What is the Process of Buying Out a Leased Car 2024? (4 Simple Steps)

What is the Process of Buying Out a Leased Car? If you enjoy your leased vehicle and dread the thought of returning it to the dealer, a lease buyout may be a good option to consider.

What is a lease buy out? A buy out sometimes called an option to buy, allows you to buy the car at the end of the lease instead of returning it if your lease allows it.

Car leases typically allow lessees to return the car, trade it in for another car, or purchase it at the end of the lease period. Buying a leased vehicle may be the right decision for some people, but it is not always the best option.

Before purchasing a lease, make sure you don’t waste your money. There are a few things you should know when you’re considering a purchase, especially when it comes to financing, negotiation, and insurance.

Key takeaways:
During a lease purchase, the lessee purchases their leased vehicle at or before the end of the lease.
If the lease has not ended, termination of the lease may result in additional charges.
While the leasing company will likely offer financing options, it’s best to shop around to find the most competitive rates.
The process can be smart if you’ve fallen in love with your leased car and want to drive it long-term.

How do you Buy Out a Leased Car?

Many finance companies offer drivers lease purchase options that they can exercise after the lease ends, sometimes sooner.

The car lease agreement should detail your lease purchase options and the price, or method of determining the price, that would have to be paid to exercise the lease purchase.

Your car leasing company can tell you your lease termination options toward the end of your lease. Before you decide to break the lease, you may want to check out other car purchasing options. While it may be convenient to buy a car you’re already used to, you may be able to save money on the same make and model at a different dealership.

What is the Process of Buying Out a Leased Car

If you’re wondering how to purchase your leased car or how you plan to pay for it, contact your dealer or lessor. There are financing options on the market designed specifically for lease buyouts that may work for you.

Before making any decision you can learn more about buying vs leasing a car, and what is best for you.

5 Easy Steps to Buying Your Leased Car

1. Determine the purchase amount or purchase price, if available, by reviewing your lease and contacting your landlord.
2. Evaluate the car’s wear and mileage. Consider how much (if anything) this could cost you.
3. Shopping around; You may be able to find the same vehicle at a better price elsewhere.
4. Apply for financing if necessary.
5. Follow the lessor’s process for purchasing the vehicle.

How Does Buying a Car Lease Work?

When you cancel your lease, you purchase the car at the end of your lease by paying the dealer the remaining value.

Not all leases allow for acquisitions, but it is quite common. Some contracts even allow you to buy the car before the lease ends. Most leasing companies have their own unique process for purchasing car leases.

You can also check out the basic income requirements to lease a car.

How much does it cost to buy a lease?

It depends on a few factors, such as the value of your car. Check your lease agreement to find the residual value, which refers to the expected value of the car at the end of the lease. This is the base amount you will pay the dealer to take possession of the car.

Next, determine how many payments are left on your lease. If you are halfway through your lease, you will pay those payments in addition to the residual value amount. For example, a car with a residual value of $16,500 with $2,100 in payments remaining would cost $18,600.

You will also be subject to any sales tax your state requires. Your dealership may charge you fees for breaking your lease. However, dealers also typically charge fees for cleaning and preparing your car for resale when you return it after the lease expires, so you can avoid paying these when you buy them.

In summary, add the following costs to find the lease termination amount:

• The value of the vehicle (found on your original lease)
• The rest of the payments during the lease term
• Sales tax in your state
• Dealer fees

How can I pay for the termination of the lease?

Let’s face it: some of us may not have $15,000 in cash to cover the purchase price. However, you can choose many financing options to make things easier.

Banks, credit unions and other lenders offer lease purchase loans that give you attractive deals. Alternatively, you can also refinance the car lease, which means you take out a loan to purchase the car and then pay affordable monthly payments on the car loan over a set period.

Whichever option you choose, always remember to look for offers from multiple lenders. That way, you won’t have to settle for the first loan offer you receive and you can choose one with an affordable APR.

Tips for Buying Out a Leased Car

If you are considering purchasing a lease, first confirm with the landlord or dealer that it is an option. Or you can check your monthly lease statement to find the payoff amount if a lease buyout is allowed.

These five tips will help you get the car you want and a good deal.

1. Think in the moment

Perhaps the question isn’t whether to buy your leased car but when to buy it. The moment of purchase changes the price you will pay.

If you decide to purchase before your lease expires (known as pre-purchase), you may be required to pay additional fees or finance charges. Check the terms of your lease carefully to see how the leasing company handles early buyouts. If there are too many fees, wait until the end of the lease to buy.

If you decide to buy before the lease is up, make sure the leasing company doesn’t misinterpret your interest in an early purchase as a desire to get out of the lease early. Be clear that you want to keep the car, not get rid of it.

2. Compare financing prices

The leasing company will likely offer to finance the purchase, but don’t say yes until you’ve explored other financing options. Otherwise, you could pay additional interest due to the dealership’s profit margins.

You’re likely to get a better interest rate at a financial institution than at a leasing company or dealership. There are no fees or penalties if you decide not to hire the leasing company.

3. Evaluate the value of the car

Research both types of car values to ensure you make a good purchase.

Retail value: How much you would pay to buy the car from a dealer.
Wholesale Value: How much a dealer would pay to buy the car at auction.
For detailed pricing information, consult sources such as Kelley Blue Book, Cars.com, TrueCar and Edmunds. Have all relevant information handy when doing your research, including make, model, trim, model year, and current mileage.

4. Let the leasing company take the first step

You may feel like you can’t wait to contact the leasing company to discuss purchasing a car lease, but take a moment to slow down. Taking the first step could ruin your chances of negotiating favorable terms, according to consumer advocates.

Typically, the leasing company will call approximately 90 days before the lease expires. If you contact the company before the countdown starts, you can find out how much you want to buy the car.

5. Try to negotiate

Companies often have a no-negotiation rule for the purchase price of a lease, leaving little opportunity to haggle.

“There’s not much to negotiate, if any, because all the terms are agreed upon in advance in the lease,” says Benjamin Preston, automotive reporter for Consumer Reports.

Still, it doesn’t hurt to raise the issue. You’ll never know what kind of deal you could get if you don’t ask. Learn how to negotiate a car lease.

Pros and Cons of Buying a Leased Car

Buying a leased car is not for everyone. Some people may prefer to continue leasing new vehicles and others may want to check out used car lots for their next purchase. When making this type of decision, it is best to weigh the pros and cons to determine the right decision.

Learn More about How To Lease a Car With Bad Credit.

Pros of buying a leased car

1. If the purchase amount is less than the market value of the vehicle, you may pay less to cancel your lease than to purchase a similar vehicle.
2. You won’t have to waste time looking for a new car.
3. If there is excessive wear and tear, you may not be charged for it.
4. You may not be charged for any excess mileage.
5. You can keep a car you love.

Cons of buying a leased car

1. If the purchase amount is more than the market value, you may be overpaying for the car.
2. Financing a lease purchase may carry higher interest rates.
3. Excessive wear and mileage can reduce the value of the vehicle.
4. You may end up paying more for the car than you would have if you had originally purchased it.
5. Remember that ending a car lease can affect your credit score.

To build your credit score again you can follow these steps to improve your credit score.

Factors to Consider When Deciding to Buy your Lease Car

If you’re wondering if you should buy your leased car, think about the following:

Mileage

A lease agreement clearly states the number of miles you can drive during the lease period. If you exceed your mileage limits, you will probably owe a fine when you return the car.

Condition

Dealers typically expect some wear and tear at the end of the lease, but if you’ve accumulated damage, it might be smart to buy the car yourself. Dents, stains, cracked mirrors, and chipped paint can reduce the car’s actual value.

But like mileage, you’ll likely have to pay high fees to pay for repairs. It might be smarter to absorb the cost yourself and buy the car, especially if the damage doesn’t bother you. You can always repair it later.

Satisfaction

A growing family might need a roomy SUV with a suite of safety features. Research other cars to see if there is a model that might be better for you.

Price

This might also be a good time to think about other end-of-lease options, such as trading in the car for another lease, returning it and purchasing a new model, or purchasing a used car from a dealership or independent seller.

It’s important that you can afford the option you commit to, but it’s also important to feel like you’re making a worthwhile investment.

If you are short in budget then you can consider a lease takeover. Before that, you can learn the pros and cons of car lease takeover.

Moment

Even if you’re sure you want to break the lease, purchasing at the right time can save you money. There are two types of acquisitions: an end-of-lease purchase and an early lease purchase.

Review your contract and talk to your leasing company to find out which option is best for you.

What is a Car Lease Buyout?

A car lease buyout, also called a purchase option, is a clause written into your lease that allows you to purchase the car at the end of the lease period. Simply put, a lease lease buyout allows you to own the car at the end of the lease period.

The purchase amount is based on the car’s residual value (the anticipated value of the car at the end of the lease after accounting for wear, depreciation, and mileage).

When Should You Buy a Car Lease?

Generally speaking, there are four considerations for when to purchase a car lease:

• Exceeding mileage limits: If you have exceeded the mileage limits stated in your lease, you may be required to pay additional fees for each mile driven. It may be more convenient to buy the car outright rather than paying high fees.
• Future maintenance costs: Certain makes and models of cars have very low maintenance charges, meaning you can save more in the long run. Instead of paying for lease maintenance, buy the car and enjoy the savings.
• Car Condition: All vehicles depreciate over time due to wear and tear throughout their useful life. However, you will find that dealerships charge high fees for more than normal wear and tear, sometimes in the thousands of dollars. Buy the lease if you don’t think the fees are worth it!
• Ability to finance the purchase: Do you have enough cash to pay the lease up front? Or do you plan to finance it through other means, such as refinancing? Choose a lease buyout only if you are clear about these options.

When Not to Buy a Leased Car

You love your car, but sometimes it’s just not worth renting. Buying a lease is a big decision, so it’s important to choose wisely. Here are some circumstances where it would actually be best to return the car to the dealer:

When the car is in bad condition.
When you can replace it at a better price.
When the car has high mileage.
When you are not happy with the car

How is the Lease buyout Calculated?

Calculating lease termination is like determining the total cost of ownership of your leased car before the lease ends. It involves adding three main components:

Residual value: This is the estimated value of your car at the end of the lease term, as stated in your lease contract.
Remaining Lease Payments: You must make these monthly payments until the lease ends.
Additional Fees: There may be fees associated with terminating your lease, such as early termination fees or documentation fees.

To calculate your lease lease buyout, add up these three components:

Lease lease buyout Cost = Residual Value + Remaining Lease Payments + Additional Fees

Bottom Line

Buying a leased car can be worth it if you can buy it below its market value. Or it could be worth it simply because you love the vehicle and don’t want to go through the hassle of replacing it or installing a new one.

Try to negotiate the terms and conditions before agreeing to anything. It’s never a bad idea to ask for better treatment.

FAQs about Buying Out a Leased Car