Overhaulin'

Is leasing a car a way to get out of an upside-down loan?

Right now, I am upside-down on my loan. I owe about $18,000 on a car that is probably worth $14,000. I went to a VW dealer who told me that he would give me $17,000 for a trade, and could get me a lease for about $315/month (which is lower than my current car payment). He said that this may be a good way for me to get out of being so upside-down so that in three years I am essentially back to a blank slate. Good idea, or not?

Public Comments

1. Where would the $1000 difference come from? Also....he said ABOUT $315...I bet it winds up being a lot more. If they stick to the initial figures it wouldn't be too bad. I don't really believe in leasing unless it is a business write off, but in this case it could help (if they don't raise the actual payment amount and/or lower the trade in allowance).
2. Yes, leasing is the only way to get out of the negative equity. Your salesperson is right. You're out of it in a few years and you are starting fresh. Is it a 3 year lease? that seems awful cheap for a 3 year lease w/ negative equity. just make sure it's not a 5 year lease. From your friendly toyota salesperson.
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4. Yes, many people use a lease in this way, although it only works if, and only if, you can stick out the lease until the end. If you try to end the lease early, you'll be in a worse upside down situation than you are in now. If you car dealer said he would give you $17K for a $14K car, then you can be sure your lease is based on a car price of $3K more than you would have gotten without the trade, plus the $1K in negative equity (difference between $18K you owe, and $17 he's giving you for your trade). That doesn't necessarily make it a bad deal, but just so you know. BTW, the reason the dealer is doing it this way is not necessarily to make you think you're getting a great deal, but he knows the lease company might not accept a deal with too much negative equity. So he just jacks up the price of the car instead. These and other dealer leasing tricks are discussed in more detail in this article: http://www.leaseguide.com/Articles/toptricks.htm Make sure you understand how leasing works so that you know exactly what the dealer is doing with the numbers. Again, leasing is a popular way to get out of being upside down, as long you understand leasing and can stick with the lease until the end. Good lcuk.