How to Buyout your Lease

  1. Research Center
    2. /
  2. Car Leasing Research Articles
    3. /
  3. How to Buyout your Lease Car
A lease buyout, also known as a purchase option, lets you purchase your lease car instead of returning it at the end of the lease. If this is of interest to you, check your lease contract and look for details on the purchase option. But before you get excited about buying your lease car, let's consider all the factors at play. The most important factor involves all the costs that come with a lease buyout. It is important to compare what you'll pay to buy your lease car out rather than just turning it in and leasing another car or buying a used car.

It is possible that buying the lease car will cost you more than the car is worth. There are several reasons why this could happen. Higher than normal mileage on the car can affect its value as can any unusual wear and tear including dents and dings, damage to the paint or torn upholstery. In such cases, it is sometimes cheaper to just turn in the car at the end of the lease. On the positive side, assuming you aren't overpaying for the vehicle, if you really like the car and want to keep it, buying it from the leasing company is a fairly simple proposition. Plus, you don't have to go shopping for another car and you already know the history of your lease car, when it was serviced, and how it was driven.

How to Get Started

Lease buyout options are available from many finance companies, and you can sometimes buy the car back earlier than at the end of the lease contract. So, your first step is to review your lease contract. It should show you all the details for buyout options and what it will cost you. 

Within the last few months (90 days) of the lease, the leasing company usually contacts you to find out if you intend to get another lease car or if you are interested in buying the car you have. You've got to figure that if you buy the lease car it makes the company's job a lot easier. They don't have to prep the car for sale to someone else. Some industry insiders say that you can get a better deal on buying your lease car if you wait for the lease company or dealer to call you with finance options designed specifically for lease buyouts. 

According to Chase Bank, to buy a leased car, first determine the buyout amount or purchase price by looking over your lease contract. Evaluate the wear and tear and mileage of your car and factor in what this will cost you. Shop around online to see what other used vehicles with the same year, make, and model as yours are retailing for, and apply for financing if needed. However, there is often more to a lease buyout than keeping to those simple steps. First, know that buying a leased car differs depending on who holds the lease. Many car dealers or lease companies add various fees and taxes that come due when you close the lease. Often, buying the lease car is a way to get around some of these fees. 

Buying your leased car can be worth it if you purchase the vehicle below its market value. You can try negotiating buyout terms before you sign the lease, and you can sometimes negotiate the value as well as fees that are applied at the end of the lease. You will have to contact the finance company directly to negotiate the buyout price. 

Good and Bad of Lease-to-Own

On the positive side, buying your lease car may cost less than purchasing the same year, make, and model of vehicle used at a dealership. Especially at the moment as used cars are scarce and are going for top dollar. If you buy the lease car you will probably not be charged for going over the limited mileage plan and you may not be charged a fee for wear and tear to the vehicle. At the end of the day, buying your lease car means you get to keep and enjoy the car you love. 

On the negative side of a lease buyout, if the buyout amount is higher than market value, you may be overpaying for the vehicle. Depending on the finance company you are using, you may pay higher interest rates on a lease buyout. But the bottom line has to do with how much you have paid in total for the car when you factor in the lease monthly payments, the residual value, and all taxes and fees that apply. You could end up paying more for the car that you would have if you just bought it new from a dealer. 
Tips for Buying out your Lease 
Before you sign a lease contract, look at the purchase price option. This amount is known as the residual value of the car. When you buy a leased car, you will pay the residual value amount as well as any remaining lease payments (if you are buying the vehicle before the end of the lease) plus sales tax and a disposition fee to the dealership.
When to Buy 
Buying the car before the lease runs out is called an "early buyout" and you may be on the line for extra fees and finance charges. Simply put, if there are too many fees for an early buyout, wait until the end of the lease to make your purchase. The dealership will have to resell the car if you do not buy it and it behooves them to sell it to you! 

The loan experts at Bankrate remind us, "If you decide to buy before the lease is up, make sure the leasing company doesn't misinterpret your interest in an early buyout as a desire for early termination of the contract. Be clear that you want to get the car, not get rid of it." 

Shop for the Best Rate 
You can finance the purchase of your lease car through the leasing company, but it is well worth shopping around for the best rates. It is likely that you can get a lower rate through your bank, credit union, or through online lenders. Remember that there are no fees or penalties if you decide to take your loan business elsewhere rather than to go with the leasing company. 

Many lenders offer special loans specifically for car lease buyouts but the APR on these types of loans are generally higher than on a new car. Make the leasing company work for your business. Do some research and shop around for the best price on a loan then make the leasing company beat the best deal you found. 
The Car's Value 
Make sure you understand your car's wholesale value and retail value. The wholesale value is how much a dealer will likely pay at auction to buy the car. The retail value is how much you would have to spend to buy the car from a dealership. 

To find out what your vehicle is worth on the market, visit Kelley Blue Book online and enter your car's year, make, model, trim level, and mileage. Once you know the approximate value of the car, compare it with the residual value in your lease agreement. Add the residual value with the purchase option fee and you'll have a good idea what the lease company will charge you to buy the vehicle. 

If the total price to buyout the lease is considerably more than buying a similar used car, just return the car when the lease is up. 

Love at First Drive
When it comes to lease buyouts, many companies will not negotiate on the residual value that you signed off on when you first signed your lease contract. But it never hurts to ask, right? If you can't get the lease company to lower the price on the car, try working with them to make a few concessions including financing discounts on purchasing the vehicle, waiving the purchase option fee and the mileage allotment fee.

If buying your lease car costs more than purchasing a similar used car, you can always just walk away. At Lithia Motors, you have options, and we have answers for all your personal transportation needs. With over 75 years in the business and over 275 dealerships from coast-to-coast, we've got your back because we want to keep you as a customer for life!Â