I recently, leased a car and I want to do buyout and do refinance (I live in CA). The total purchase price is around 45k. Which method do you suggest and is there any difference in terms of work load, complexity of the process or shop the best refinance offers?
1. Write a personal check and buyout. Afterward, shop for refinance offers from banks/CUs.
2. Start shopping refinance offers from banks/CUs, ask them to write the check to the leasing agency.
I would suggest option 2. This way the new bank can get the title and make the payoff from the old bank. That feels cleaner than you writing a check and then have them finance the car through you as the seller back to the bank. I would be willing to bet, the rates are likely a tad better if they pay the selling bank directly.
HOWEVER......one HUGE NOTE on this....when you leased the car...you paid the license fees, other deal fees and a small sales tax amount on that day. Then each month you've made your lease payment which included sales tax. HERE'S the kicker.....when you or the other (new) bank payoffs off the old the bank and you finance the car, the title will need to get reissued and the State of California will be coming to you for the FULL Sales Tax amount of the car. If you don't pay that....they will not reissue title or register the car. Will your new loan/bank finance that...not sure.....that's likely dependant on their own practices and you'll need to get clarification.
$50K car loan payoff with typically 8% sales tax = $4000 plus re-registration fee is typically 1.5% of the $50K so that's another $750. No, you won't get a credit for what's already been paid. As soon as the leasing company/bank gets paid, they will hand the loan to a new bank. The DMV will need to reissue the title to you and new bank....so instead of "Lessee and Lessor" it is Bank and Buyer. The DMV will not reissue until the sales tax on the payoff amount which gets recorded is paid. Be prepared to pay that bill upfront or find out if your new financed bank will pay/cover those fees in the new loan if you need that extra help financing.
The total lease buyout already included the 4k state tax. So, it should be good to go. I may suggest the banks/CUs to consider a down-pyament of ~2-5k to see whether they can reduce the refinance APR. The APR for auto-loan is very high now (I even heard 9% ).