Your car lease is coming to an end, but you love your car and aren’t quite ready to let it go. Should you buy out your car lease?
Owning your previously leased vehicle could make financial and practical sense. You can skip the shopping stage and stay in a vehicle with a known history and drivability rather than take a chance on another used car.
Here’s what to consider before making a decision.
Why Buy Out Your Car Lease?
When you reach the end of your lease agreement, you have the option of returning the vehicle to the dealership or taking the buyout option, where you pay to own the car. Some contracts also allow drivers to buy out their lease before the agreement expires.
The buyout price of the vehicle, also known as the purchase price option, is usually set at the time of the lease signing (you should be able to find it on your agreement contract). It is determined based on the car’s residual value, the car’s predicted price at the end of the lease.
This is where the current car market comes into play. If you signed your lease agreement when the car price was lower, your purchase price option could be more favorable compared to what a used car on the open market could cost you.
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Download NowAnother consideration is the condition of your leased car. The dealership will inspect your vehicle when your contract comes to an end. If there’s any damage above the normal wear and tear, you’ll be responsible for the costs. If you choose to buy out your lease, however, you won’t need to pay. That money could instead go toward purchasing the car.
The same is true with mileage. If you exceed your lease agreement mileage limits, you’ll be on the hook for per-mile penalties if you return the vehicle to the dealership — but you won’t be if you buy out the lease.
How to Buy Out Your Lease
If you’re thinking about buying out your lease, take a look at your current lease agreement terms and the car’s residual value. Then compare these numbers to the going rate of the car today. Remember, when buying out a lease, you’ll have to pay the residual value plus any applicable taxes and fees. You also may have to register the vehicle in your name and pay any applicable sales tax.
Fortunately, lease buyouts can be financed through auto loans. The process is very simple and much like that of any other car purchase or refinance. It’s always a good idea to shop around for loans with the best terms and lowest interest rates.
Looking to buy out your car lease? AAA has you covered with low-interest auto loans to help finance your purchase.
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4 Thoughts on “Should You Buy Out Your Car Lease?”
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Best scenario if you go into a lease deal. Lease a car you like, not just for utility. Negotiate a good deal, paying attention to the residual value . At the end of your lease, see where the market is at. If favorable and you really like it, try to pay a cash buyout. I leased a 2018 Toyota RAV4 at the end of the lease I bought it because residual value was less than market. Have had now for more than 7 years now. Remember, you’re dealing with the auto manufacturer, not the dealer, the manufacturer was the car, not the dealer. So, I bought the car directly from the manufacturer, not the dealer. The dealer will be the middleman, getting their little taste of the deal. Remember, buying or leasing is a depreciating investment.
Leased a car in 2018 so the lease ended during the COVID days. All car prices were inflated at the time my lease came due but the buyout was 40% less than buying the same exact car used from a dealer. Did the buyout and paid it off after about 18 months so it was very cost effective. Still have the car with only 60K miles and ended up moving 3 mils from my job so I expect to have it for another 5/6 years. Can’t say I would have considered the buyout if COVID never happened to turn the world upside down.
Enjoyed reading the article, but duration should be a consideration. If You lease for say, three years and then finance it for another five or six years, I think that’s way too long…….
My daughter leased a Range Rover. She hated it so she ordered a RAV4 a few months prior to the end of her lease as there was a waitlist at the time. She bought the Range Rover since her RAV4 wasn’t available yet. Once the RAV4 arrived she sold the Range Rover to CarMax for more than her purchase price option. At that time used car prices were crazy high.