Car Lease Buyouts: What You Need to Know

From lower monthly payments to getting a new car every few years, leasing a car certainly has its benefits. But if you’re ready to shift from leasing to owning, it may be time to consider buying out your lease.

How to Buy Your Leased Car

Whether you’re beginning to drive more (and you’re worried about exceeding the mileage limits in the terms of your lease) or you’re just ready for ownership, here’s what you need to know about buying out your lease.

Understand the Terms of Your Lease

Before you buy out your lease, you’ll want to check the terms of your lease agreement to see if the dealership will charge you fees for a lease buyout before it expires. It may be better financially to wait to purchase until your lease expires.

Many finance companies offer drivers lease buyout options they can exercise once their lease is up, sometimes sooner. The lease contract should detail your lease buyout options and the price, or method for determining the price, that would have to be paid to exercise the lease buyout.

Add Up the Costs

Once your car is a few years older and is beginning to rack up the miles, it’s a good time to research the value of your vehicle. Websites like Kelley Blue Book and Cars.com, provide tools to estimate your car’s worth from different perspectives — private party, trade-in, etc.

You’ll want to look up your car’s residual value (estimate of its worth at the end of the lease), which should be listed in your lease agreement. Determine the buyout amount or purchase price, if available, by looking at your lease and contacting your lessor. Don’t forget to evaluate the car's wear and tear, and factor in how much this could cost you. 

For most lease buyouts, you’ll need to be prepared to pay for the value of the vehicle, the rest of the payments in the lease term, state sales tax, if applicable, and any additional dealership fees.

Secure Financing

Like most auto loans, you can finance your car lease buyout if you're not ready to pay cash. The dealership's offer might not be your best option, so be sure to do your own research before putting anything in ink. There are finance options in the market designed specifically for lease buyouts, and it’s always a good idea to shop around for the best deal on your lease buyout loan. Explore different options such as local banks, credit unions and online lenders.

Be Ready to Negotiate

Most dealerships have minimal flexibility on the lease buyout price, but in some situations, it's possible to negotiate a better purchase price for your leased vehicle. Arm yourself with the right information, like the current market value of your car. If it’s lower than the purchase price on your lease, you may be able to use that as leverage towards getting a better deal.

Alternatively, if the buyout price is non-negotiable, you might still manage to save money by asking the dealership to eliminate or lower fees such as transaction or document fees. Request an itemized list of fees included in your buyout and look for any fees that aren’t part of the original lease — that’s where there might be some room for negotiation.

Evaluate Your Insurance

Let your insurance company know that your lease is over and you’re planning on purchasing the car. Your agent may be able to revisit your policy and save you money now that you have different contractual terms. For example, if your lease agreement required extensive coverage or a low deductible, you might be able to adjust your policy to better suit your needs. 

Get the Coverage You Need

Whether you own or lease your vehicle, be sure you have the right coverage in place. When you’re on the road you want to be sure you’re protected. Connect with your Farm Bureau agent today.