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- 7 Ways to Support Local This Holiday Season Without Breaking the Bank - October 14, 2021
One of the advantages of leasing a car is that once the lease is up, you’re free to walk away. You’ll have to drop the vehicle off and sign some paperwork, but, from there, you’re free to move on and purchase a new car.
But what if you don’t want to walk away from your current car? You love the car you have and don’t feel like shopping for a new one. Does it make financial sense to buy your leased car?
What is a Lease Buyout?
When you lease a car, it’s like you’re borrowing it for a predetermined amount of time — typically between 12 and 36 months. You make monthly payments and are given the right to use that car, but you don’t own it.
But once your lease is up, you have a decision to make. Do you want to turn the vehicle in, or do you want to buy it? If you choose to buy it, this is what’s known as a lease buyout.
When a Lease Buyout Makes Sense
Depending on the vehicle and your circumstances, buying a leased car might make financial sense. Here are five scenarios when it may make sense to buy a leased car.
1. You’ll Get a Good Deal
Your dealer should contact you about three months before your lease is up to determine your plans. If you’re interested in buying the car, you can revisit your lease documents to determine the buyout price.
The buyout price predicts how much your car will be worth at the end of the lease. But the actual value could be higher or lower than market value.
To get an accurate estimate of your car’s value, consult an industry guide like Kelley Blue Book or Edmunds. These resources could help you determine what you’d pay for the vehicle if you bought it today from a dealership. If you can buy the car for less than its market value, then the lease buyout might make sense.
2. It Fits in Your Budget
Ultimately, getting a good deal on your lease buyout doesn’t matter if you can’t afford to buy the car. If you can snag a great deal and pay cash for the car, then a lease buyout probably makes sense.
If you have to take out an auto loan, make sure you shop around for the best deals. Look for a lender that offers affordable interest rates, and doesn’t charge any prepayment penalties. Check out Credible.com. They can help you compare interest rates from multiple lenders.
One way to save money on an auto loan is to apply for a loan with a longer-term limit. These auto loans tend to come with lower interest rates. But if you pay it off as quickly as possible, you’ll pay less in interest overall.
3. It’s More Convenient to Keep it
Sometimes, it’s more of a hassle to turn in your leased vehicle and start over with a new car. Shopping for a new car is a pain, and if your current vehicle still fits your lifestyle and needs, why mess with a good thing?
And if you’ve exceeded the mileage limits on your car, you might have to pay hefty fees if you turn it in. Lenders charge a fee for every mile you go over on your mileage terms. You also may have to pay fees if there’s a lot of wear and tear on your car.
4. The Car is Still in Good Condition
When you lease a car, the vehicle is under warranty for the duration of the lease. But once the lease is up, the warranty ends. So if you buy the car and it starts having mechanical problems, you’re going to be responsible for footing the bill.
If you’re considering a lease buyout, take your car in for an inspection first. Consider the mileage, and what you can expect to spend on maintenance in the future. If the vehicle is still in good condition and relatively reliable, it might make sense to hang onto it.
5. You Can Negotiate With the Dealer
When you signed the lease, the contract outlined how much you’ll pay for a lease buyout. But some dealers are willing to negotiate on the final price.
That’s because it’s easier for the dealer to sell the car to you than to have to ship and auction the vehicle. And if you negotiate the financing through them, the dealer has even more of an incentive to work with you.
If you want to negotiate your contract, ask to talk to the manager at the leasing company. That person will have the authority to negotiate and approve the vehicle at a lower price.
Bottom Line
If you love your leased car and want to keep it, it might be the right choice in certain circumstances. Ensure the vehicle suits your budget and lifestyle, and that you can get a good deal on it.
But there are a few situations where it’s probably not a great idea to buy a leased vehicle. If the car is worth less than the price outlined in your contract, buying it is not a great plan. And if the car payment doesn’t fit in your monthly budget, you should look for something more affordable.
Ideally, you’ll start researching your options about three to six months before your lease is up. Getting started early will give you time to explore your options and decide what’s right for you.
I’m trying so hard to get OUT of my lease! It’s thousands of dollars and another two years to keep that due to changing circumstances we can’t really afford but haven’t stopped paying. The dealership guy literally told us to total the car because that was the cheapest way out.
I did buy out my leased car and I am really happy with my decision. It had very low mileage compared to what the lease covered, it has been an extremely reliable, great in the snow, well cared for by me as I do for all my cars, and I liked the payout amount of $14,000 for my three-year/old Subaru Impreza. With my good credit, I qualified for 2.49% interest rate.Since January when the balance was $10,000 I’ve been paying extra so now I owe $5999. I would like to pay it off by January 1 although it might not be possible. Regardless I will easily pay it off in May 2021 which would be 2 1/2 years early. The engine in this car is rated for 200,000 miles and I plan to keep it at least 10 to 12 years total, maybe longer. I only have 45,000 miles on it now and of course I am rarely driving due to sheltering in place. I’ve only driven 403 miles since March 4:) So yes financially and emotionally buying my leased car has been phenomenal.