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Tips on Buying Cars/negative equity on a new lease trade in


Hello Sir,

I'm in a situation with a dealership that has my mind-boggled. I leased a 2014 Lexus ct200h about 2 months ago and loved it as an everyday work car..but it was too small for an family car so I took it back to the dealership to trade it in for a little bigger vehicle..and doing so even-though the hybrid was only 2 months old and less than 5k miles...they tagged me with almost $8,000 in negative equity and rolled that money on to the new vehicle...puzzled but needing another vehicle suitable for my family...I drove off the lot with the car...but after not being able to sleep over what I had done...I went back the next day to cancel the deal...the dealership informed me they had already sold the ct hybrid and there was nothing they could's been almost 2 weeks now and I'm still distraught over the whole dilemma..and I found out they lied about selling the question is how can a leased car have so much negative equity...and is the transaction legal?   please help

Hello Loretta,

They sure are proud of those Lexus's when they sell them and not so much so when they are taking them back in on trade. Sorry to hear about your situation.  

In hindsight the best answer might have been to keep the CT and find a nice cheap pure owned family people mover.  But let's. Get to your questions:

1. How can a leased car have so much negative equity so quickly ?

Since you were only  2 months into this lease the dis equity  probably didn't come from the fact hat it was leased.  I will explain why in a second but first I need to know more about the lease terms specifically:

  A) did you roll any negative equity into the lease on the 200h?
  B) even if you don't think you did was there any trade in on that lease with any payoff  whatsoever?
  C) what were your lease payments ....term of lease... And how much did you put down at lease signing?

Ok back to why it wasn't the lease that caused the negative equity. Let's assume your lease payment was $500 per month when you lease a car equal portions of that $500 monthly payment go to pay for interest and depreciation. Of this $500 monthly payment let's assume that $400 goes to depreciation and $100 to interest We all know that cars depreciate most rapidly at the start of its lifecycle or when it's driven off the lot in other words cars don't depreciate in
Equal installments every month.... Add to sudden decline in value as you drive it off the showroom floor the fact that the Lexus dealer probably made anywhere from $4-$5000 in profit on the transaction where you purchased the 200 H. If the Lexus took a $4000 hit when you drove it off the lot and the dealer made $4000 profit and you've only paid for $800 in depreciation I think you can see how quickly it can add up. Even though the car was less than two months old and had very few miles on it since it had been registered to somebody it couldn't be repaired as anything but a used vehicle and even the Lexus could've certified the car and sold it for almost the same price. I always preach selling any trade-in yourself instead of trading the minute the dealer put it on craigslist sell it yourself and save yourself thousands and thousands of dollars and this is a good example of just how much difference there is between the cars wholesale value ...the pay off .... And it's retail value

I know that that doesn't take the sting out of what happened at all and I don't know how to make it any better since it's already happened. I would definitely notify people at Lexus and the public to let them know that the dealer lied to you about selling your car. Lexus cares very deeply about the reputation of the dealers who ride for their brand and a complaint would not go unnoticed or on commented on. You should also post your experience with this dealer on places like ripoff report and other prior buyer forms in your area to let them know how you were treated. Well pet this happened it one of my sisters I would not have unwound the original deal but I would've done something to take the sting out of the new lease my thinking is that it's likely they made a big profit on both Cardinals the 200 H and the new one.... And that's perfectly legal but it's also kind a messed up  

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Roger Alvey


I can answer any question about the car buying process. I am a recognized industry expert on all issues regarding auto finance, including sub prime and buy here pay here financing, I can answer questions about car lock out systems, GPS monitoring by your bank, and about auto recovery methods and defenses. I am a 20 yr car industry expert and can tell you what to look for in a used car, how to negotiate the deal, help with how to market your own car, and how to negotiate with the internet department of any car store. I can tell you every single way the dealer is set up to beat you and how to avoid those traps, I can discuss all aftermarket and extended service contract products you will be offered in the finance process, I have lectured extensively on "The Best Way to Buy a Car" to civic groups and university students. I am a credit expert and can tell you what the dealer and banks are looking for and the rate you can expect to pay. HERE IS THE LINK TO MY OTHER ALLEXPERTS CATEGORIES WHERE I HAVE ANSWERED LOTS OF QUESTIONS HERE IS A LINK TO MY BLOG


20 years industry experience in top management of dealerships and dealer groups. Recognized industry expert since 2004 in the Top 10 industry experts for The Gerson Lehrman Groups Auto Industry Council. I also do consulting work for Atheneum Partners, Expert 360, Expert Connect and Coleman Research. I have been a franchise owner and understand all facets of the auto industry from the time the car leaves the factory until it leaves the lot with it's new owner. I have written training materials for both the prime and the subprime sales and finance process.

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