Leasing can be a great option for drivers who don’t want to commit to one vehicle or enjoy having a new car every few years. At the end of the lease period, you can either get a new lease or purchase the car you’ve been driving.
If you fall in love with your leased car, buying it might sound like an easy decision. However, it’s still important to do some research to make the right decision.
Looking to buyout your lease? Easily compare rates from auto lenders below.
How to Buy a Car After Your Lease Ends
When your lease is up and you start thinking about buying, you should consider your options. Here are some things to think about before you choose to purchase your leased vehicle.
Evaluate the Car’s Condition
First, consider the condition of the vehicle. If the car sustained lots of wear and tear during the lease period, you might decide to pass on the sale. On the other hand, if you took great care of the car during the lease, and there’s very little damage, buying the lease might be more appealing.
Calculate the Market Value
After assessing the condition of the car, look up the market value of the vehicle. This represents the price you would pay if you were buying the car from a dealer. You can find the market value of most car makes and models through sites like Cars.com, NADA Guides, and Kelley Blue Book.
Find the Buyout Price
Once you have the market value, you’ll want to compare it against the buyout value, which should be stated in your lease contract. The buyout amount is based on the residual value, and it’s what you must pay if you decide to buy the leased vehicle. This number usually includes the car’s residual value at the start of the lease, the remaining payments, and additional fees.
Check Out the Market
When you know what the leased vehicle will cost to buy, you can decide if it’s a good deal. For example, if you can find the same vehicle at a different dealership for a lower price, you might decide to walk away from your leased car. Or, if the numbers work out, buying your lease might be the best choice.
Look at Your Financing Options
Before you purchase the car, you’ll need to secure financing. Get pre-approved from a bank or credit union, then shop around to find the best deal. Aim to get at least three pre-approval letters, so you know which lender can offer you the lowest interest rate. Keep in mind that pre-approvals are usually only valid for 30 or 60 days, so make sure to apply close to the time you’re thinking about purchasing the car.
Negotiate the Final Price
Once you’ve decided to purchase the leased vehicle, you should take the opportunity to negotiate a lower sale price. Some lease companies may refuse to negotiate, and if they do, you’ll have a choice to make.
However, if the car’s market value is lower than expected, the dealer might be more willing to drop the buyout price.
Is Buying Out Your Lease a Good Idea?
If you’re nearing the end of your lease, you might be thinking about buying the car. But before you do so, it’s important to look at the pros and cons of a lease buyout.
First, think about what you liked and didn’t like about the vehicle. If you loved your experience driving the car for the last few years and want to continue driving it, buying the lease might be a no-brainer. If there were things you didn’t like about the car, like the body style, interior, technology, comfortability, or gas mileage, you might want to move on.
Also consider the costs of leasing vs. owning a car. For example, the whole time you were leasing your vehicle, you were probably under manufacturer’s warranty, and you might have had a maintenance agreement. That greatly reduces the cost of car ownership.
When you buy out your lease, you might lose some of those warranties. If your service agreement is over, you become financially responsible for any maintenance and repairs. You may be able to get an extended warranty, but that will cost extra.
You should also look at the car’s current mileage. Most lenders charge a small penalty for each mile you drive over the limit stated in your lease agreement. If your penalties are going to be very high, you might be better off buying the car.
Finally, consider whether you have a down payment for your buyout. If you finance the entire cost of the vehicle, your payments could be considerably higher than they were on your lease payment.
Finance & Insurance Editor
Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia, Reviews.com, Forbes, and Bankrate.
