Financial Regrets: Leasing a Car

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Leasing a car is the most expensive way to operate a vehicle. This is a lesson I learned as I was transitioning into my frugal phase in 2010, ignored it and leased a car anyway. Great start to a lifestyle change: ignore the advice of said lifestyle experts. One of my sisters even said to me, “did you see that chapter in Dave Ramsey’s book about this?” At the time, I had a pit in my stomach about it, which I ignored in favor of a quick fix. Any experienced finance professional will tell you that buying a used, reliable car and “driving it into the ground” is the route to go. My previous car was the first one I ever owned (also a lease to begin with) and I had it for ten years. After a series of irreparable breakdowns, I looked into leasing a Kia because I had no money for a new car. But I know you dear reader, are smarter than that and have funds set aside for just this type of dilemma. Within a week, I had a new car and shiny monthly payments to go with it. Boy was she cute: stick shift, bright red, sporty. It didn’t matter that I was throwing my money at a car I didn’t own and never would. I had a way to get around! And it never broke down! Free oil changes for a year? Sign me up, scammers!

Believe it or not, this is not the reason I regret my lease. You don’t need another person explaining to you why this is a bad financial decision; if you do, google it and you will see hundreds of articles on the topic. I regret leasing my vehicle because of the specific situation I went through in order to give it back.

When your lease is up, you have two choices: return the car or buy it. On my contract, I had to pay $400 just to do the former and then any additional amount they wanted to make up because of wear and tear. The car was in good shape, but there were some scrapes on the exterior from years of curb parking in the city. I looked up the Kelley Blue Book value of my car at the time and it was $3,000 more than the amount I owed on the car if I were to buy it. This is rare and I saw an opportunity to make some money. If I bought my car at the end of the lease, I would avoid the $400+ in return costs and could then resell it for more than I would be paying. In other words, I could potentially make a fast $3,000 if it all went my way. Seems pretty clever right? Plus, California has a law that if you resell a vehicle you purchased within ten days of the title signing, you are exempt from paying tax on it. Even more money saved! This was the goal… and I failed. Miserably.

I bought my car through the parent company via check for the full amount, as opposed to the Kia dealership. By doing so, at the recommendation of the company, I was able to avoid the tax and registration costs, knowing I would not own the car in a few short weeks. But the problem here was the title was processed about a week before it was in my hands for signing, because it came from out of state. The date on the title is considered the start of the ticking bomb for the “sell your car in ten days” game, despite assurance from the DMV that I could fill out a Statement of Facts explaining I did not receive the title until a week later and be in the clear. So really, when I received the papers in the mail, I actually had about three days to sell the car, unbeknownst to me. Instead I took exactly ten, making nothing near what I was going for (actually losing money). An absolute fail. I should take a moment here to note the importance of a clear head when trying to coordinate a transaction worth thousands of dollars. I was on a film set, standing on the curb outside, talking with the DMV lady to get information about the process and scratching notes on the back of a call sheet. This is already a problem. One ear was waiting to be called back inside, the other trying to make out what the person was saying over noisy traffic. My husband had flown across the country for a family emergency and received tragic news that weekend which was completely distracting me. I was emotional, he was not present as a sounding board and my head was totally muddled as a result. Not a great combination when the stakes are high.

I had posted the car on Craigslist to sell that week. No dice. I found a company that comes to your house and appraises the car, giving you money on the spot. Their offer was insulting. I went to Carmax and they turned me away because I had no registration. I called a company I had previously sold a car with, they gave me a quote over the phone. Still too low. I did my research and found another great place to sell the car, hoping to make back the money I spent and then some. Their reviews were solid, they were known for paying higher than other places and they had a reputation for honesty. Another personal life mistake: I waited until the very last second to do this. It was “day ten” in my brain, so it had to happen then (when in reality, I was past the due date and could have waited as long as I wanted because I was going to have to pay tax no matter what). Previously stated emotional tragedy in our personal life was pending and required my husband and me to fly out of town again that very day. I had a flight within hours of trying to sell the car and my bags were in the trunk. I’m sure I looked shady as hell; “here, take the keys, I got a flight to catch”. I left the reputable car buyer place in tears after learning that according to their vehicle analyzer, my Kia had been in an accident prior to my leasing it, greatly decreasing the value. The dealer knew this and leased me a “brand new car” anyway. I was a hot, crying mess. The man showed me all the subtle evidence of this. He opened the trunk and pointed out how the paint color on the inside did not match the factory paint. He explained how having seams in certain places is an indication that parts had been replaced from rear-end damage. He also shared with me what he would have paid if these defects didn’t exist, which stung a little. I was fuming; shocked. I didn’t want to miss my flight and had to be across town. Crying in front of stoic mechanics was crazy awkward. Needless to say, they wouldn’t purchase the car and instructed me to go back and sell it to the scammy dealer that I got it from in the first place. He said if they tried to low ball me, to demand an explanation, because unless they were willing to admit the stuff they had covered up, they should be giving me a fair price.

Here is mistake #2,045: I went into the Kia dealership with 30 minutes to spare and puffy eyes. I’m sure my luggage didn’t help either. They were already winning before I set foot in the door. I had no time to negotiate and they had the upper hand knowing I was rushed. In the end, the accident was never brought up and they gave me enough for the car to where my loss was only about $1,000. With my ride to the airport waiting outside, this was not terrible–and very possibly equal to what it would have cost me had I returned it at the end of the lease. I felt okay about it, even with the loss. It was over, my hands were free, the car was gone forever.

Ah…but that sneaky sales tax. There had to be more, didn’t there? I went to the DMV to pay it. They were all, “huh?”. I left the DMV and called the State Board of Equalization, who were all, “huh?”. Apparently my situation is very rare, and most people do not take advantage of the “resell your car in ten days and don’t pay sales tax” loophole. This left very few professionals who knew how to deal with my case. Transferred call after transferred call led to my writing a lengthy letter, providing all the necessary documents, to the State Board of Equalization–the people who I was told handle the tax. They replied a month later saying I was denied the tax exemption because the date on the title was two weeks prior to the date I sold the car. Go figure, Statement of Craps. This meant, I owed even more money on a car that wasn’t even in my possession anymore. And they didn’t bother to tell me the amount I owed either, they thought it’d be cute if I could figure it out all by myself like a big girl. Did I mention during this period, we had no car? I took a bus to the DMV and got picked up by my sister. Things were going SWELL.

Being the idiot that I am, I read the denial letter, put it aside and thought, “I’ll pay this during tax season”…because that’s when you pay taxes, right? Apparently not sales tax. Little did I know, I was earning interest for every month I did not pay the tax. Finally, as the end of the year approached, I started thinking about the car again. I thought to myself, “Sara, you savvy economic genius you, why don’t you look a little more into that sales tax situation to see if you need to pay it in the same calendar year as the purchase?”. My research was inconclusive, so I thought I might as well pay it and be done with it, just to be safe. Look at me, two steps ahead of the game, thinking on my feet. So last December, I went into the DMV and paid a total instructed to me there (after much confusion and deliberation on part of the staff, mind you) in the absence of a total from the organization that should have provided one. Finally, I had wiped my hands clean of the situation. My debt was paid, people! Tax payer here, close my tab!

No such luck. In February, I received an outstanding balance notification from the State Board of Equalization, asking for the payment that I had already made through the DMV–upon their instruction. They had kindly included an actual dollar amount to pay this time. It’s really great that the DMV and BOE communicate so thoroughly. Rather than freak out and and start crying, I calmly wrote a bitchy letter in response. I explained every detail of what happened, provided all the necessary documentation AGAIN and wrote a check for the interest accrued. I scoff at your $78, BOE! It was over as far as I was concerned. The victory was mine.

You’ve heard this sad song before. It wasn’t over. Yesterday, as in the day before April Fools’ (if only it could have been today!!), I received another notice that I owe the tax and not one word acknowledging my previous communication. Are you joking, BOE? Get your act together, girl! Did you not see the lengths I went to be clever and condescending all in one carefully constructed letter? What about the photo copies I made of my DMV receipts? Or the precise math I did to calculate the actual interest I owed versus the amount you were trying to charge me? Not even a thank you? I should charge you interest for how long you are drawing this out.

Some of you may read this and think that this situation is so specific that it won’t deter you from leasing a vehicle. But may I remind you, that had I followed Dave Ramsey’s (and countless other financial experts) advice, this entire thing could have been avoided. Here are some lessons to take away from my unresolved car frustrations:

  • Do not trust a car dealer. Ever.
  • Do not lease a car
  • Do not pursue a rare loophole that no one in the field is familiar with and expect good results
  • Do not lease a car
  • Do not negotiate a high stakes transaction during an emotionally tumultuous time
  • Do not lease a car
  • Do not trust the DMV’s counsel without a second opinion
  • Do not lease a car
  • Do not attempt to sell a car in ten days
  • Do not lease a car

Even if you never find yourself in my situation, you should at least find five of these lessons useful. I don’t want to discourage those of you who do lease a car, as I have done it twice and survived. I just hope this causes you to think twice before acting. Do your research and know how much money is truly at stake before you sign the papers. It’s a lot more than the monthly statement reflects. I’ll let you know how my story ends when I do.

 

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3 thoughts on “Financial Regrets: Leasing a Car

  1. Pingback: BOE And Savings Replenishment Update | Knuckles & Twine

  2. I so regret leading my car, every reason I thought I had to lease wasn’t true and every dime I thought I’d be saving was gone. After so may oil changes, they started charging me, the the filters, the alignment, the brake dust.i can’t leave that place for less than two hundred dollars. The salesman who sold me the car quit the next week, so my phone calls and emails were ignored and someone selected do not contact via email with surveys, I asked them you selected that, they said you did. I said no I didn’t!
    They wanted to give me 12,000 a year , I needed 20,000 a year. The most they would give me was 18,000 a year.
    And my payment went up to almost four hundreds dollars.
    Paying insurance and tags , plate fees and taxes to county and state for a car that I don’t own is extra insulting.
    My lease is up in July.i may turn it in early. They demanded a pay a 500 dollar wear and fed up front. I worry everyday about being dinged.
    The new finance officer wants me to drive up and talk to him about my options and I wrote back only if you adjust my mileage .

  3. A new finance officer is trying to get me to trade in my lease car and trade up to a new car and keep the payments the same . I want to get rid of the lease. Walk away from them and go somewhere closer to home and get a Preowned one year old with low mileage car and have a lower payment so I can pay off my credit cards and buy stocks and go on long vacations.

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