Car Lease Buyout

When you lease a car or truck, most dealerships will allow you to “buy out" the vehicle before or at the end of the lease contract. If you are unsure about leasing or what a lease is, please refer to our Leasing 101 Guide.

Before you can decide whether a lease buyout is a good idea for you, it's important to understand both the differences between the buyout options and the contractual requirements you'll be required to meet.

The two types of lease buyout options offered by most dealerships are:

  • Lease-end buyout.
  • Early buyout.

Lease-end Buyout

The most common of the two buyout options, a lease-end buyout requires you to pay the residual value of the vehicle at the end of the lease contract.

Residual value is:

  • What the car is expected to be worth at the end of the lease.
  • Usually agreed upon at the beginning of the lease and written into the lease contract.
  • Can sometimes be negotiated before you sign.

Once you decide to buy out a lease at the end of the contract, remember that you've already paid the amount that the car has depreciated. What you'll pay for the buyout is what the car is still worth according to the pre-determined residual value.

Is It a Good Deal?

To determine whether or not it's a smart decision to buy out your vehicle at the end of your lease, you'll need to compare the buyout price (residual value) to the vehicle's true market value.

The true market value of a vehicle is:

  • What the vehicle is worth on today's market.
  • The price a vehicle in similar condition is being sold for.

When the buyout price is less than or equal to the market value, purchasing the vehicle at the end of the lease is a good deal if:

  • You're happy with the overall performance of the car.
  • The vehicle has needed little to no repairs during the lease.
  • There isn't another car on the market with a similar value that you'd rather own.
  • You can finance the buyout price at a good interest rate.

Since you're fully aware of the history and condition of the vehicle you've been leasing, a buyout can be safer than purchasing a different used car with a history that's unknown.

Early Lease Buyout

An early lease buyout gives you the option to purchase your leased vehicle before the end of the contract.

Most but not all lease contracts allow early buyouts. Some dealerships may limit when a buyout is available, such as restricting purchasing options for the first and last few months of the lease contract.

Before you agree to an early lease buyout:

  • Read the contract to see if an early buyout is an option.
  • Consider the history of the car and see if it makes sense to make a long-term investment.

Is It a Good Deal?

Calculating the cost of an early buyout on your car lease can be more difficult to determine than for a lease-end buyout. With an early lease buyout, the price is calculated by:

  • The lease-end residual value stated on your contract.
  • The amount of money you still owe on the lease.
  • Further depreciation.
    • If the leased vehicle has depreciated faster than expected and is now determined to be below market value, you may have to pay the difference.

It is common for buyers to consider an early buyout when they are concerned with lease penalties such as:

  • Going over allowed mileage.
  • Not keeping up with scheduled maintenance.
  • Damage to the interior or exterior of the car.

In general, an early lease buyout will not be a good deal because of the additional depreciation fees. If it's possible, wait until the end of the lease to get the best deal.

Buying Out Your Car Lease

A buyout can be a good deal if the car in great shape and can be purchased below market value. If, however, you don't have the cash to buy it outright, you'll need to qualify for a loan.

A few common requirements for a lease buyout loan that you should be aware of include:

  • A history of making scheduled payments on your current lease.
  • A good credit score.
  • Adhering to the specified buyout window on the lease contract.
  • Making a down payment if the buyout price (residual value) is more than the market value.

For more information about ending a lease early, please refer to our Early Car Lease Termination page.

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