By Charlie Burns () - February 27, 2019
Should You Buyout Your Lease?
Are you one of those people who gets very attached to your car? If so, you are not alone! When leasing a car, most people’s first question is whether they can opt to purchase the car at the end of the lease term. As with many complex things, the answer is “it depends.”
There may be specific reasons to consider buying out your lease. Perhaps you have driven well over your mileage allowance and will owe mileage fees at the end of your contract. Maybe some minor body damage has been done that you don’t want to pay for. Maybe you are too busy to shop for something new and just want to go with the simplest solution.
Step 1. Read your contract.
Whatever the reason you may want to move forward with a buy-out, the first step is to read through your lease agreement to understand its buy-out provisions. What is the residual value of the car as stated in your contract? Is there also an additional purchase-option fee? Will there be added fees you can expect due to your car’s mileage or condition? Lease contracts vary, so be sure to take the time to read the “fine print.”
Step 2. Research your car’s value.
Don’t make the mistake of interpreting the residual amount listed in your contract as the true value of your car. For that, you will need to conduct some research to see if your car is actually worth the amount they are asking. Look at what a similar vehicle—matched by model, year, condition and mileage—would cost you through industry sites, such as Kelley Blue Book, Cars.com or Edmunds. You can also check the car’s estimated wholesale value to get a sense of what a dealer might pay to buy your car at auction. The true market value of your car typically falls somewhere between those two numbers.
Step 3. Negotiate.
Like with most good things in life, patience is a virtue. As the potential buyer, you can maintain more leverage in negotiating a lease buy-out price if you don’t play your hand too early. In most situations, there’s no need to consider a buy-out before the end of your lease. When the right time comes, you can talk to your leasing company and ask for purchase price discounts, financing incentives or fee waivers. Some lease companies are not open to negotiation, but it certainly doesn’t hurt to ask.
Step 4. Be Ready to walk
As attached as you may be to your car, it’s actually quite simple to determine its true value, so you can have a clear-headed approach when you talk to your lease company. If you have already determined that the car is worth significantly less than the purchase price, and you cannot negotiate with them, don’t be afraid to walk away. There are plenty of other cars out there waiting for you.