Just think…you have six months until your lease is up and you can give the car back to the dealer. But you really like your ride and the car's in great shape. You're getting stressed out just thinking about looking for another car. Could a lease “buyout” be right for you?

Buying your leased vehicle is different than buying a new or used car. When you buy out your lease, you have the unique knowledge of a vehicle you know and like, but you also have some unique financial considerations.

Here's what to consider:

Market versus Residual Value

  1. Determine the market value vs. the residual value of your vehicle and compare the two.
    • Your car's true market value is what the car is worth on today's market.
    • A car's residual value is what you can buy the car for at the end of the lease. If you take a lease buyout, you'll also need to add in the purchase option fee as shown on your lease agreement. If you are current on your lease and don't have any fines or penalties, then these two figures together give you the buyout price.
  2. If the buyout price is less than or equal to the market value, buying out your lease could be a good deal, especially if you're pleased with the car's performance and it didn't need many repairs during the lease.

Here are other reasons a lease buyout could work for you:

  • You're happy with the vehicle's performance.
  • You can make the purchase in cash or finance the buyout price at a good interest rate.
  • There's not another car on the market with similar value you'd rather own.
  • It could be a “safer” investment since you know the car's history.
  • You can avoid end of lease fees.

Remember, you've already paid the amount that the car has depreciated–so as a buyout, you'll pay what the car is still worth according to the pre-determined residual value.

If you can't buy your leased vehicle outright, you'll need to qualify for a loan – be sure to look into the best timing as outlined in the lease contract.

Your financing institution will look at the following:

  • Whether you paid the lease payments on time
  • Your overall credit history and score
  • Your potential down payment
  • Whether the buyout price is more than the market value

You may have to pay a purchase option fee, which is detailed in your lease agreement and can be rolled into your purchase financing, so you don't have to pay it up front.

Can I buy out my lease early?

The leasing company will figure out the price based on your remaining payments and the car's residual value. Some companies will also ask you to pay early termination or buyout fees which vary. But you'll avoid mileage and wear and use fees. Usually, I'd recommend waiting until the last six months of your lease.

Do your research, take the time to consider all the facts and make the right decision for you.

This is intended for informational purposes only.

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