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Publish Date - February 24, 2022

Author: Staci Bailey

Categories:   Leasing a Car    Vehicle & Buying Research   

Considering a Lease Buyout? 6 Things to Consider

Leasing a vehicle can be a good alternative to buying a car. A lease is similar to borrowing a car for a predetermined amount of time at a preset price. It comes with a contract which spells out the terms of the lease such as when it will terminate, how much it will cost, your responsibilities, and what options you will have when the lease runs out.

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Leasing a vehicle can be a good alternative to buying a car. A lease is similar to borrowing a car for a predetermined amount of time at a preset price. It comes with a contract which spells out the terms of the lease such as when it will terminate, how much it will cost, your responsibilities, and what options you will have when the lease runs out.

Leasing allows you to try out a vehicle without having to commit to it. You get to thoroughly test out a vehicle and see how it fits with your lifestyle. At the end of the lease you can return the vehicle to the dealership and you’re not stuck with a car you don’t like.

But what if you love the car and aren’t ready to give it back when the lease is up? That’s when you can consider a lease buyout. This option allows you to purchase the car at the end of the lease at the price stated in your lease agreement.

Even though you may not want to return a car that you love to the dealership, don’t let that lead you into a bad decision. There are times when a lease buyout is a good idea and there are times when it isn’t. Before you contemplate the idea of a lease buyout, there are some things you should consider.

1. The Value Of The Vehicle

If you choose a lease buyout the price that you will have to pay for the vehicle will be based on it’s residual value. This amount can sometimes be called the buyout amount or the purchase option price. It is set at the time that you sign the lease and it will be stated in your contract.

The residual value is based on the predicted worth of the car at the end of the lease. It is a percentage of the manufacturer’s suggested retail price. Because it is based on a prediction, the actual value of the vehicle may be higher or lower than expected.

If you are considering a lease buyout you should always compare the residual value of the vehicle, against what you would pay to buy a car in similar condition of the same make and model. Check sources such as the Kelley Blue Book to see what the car is worth and look at listing sites to find out what cars like yours are actually selling for in your area.

2. Excess Mileage Or Wear And Tear Charges

When you lease a vehicle the dealership expects to get the car back and they want to be able to sell it to someone else. The amount that you pay to lease the vehicle represents the usage you put on the car and there are limits. If you exceed those limits the value of the car will be lower than the dealership expected and you will have to pay additional fees.

The most common limitations involve mileage and wear and tear. Your contract will specify how many miles you can put on the car without incurring fees when the lease is up. Regular wear and tear is expected but anything beyond that may also result in additional fees.

If you are considering a lease buyout you will have to factor in any additional costs that you would have to pay if you brought the vehicle back to the dealership. Excess mileage charges or fees to address torn upholstery or dents and scratches can sometimes make it more economical to buy the car instead. Do the math to find out the cost of returning the car.

3. Additional Fees

Some dealerships charge a lease purchase fee. This is an additional charge if you decide to proceed with a lease buyout and this amount should be factored in with the cost of buying the car at the end of the lease. The contract will tell you if your dealership charges this fee.

If your lease has some time left on it and you’re thinking about buying the car early, keep in mind that some dealerships will charge you an early buyout fee. Check your lease agreement carefully. Factor in any additional fees before making a decision.

4. The History Of The Vehicle

Whenever you’re looking to buy a vehicle, knowing the history of the car can make or break the deal. Luckily, if you’ve been leasing a car you have detailed insider knowledge of the car’s mechanical history. You were driving and maintaining the vehicle.

If you’re thinking about a lease buyout consider how well you have been taking care of your car and what has happened to it while it was in your possession. Think about any accidents the car may have been involved in as well as any mechanical issues that you have had to address. Consider if you have kept up with regular oil changes and other maintenance items before you decide if the car is worth buying.

5. The Affordability Of The Car

It’s important to make sure you’re getting a good deal on any car you’re considering buying but if it’s beyond your financial means then even the best deal is a bad idea. Unless you can afford to pay cash for your lease buyout, you will probably need to secure some type of financing. Factor in the cost of financing to determine if you can afford to buy the vehicle.

Many lenders do offer auto loans that you can use for a lease buyout. Most dealerships can help you finance the vehicle too. As always, shop around for the best deal on auto loan financing.

6. Best Position To Negotiate

A lease buyout usually comes with little opportunity for negotiations because most items are predetermined and laid out in the lease agreement. However, there is no harm in asking the dealership to make a few concessions. Sometimes you can get the lease purchase fee waived, a better deal on financing, or additional purchase incentives.

Unless you have a good reason to proceed with a lease buyout early, you should wait until the leasing company contacts you. Normally you get a call around 90 days before the lease is set to expire. Let them approach you and try to sell you the car before you reveal your interest in the vehicle.

Approach any lease buyout the same way that you would approach the purchase of any vehicle. If it’s not a good deal then it isn’t worth buying. After all, there are plenty of other cars not much different than yours so consider your lease buyout without emotional attachment.

If the vehicle has been well cared for and it’s value exceeds the residual value in your contract then it might be a good car to consider. Excess mileage and wear and tear charges, a low or no lease purchase fee, and a good deal on financing can make a lease buyout the best option. Look at the numbers and use them to make your decision.