Is a Lease Buyout Right for You?
Are you leasing a car you’ve come to love? Maybe you’re just not ready to lock those doors one last time? If that’s the case, a lease buyout loan could keep those keys in your hand.
If you’re thinking about buying out your auto lease, there are some things you should consider first before you make that decision.
Take a look at your lease contract
The first thing you’ll want to figure out is how much exactly a lease buyout will cost you. Review your original lease agreement and look for the residual value or the purchase option price. You can use our helpful lease residual calculator.
Depending on the make, model, and details of your leasing agreement, your car may be worth more or less than the residual value.
A few things about the residual value:
- It’s based on previous sale prices for your make and model
- It also reflects the car’s demand. Usually, the more popular the car, the higher the residual value
- It’s typically non-negotiable
Running a simple search for used cars on sites like Edmunds.com, Cars.com, or Kelley Blue Book (kbb.com) can give you an idea of how your car’s lease buyout price compares to the current car market.
In addition to the residual value, you’ll also have to pay any applicable taxes and Department of Motor Vehicle (DMV) fees.
Depending on your leasing company and their terms, you may have to pay an administrative fee to cover transactional costs associated with the lease buyout.
3 important lease buyout factors
If your car’s residual value is at or lower than current market conditions, ask yourself these three questions to make sure buying out your lease truly makes sense.
- Have I gone over the mileage limit in my lease? If this is the case, you’ll have to pay per-mile penalties that can really add up when your lease comes to an end. For example, if you’re 10,000 miles over the limit, you could pay a penalty as high as $2,500. Instead of paying that penalty at the end of your lease, you could put it towards buying out your auto lease instead.
- What’s the condition of my car? When you return your car to the dealership, they will do an inspection. Wear and tear that’s common to everyday use usually doesn’t matter. However, anything the dealership considers above-average wear and tear could result in fees. Depending on the damage, this could mean anywhere from hundreds of thousands to dollars.
- How much will it cost to maintain my car? If you buyout your lease, you own the car outright. This means you’re responsible for maintenance and repairs. Do some research on the make and model of your car to get a general idea of how much you can expect to spend on regular maintenance.
What are your financing options?
Unless you have enough cash on hand to fund your lease buyout, you’ll need to look at financing. You could stick with the dealership’s financing options or you could shop around for other lenders who offer lease buyout loans.
Since there are a lot of options for lease buyout loans in San Francisco, you’ll want to make sure you get the best interest rate and terms from your lender.
Consider the term of the loan too, and make sure it works for you. Shorter term loans come with higher monthly payments, but the interest charges will be lower over the life of the loan. Lease buyout loan terms typically range from 36 -72 months.
You can use our helpful loan amount calculator to find out how much you can actually afford based on the loan amount, APR, and term.
Ready to own your wheels?
Buying out your car lease can be an attractive option for a variety of reasons:
- You’re happy with the car and not ready to give it back to the dealership
- The car is in good condition
- You can get a lease buyout loan with lower payments than what you’re paying on your lease
If you’re ready to own your wheels and a lease buyout loan sounds right for you, we have speedy financing options to help make that happen.
We believe you should be informed and comfortable before you make any financial decision. So, if you still have questions about car loans, leasing versus buying a car, or questions about other types of loans, check out our helpful articles in the Learning Center.
