don't want to go underwater on a lease or loan in January 2028.

Thanks in advance!

Sponsored

 

[NoSlushbox4Me]

Have you been modifying the lease truck? If so, are they mods that can be removed? Is that a consideration?

 

[saerandy]

I've been pondering your exact situation, and here's my thoughts. If you buy now for ~$46k: You immediately take on the depreciation risk yourself. And right now the market for comparable trucks appears closer to ~$37k. Even if your specific truck is cleaner/better-optioned, there’s a decent chance you’d still be over market value today by several thousand dollars.

The lease is currently protecting you from that possible downside. Your $9k trade equity is already spent. Don’t mentally reuse it in future calculations. It’s gone into the lease structure already. Right now, the lease is functioning exactly as intended: it protects you from uncertain resale value while letting you enjoy the truck. If the market value is wayyy below what your lease-end purchase price would be, then you win and Toyota loses.

One thing worth considering: if the vehicle market improves by 2028, meaning lower interest rates, better manufacturer incentives, and stronger residual values, you could potentially step into an even newer or higher-trim truck for a payment similar to your current ~$550/month with zero down, etc. And it will be brand new with a full warranty.

 

[B-52 Gunner]

I've been pondering your exact situation, and here's my thoughts. If you buy now for ~$46k: You immediately take on the depreciation risk yourself. And right now the market for comparable trucks appears closer to ~$37k. Even if your specific truck is cleaner/better-optioned, there’s a decent chance you’d still be over market value today by several thousand dollars.

The lease is currently protecting you from that possible downside. Your $9k trade equity is already spent. Don’t mentally reuse it in future calculations. It’s gone into the lease structure already. Right now, the lease is functioning exactly as intended: it protects you from uncertain resale value while letting you enjoy the truck. If the market value is wayyy below what your lease-end purchase price would be, then you win and Toyota loses.

One thing worth considering: if the vehicle market improves by 2028, meaning lower interest rates, better manufacturer incentives, and stronger residual values, you could potentially step into an even newer or higher-trim truck for a payment similar to your current ~$550/month with zero down, etc. And it will be brand new with a full warranty.

Well said. I agree completely. Don't buy out the lease early.

 

[Briscoelab]

You aren't going to negotiate a lower buy out at the end of the lease... that's not how leases work. The lender/lease company (captive or otherwise) takes the hit and deals with the difference. Manufactures often artificially subsidize/prop up residual values to make leases more enticing to shoppers.

Buying out a lease early is not a wise decision. Buying out at the end can be a bad decision as well. This depends on how propped up the residual value is at the start of the lease (which based on you finding similar trucks for $37k now and a $42k residual on your truck... would suggest is the case). There is zero disadvantage to waiting until closer to the end of your lease to decide what to do.

You could, for instance, get a 2 year newer used Tacoma for the same $37k they are going for now... because time will have passed. You might be in a position where you have some "equity" in the leased vehicle if you wanted to use it toward a new finance deal or lease. This isn't as straightforward as with a financed vehicle, but can be thought of in analogous ways.

All that said... you should almost NEVER put money/equity from an owned vehicle into a lease. All you are doing is a capital cost reduction. Sure, security deposit, taxes, first/last month, etc are reasonable to pay up front. But cap cost reduction is just money you were going to spend anyway. Sure it makes you payment look lower, but it doesn't help you in the end. This is a common mistake people that have normally financed/purchased vehicles make.

Again, ride this one out and decide what you want to do at the end. You can always just lease another and have a new truck every 3 years. This is appealing if you don't do mods and want the lower payment.

 

[Dirt]

Decisions, decisions. You like this rig and think you want to keep it, buy it. Put your money into something that will give you a level of enjoyment you haven't had in ten years. You got a good one you love, don't overthink it on what might be.

Sponsored