Trade in an old car and lease a new one in Canada – Question on down payment

x2 the dealer is just wrong. It makes no difference if they apply the trade to the value of the vehicle or apply the trade to your down payment.

One item of interest for you - regardless on if they apply it to vehicle price reduction or down payment, you get a tax credit for the value of the trade in. Once you calculate the total sales tax on the value of the lease, you apply the credit from your trade towards this sale tax - effectively lowering your total payment.

I've only seen the more money down for better rate on Lexus, haven't seen this on any of the German makes.

As for VW not being ready to sell 50K vehicles, VW has been at the Touareg game for over 10 years and VW Finance runs financing for VW, Audi, Porsche, Lambo, Bentley, Bugatti so they are more than familiar with financing expensive vehicles into the 7 figure range. You may have just gotten a bad sales rep.

new2treg said:

Why can't you just trade in the Lexus in for the Touareg? If you owned the Lexus outright why wouldn't you want to own the Treg? I'm confused.

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I am not sure I want to own the Touareg outright. I switch cars too often, so having a guaranteed value at the end is appealing, and I don't need to deal with trade-ins or private sales.

I want the value of the Lexus in my pocket rather than in VW's, and pay VW as I use it instead of pre-paying.

Here are cases:

Case 1: Say a Touareg is $60k and subtract $10k from the Lexus, and the residual of the Touareg is $30k, I am owe the amount of $20K+interest in the next 36 months. Meanwhile, I do not have $10k in my bank, and I do not own the car.

Case 2: Say a Touareg is $60k, VW pays me $10k for the Lexus, and the residual of the Touareg is $30k, I am owe the amount of $30K+interest in the next 36 months. I can make more than the interest saved with the $10k in the bank or some investment.

Ultimately, in both cases, the dealer gets $50k and the Lexus, just a matter of paper work.

Also, if I totaled the car, the insurance is going to pay the financing company before me, so I lose some amount of the $10k, and that "some amount" is an unknown - a huge one. If I want to transfer the lease, I lose the down payment. (It is probably hard to *sell* a lease contract to someone.)

I own the Lexus outright, and I don't want to give it away to VW so I can have an artificially lower payment in 36 months. If they include the trade in the total obligation, it is the same as putting a huge down payment on a car that I don't own, and many people discourage down payments on leases.

Some people do put a down payment on a lease, and I want to hear their reasoning, which I think is probably reasonable too.

Thanks!

Never put a dime down on a lease. The whole point of a lease is to use their money since its pretty easy to beat a 1 point interest rate, and also use their money for an income tax expense benefit (if you can). Yes they will charge tax on a downpayment since any payment toward the lease is taxable (you don't pay tax on residual value). Advantage 2 of a lease is a guaranteed residual, giving you a pre-determined "out" point at a guaranteed price.

Understanding a lease is pretty easy, you pay interest on the whole amount of the vehicle (say 60k), but you only make payments plus sales tax on the difference between purchase price and residual (say 30k). So pay down 30k while paying interest on 60k is essentially the structure of the deal. There is ZERO advantage to putting money down as you are still paying the full interest cost.

I asked another dealership the same question. I told the salesperson whether or not I would buy a VW depends on his answer, and yes, the dealership could pay me for my old car.

Also, here is a fun dealership story for you all:

The first VW dealership that I visited was chaotic, but I think their salespeople uses chaos as a sales tactic. On the phone, the salesperson at the first dealership told me that he would give me X discount, send me an email of a scanned ads that was so small that I could not read the fine prints, and when I arrived, he told me the discount was only for a manager’s demo gasoline engine with an interior that smelled like French fries. Another salesperson told me that they were not giving the cars away, and I told her that I had a price in mind, and I was not going to give one cent more than that price away, so I told her we were on the same page (with my trademarked smile!) I should have walked away, but because of how they acted, and I had a few hours to waste, I wanted to experience for myself how bad a buying experience can be. I heard stories, but I never experienced one.

I told the salesperson that I wanted a brand new car with a diesel engine. The salesman acted all surprised when I showed him an invoice report. After two hours of sharing personal stories, testing my old car, and trying to get my commitment to buy, he came back from his manager’s office and presented me the “great news” of a mediocre deal, subtracted the value of the old car from the new car, and said “look at the LOW payment!” To top it off, the salesperson joked why I did not look surprised at such “amazing” deal (I think I gave him my unimpressed look) and told me the deal was good for the next hour. He also said he could lower the price if I went with the demo. (Since the beginning, I told him I wanted a diesel only. I thought that he was listening to my needs, but he was just trying to make a sale. I really thought he had my best interest in mind LOL.) It was an experience all too stressful but funny at the same time, and I went doing errands instead. He called a little over an hour later, and I told him I would go with Lexus instead. (However, since, I have changed my mind and I am still debating between VW and Lexus.) The car that I wanted is still on the lot today.

Also, for the vehicle that I was wanted, there was a huge gouge in the interior that cut across the plastic trim to the aluminum trim to the wood trim. The gouge which was probably caused by a knife when someone was removing the wrapping. (They said that they could change the trims, but I am unsure that they are competent enough to change the trims without causing rattles in the future.) With their demos, it looked like someone used a really rough clothe to wipe the wood trims, so the wood trims were horribly scratched. I am not sure if I want to have my car serviced there if they treat their unsold inventories like that. (This is why I originally said that I am not sure whether or not VW is ready to sell and service a car that costs more than $50k.)

The sad thing was that one older couple bought a car at the same time, and I guessed that their salesperson used the same tactic, and they did not get a good deal.

If Lexus (of all brands) can give me below invoice price with all incentives, snow tires, and free maintenance with little to no haggling and top-level service, I am pretty sure VW can too.