<BLOCKQUOTE><font size="1" face="Verdana, Arial">quote:</font><HR>Originally posted by rd100acrew:
3 years ago I made a mistake because I was influenced by a car salesman to purchase on lease a Toyota Corolla. I had objections to that purchase option because I knew I was going to be working a job that required alot of commuting. When I explained this to him he said don't worry when you trade in your car for another at the end of the lease, we won't charge you for the extra miles. After 3 years of payments, I have made $9000 in lease payments. My car ( this is the last month of my lease) has 100,000 miles. At this point I want to just buy the car for it's Kelly blue book value, $4800. I don't want to purchase a new car and get into another long term purchase arrangement with this dealorship. However, I noticed in my original contract that they list the residual value as being 9467.82. Do I have any rights as a consumer to negotiate for them to reduce their qouted residual value closer to the blue book value? Please help!<HR></BLOCKQUOTE>
My response:
First, when you signed the contract, you agreed to some important points, the least of which are:
1. Nothing orally stated to you has any force or effect. Any terms or conditions, e.g., "We won't charge you for extra mileage", must be in writing and within the four corners of the vehicle lease contract.
2. You agreed to the residual value of the vehicle at the end of the lease.
You could have purchase "Residual Insurance" to protect you from the difference between the actual value of the car versus the residual value of the car.
Residual value insurance is one of the many new financial guarantee insurance products that have been brought to the market in an effort to bring insurance company capital to work in the arena of asset based finance. The main role that residual insurance plays in a transaction is to assist in one or more of the following transaction enhancements:
Create Increased Portfolio and Single Transaction Liquidity.
Favorable Accounting Treatment for Lessors, Lenders and Manufacturers.
Favorable Accounting Treatment for Lessees and Borrowers.
Removal of a Contingent Liability from Lessors, Lenders and Manufacturers Balance Sheets.
Support Regulatory Capital Requirements.
Hedge the Accumulation of Asset Risk on a Lessors, Lenders or Manufacturers Insurance.
Product Definition
A RESIDUAL INSURANCE POLICY INDEMNIFIES THE INSURED AGAINST A LOSS WHICH MIGHT OCCUR IF THE SALE PROCEEDS OF A PROPERLY MAINTAINED ASSET ARE LESS THAN THE ASSET’S INSURED RESIDUAL VALUE AT THE POINT IN TIME SPECIFIED IN THE POLICY.
A few key points from this definition deserve further explanation;
The policy is a contract of indemnity; its purpose is to reimburse the insured for a covered loss, thereby, returning the insured’s financial position to its level prior to the loss.
To qualify as an insured, a party must have an insurable interest; that is, the loss of asset value being insured against must cause a financial loss to the insured.
A sale or valuation must be obtainable by the insurer prior to establish the basis for a claim. Generally, a physical asset to which the insurer can obtain title must be present in the transaction. A claim may be established through an actual sale (our "proceeds policy" format) or through an appraisal procedure (our "fair value policy"), the mechanism for which is spelled out in the body of the policy.
The asset must be properly maintained, according to the lease or loan documentation and in the insurance policy.
Your choices are:
1. To turn the car in and walk away, per the contract - - and pay any "over mileage" fees, and for damages to the vehicle above and beyond normal wear and tear; or,
2. Purchase the vehicle for the residual value.
It makes no difference that the actual value is lower than the residual value at this point. You agreed to those numbers, and that's it.
Your monthly lease payments were based upon the residual value. The higher the residual value, the lower your monthly payments were. Apparently, at the time of your lease, and in order to get you to lease the car, they raised the residual value in order to get your monthly payments down to the point where you felt comfortable to pay.
However, like any car purchase, you could negotiate with the dealership for a lower purchase price. But, don't even think that you're going to be able to negotiate the residual price anywhere near the actual value of the car.
Good luck.
IAAL
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