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Breaking Tesla Lease

Discussion in 'Canada' started by Totezla, May 12, 2016.

  1. Totezla

    Totezla Member

    Joined:
    Apr 23, 2016
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    Toronto
    Any insight on breaking a Tesla lease?

    What are the penalties? If a buyout is done, how is that amount calculated?

    I assume monthly payment x remaining amounts + residual but would appreciate any confirmation.
     
  2. araxara

    araxara S-P85#3,218 X-90D#3,299

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    Tucson, AZ
    This is from my Tesla Lease (administered through US Bank). It may be different in Canada. I haven’t examined it carefully, so can’t comment on it, but here it is (sorry, just cut and paste from PDF file so the numbering/lettering is off):
    1. EARLY TERMINATION
      1. LESSEE’S RIGHT TO TERMINATE EARLY. You may terminate this Lease before the end of the Lease Term if you are not in Default. If you do not exercise your purchase option, the charge for such Early Termination is the Early Termination Liability defined below.

      2. LESSOR’S RIGHT TO TERMINATE EARLY. We may terminate this Lease before the end of the Lease Term if you are in Default. If you do not exercise your purchase option, upon such termination we shall be entitled to the Early Termination Liability defined below.

      3. EARLY TERMINATION LIABILITY. The Early Termination Liability is calculated as follows:
        (1) The Disposition Fee; plus
        (2) An Early Termination Administrative Charge equal to the number of Base Monthly Payments shown in the chart below which is based upon the percentage of months in the Lease Term which have expired:

    % of Months in Lease Term Expired Number of Base Monthly Payments Due
    0-25% 2.5
    26-50% 2.0
    51-75% 1.5
    76-99% 1.0​

    (3) Plus all unpaid amounts that are due or past due under this Lease; plus
    (4) Any official fees, taxes and other charges related to early termination; plus
    (5) All expenses related to recovering, obtaining, storing, preparing for sale and selling the Vehicle, including reasonable attorneys’ fees to the extent not prohibited by law; plus
    (6) The Lease Balance; plus
    (7) The Residual Value of the Vehicle; minus
    (8) The Realized Value of the Vehicle.​
    1. LEASE BALANCE. The Lease Balance is equal to:
      (1) The Base Monthly Payment times the number of Monthly Payments not yet due; minus
      (2) Unearned Rent Charges included in the Base Monthly Payments not yet due calculated according to the Actuarial Method.
      The term “Actuarial Method” means the method of allocating Base Monthly Payments between: (i) the reduction of the Adjusted Capitalized Cost to the Residual Value over the Lease Term; and (ii) Rent Charges. Under this method, a Base Monthly Payment is applied first to the accumulated Rent Charges and any remainder is subtracted from, or any deficiency is added to, the balance of the Adjusted Capitalized Cost.

    2. REALIZED VALUE. The Realized Value will be determined in one of the following ways:
      (1) By a written agreement between you and us;
      (2) Within 10 days of early termination, you may obtain, at your own expense, from an independent third party agreeable to both you and us, a professional appraisal of the wholesale value of the Vehicle which could be realized at sale. The appraised value shall then be used as the Realized Value.
      (3) We determine the Realized Value in accordance with accepted practices in the automobile industry for determining the wholesale value of used vehicles by obtaining a wholesale cash bid for the purchase of the Vehicle or by disposing of the Vehicle in an otherwise commercially reasonable manner.
      (4) If the Vehicle is subject to a total loss due to collision, destruction or unknown theft as determined by us, the Realized Value will equal the amount of any proceeds we receive from your required insurance. If there are no insurance proceeds, the Realized Value will be zero.

    3. If you terminate this Lease early pursuant to the federal Servicemembers Civil Relief Act or any equivalent provisions under state law, you may be charged for excess mileage if the actual mileage of the Vehicle at Lease termination is more than the allowed miles for the time period that you actually leased the Vehicle. In this case, we will calculate the total allowed miles by prorating the annual allowed miles set out in Section 9 to the month. If you terminate this Lease early for any other reason and your Early Termination Liability includes payment to us of the remaining Base Monthly Payments, you may be charged for excess mileage only if the actual mileage of the Vehicle at Lease termination is more than the total allowed mileage for the entire Lease Term.
     
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  3. chillaban

    chillaban Member

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    San Jose, CA
    Wow, seems more restrictive than the average lease. So, you can't just hand them a check for your remaining lease payments unless you also pay a penalty.

    Is there a clause for allowing you to buy out your lease without penalty so you can trade in the car? That option is rarely break-even and often times worse than the sum of the remaining payments once you're halfway through… but not every leasing company lets you do it.
     
  4. araxara

    araxara S-P85#3,218 X-90D#3,299

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    I only included the Early Termination Part of the lease. There is a Purchase Option which is basically the residual. You don’t pay the $395 Disposition fee in this case, so you can just buy out the vehicle:
    10. Purchase Option at End of Lease Term. You will have an option to purchase the Vehicle at the scheduled end of the Lease for $66,450.00, plus official fees and taxes.
    ...
    20. PURCHASE OPTION

    A. END OF LEASE TERM. At scheduled Lease termination, you have an option to purchase the Vehicle AS IS as set forth in Section 10 of this Lease.

    B. PRIOR TO END OF LEASE TERM. At any time prior to scheduled Lease termination, you have an option to purchase the Vehicle AS IS. The Purchase Option Price will be a sum equal to: (1) the amount set forth in Section 10; plus (2) the Early Termination Liability set forth in Section 24(C), excluding the items set forth in Sections 24(C)(1), (C)(7) and (C)(8).

    C. TRUE LEASE. This is a true lease and you will not own or have any equity in the Vehicle or its replacement parts unless you exercise the option to purchase the Vehicle.
     
  5. chillaban

    chillaban Member

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    This is the part that's horrifying to me (bolded above). When you buy out your lease before the term ends, they also assess the termination liability/penalty.

    This is in stark contrast to Audi and BMW leases. With both of those, you can buy your car at any time for Remaining Lease Payments + Residual minus unpaid interest, so you actually save a little money versus fully paying the lease term then buying out the lease….


    Again, not saying this makes the lease a bad deal. I still like leasing. But it's worth knowing that these Tesla terms make it really disadvantageous to try to get out of your lease early. More so than the average lease.
     
    • Informative x 2
  6. SDRick

    SDRick Member

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    I am sure someone would assume the lease. Your cost would be relatively minor in comparison.
     
  7. chillaban

    chillaban Member

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    #7 chillaban, May 12, 2016
    Last edited: May 12, 2016
    I'll have to ask again: What do the lease terms say about lease trading / assuming?

    While BMW allows you to transfer your lease to someone altogether for a fee, my Audi shockingly only allows you to ADD additional people to the lease (also for a fee). If I were to use swapalease/leasetrader, I am still jointly and severally liable for the vehicle's condition and its payments…


    EDIT: BTW, thanks, araxara, for taking the time to post all these excerpts from your lease agreement. The terms are virtually impossible to find unless you apply for a lease…

    I've leased two cars before from two automakers so I've had to learn the hard way sometimes that what the salesperson tells you (or what you believe based off one previous lease) doesn't necessarily match reality, and sometimes the price of a bad assumption is thousands of dollars...
     
    • Informative x 1
  8. SDRick

    SDRick Member

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    If the lease is through U.S. Bank I think they will take the original lessee off if the new lessee qualifies. Not positive though.
     
  9. X Fan

    X Fan Member

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    Chilblain---agree with your thoughts re: comparison to BMW, Audi and Mercedes leases. The US Bank lease is very punitive and although I originally was tracking to lease, I ultimately went with cash purchase.
     
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  10. ABCCBA

    ABCCBA Member

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    I recently assumed a Tesla lease from US Bank. There is a total of $650 charge to assume( $150 application fee and $500 transfer fee). There is no fee to the original lessee. It would not be unreasonable to negotiate with the original lessee to have them cover the fees. The process took just at one week to complete.
     
    • Informative x 1
  11. Blue Millenium

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    Apr 3, 2016
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    North Jersey
    US bank is horrible to work with. My experience so far has been very negative. I'm sorry I Went the lease option because I have to work with this institution. They have misrepresented themselves and do not return calls or provide accurate information in writing.
     
  12. Electric700

    Electric700 Member

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