Jooyoung99

Hello,

Has anyone tried to trade in their car to a dealer?

I'm consigning my car to a local dealer, and I was shocked at what I found out.

I called Ally and told me that my purchase to price of the leased vehicle is $75,825.22.

When the dealer called Ally to verify the amount, they got a quote for $82,000. That's more than $6K difference!!!

I asked them why there is a such a difference. They told me that since the car is leased, they can sell the car to the dealer at a different price. I don't understand how this is legal.

So basically I have to purchase the vehicle first to avoid the $6K of additional payoff. Has anyone deal with this BS before? I read the lease contract front and back, and I don't see this anywhere.

davepl

They own it, not you, so they can do what they want (subject to the lease terms). Your option is to buy it out and the do whatever you want with it.

You might have a guaranteed price of $75,825 but they're under no obligation to sell it to anyone else at that price.

I'm not an attorney and haven't read your lease, but you don't have the option of telling them who to sell the vehicle to, I guess.

Inconvenient <> Fraud

Worst case would be if you have to go through two steps (one to buy it from Ally, one to sell it to the dealer) and there's sales or business tax on each step. That varies by state.

Jooyoung99

I disagree. I've never seen this kind of practive by any other leasing companies. Lease is just another financial instrument. It doesn't give the right to Ally to charge a different payoff to a dealer vs to me. I'm not even trading in the vehicle, just consigning it to a dealer.

I probably won't have a legal recourse, but I'm sure going to tell everyone about their dishonest practice.

davepl

They have the right to do whatever they want, it's not the government or a public service or a relative, right? They and you are bound to whatever it says in the lease contract.

Certainly they don't have a fiduciary duty, if that's the right term, to protect your best interest.

Not like I'm rooting for them here, just saying they're only obligated to do what they signed up to do in the lease docs. I would have thought, even if they want to preserve their right to sell it to someone else at a different price, that they would have come up with a lower friction way for you, the original lessor, to get out of it in a trade. So I'm with you there.

MikeyTX

Based on my past dealings with Ally, I'd trust my ex wife before I'd trust them. And that's not saying much.

Jooyoung99

lol. What happened if you don't mind me asking?

I guess I'm better off doing a lease transfer.

TARANTULA

They did the same to a friend when he tried to trade his Jeep. He ended having to payoff the Jeep before he could trade it.

3 Z06ZR1

They sound like some real crooks to me!
Could you get a 90 day with a balloon payment loan for the 75k and then co sign it to the dealer. Pay the loan when it sells. But the snare is the value might be less than 75k the way prices are now.

Jooyoung99

Yes. There are ways around it. You can pay it off and then sell it to the dealer. Or have the buyer get a personal auto loan to pay off the lease. Or even do a lease transfer.

I don't know why Ally would make things difficult. It's definitely a very shady practice. When I called, they wouldn't even quote me both pay off quotes. Dealer had to call them separately.

davepl

Anyone venture a guess as to why they're making it difficult? How do they come out ahead?

Crunch527

Either way they always come out ahead...no different than vegas...they make money on the lease every month...its guaranteed money over the life of the lease...they ALSO make money by you selling early and in this case they set the price.

Leasing is never a good deal for the buyer/renter...buying a $100K car on a lease with restricted miles (if you go over you pay) plus sweating every little nick, dig, scratch while you have the car in possession is BS...I'd rather buy the car, eat the depreciation and cut out the third party...my car, my rules...more people involved, more problems...always...

Leasing is a great way to get to drive a car that you cannot afford. I know some folks lease cars and swear by it...I don't.

I am sure some will disagree...

davepl

We lease our Escalade and turn it in for a new one every 25,000 miles, which is about 2 years, and manage to do so without putting any cash in. I call it the "Escalade Subscription Program". It's just a monthly fee I pay to have an always-new Escalade in the garage.

In that sense it works out well. If I had to put in more money each time to cover depreciation or capital cost I'd agree with you, but since I've managed to avoid that to date, and I'm 3-4 vehicle cycles deep into this, it seems to be OK.

Now if I got dinged for mileage and condition and so on I'd be bummed but it's worked out OK so far. That probably only works going from one GM to another GM with the same leasing company, I don't know.

It probably would have been better financially to have bought the first one and driven it into the ground with 150,000 miles, but then I'd have an old one rather than a new one. But no payment.

Everything else I buy cash up front, like the Z, because I keep them too long. If you're keeping you vehicles 5+ years then I agree it doesn't work out well, and can be just a way to squeeze into a car that you couldn't finance otherwise.

Jooyoung99

I know you mean well to write this, but not a very good advice.

Every situation is different. There are times paying cash is better, financing is better or leasing is better.

For this particular car, because of the sales tax in California and short duration I'm keeping the vehicle, it was better to lease.

My current lease payoff is $75K. If I financed at 1.99% for 60 months, I would owe $82K because of the initial sales tax being added. That's $7K I'm paying less.

Ally's dealer payoff policy sucks, but there are ways around it. I'm most likely going to transfer the lease to someone else, or payoff the balance and then sell if to the dealer. Regardless, it's costing me $7K less by leasing vs financing.

madrob2020

Most states (even some counties) figure sales tax on leases differently. Here in Hillbilly country (Arkansas) you have to pay the sales tax up front on total value of car when lease is signed whereas some states allow you to pay it on the monthly lease payment. Also (maybe true elsewhere) we have to pay sales tax based on the difference on value of trade-in versus MSRP. We don't get to subtract the rebates, dealer incentive, etc. So if I pay $10,000 less than MSRP-too bad, I still pay sales tax on full price-Yee-hi!

SLEEKVET

I will agree with you - I leased ONCE and got burned, never again. Dave Ramsey calls it "Fleecing" and though I may not agree with everything he says, leasing may not be the best financial option.

OP - I agree with others to try and figure out how to get out of the lease (buyout) and finish your transaction so you can move forward. Sorry you are going through the leasing headache.

fasthwks

Ally has the lease contract with you, not anyone else. The explanation for the two different numbers is that they will charge the dealer "their market price" for the vehicle at the current time of payoff request. The only way around it in OH at least is to sell the leased vehicle to the current lease holder, collect sales tax, title and then trade it in. Ally will even audit the dealer from time to time and make sure the dealer is actually completing the sale including titling. They are not the only bank that will do that on a lease....
I deal with it every day and is a PITA but you cant change it.

Higgs Boson

Ally is not the only lender that does this. US Bank carries most of the leases for Jag and Land Rover and they do it too. Just because you dont like it doesnt make it illegal or shady, lol.

You lease a car and do not pay off the principal. If you want to get out early, someone has to cover the difference. It's a basic economic principle, No such thing as a free lunch.

Jooyoung99

US Bank too? I just recently sold a US Bank leased car and had no issue like this. How is paying off the balance I owe on the lease same as "Free lunch?" I've checked the lease agreement again. It has no language about different payoff amount. There is absolutely no legal merit on having two different payoff amounts. Why should a payoff amount be different when I purchase the vehicle vs trading it in? It also states there is no early payment penalty. Problem is that $6K additional payoff amount doesn't justify spending $10k+ on litigation. So most people are not going to fight it even if it's illegal and fraudulent. I filed a complaint in consumer.org and BBB and saw there are hundreds of other cases like this. Maybe someone firm will start a major lawsuit.

There is no way I'm going let the dealer pay the extra $6K. I just have to pay off the lease first and part way with $75K for 10 to 15 days until I get my title. Also, in California, if I sell the vehicle within 10 days, I don't need to pay the sales tax.

Higgs Boson

you can pay off the balance you owe (balance to maturity), that is not the same thing as a payoff. a lease does not pay off a car at the end, just down to the agreed value when you signed up. That means there is a balance (Residual Value).

You can fulfill your contract by paying off the lease and give the car back. You don't own the car so outside of some state to state variation, you don't get trade tax credits (in most states). If the dealer wants to buy your car from the lender (not the same as trading in) then the lender can let them know the purchase price (it's their car).

Nothing even remotely illegal about it. Why don't you just drive the car until the lease is over and make the rest of your payments along the way? Why did you sign a contract you didn't plan to fulfill? Why didn't you buy the car in the first place? You seem like an emotional fellow rather than logical, I guess it seemed like a good idea at the time?

Leases are great if you know what they are and why you are leasing. They serve a purpose. But they suck ***** to get out of early. And I am sure living in California doesn't help you.

If the dealer is keeping the car that means you are not. That means they lose you as a customer and any residual income that comes with it. There is a switching cost.

A point to note, this happens when a manufacturer uses third party lenders for their leases. If you lease a Mercedes Benz, it is the simplest thing in the world as they are their own finance company.

Jooyoung99

That's not how it works. You are allowed payoff lease early on a close ended lease. Lease is just a loan with a ballon payment at the end. Just like a loan, lease has an amortization schedule. I've leased more than 20 cars and never held to maturity. This is first time I'm finding this. And hundreds of other people have filed complaints about it. Banks do things that are illegal and they get fined and sued for it all the time. Take a look at the news about Deutche Bank.