You may be wondering if a lease buyout is right for you. After a lease ends, you can leave the car at the dealership, sign off on a few documents and walk away or get a new lease with a new car. But what if you really like your leased car and wish to purchase it? Buying your leased car may be something worth considering.
Here we’ll describe a few tips to help you decide if you should buy out your lease and how to make the transaction. Follow these 5 simple steps to be able to buy a leased car.
Is this car worth purchasing?
Take a look at your lease contract and search for the residual amount (this may also be called a buyout amount). This amount is the prediction of what your car may be worth at the end of the lease. While you have this contract, check to see if there is also an acquisition fee that allows you to buy the car.
If your residual amount plus the acquisition fee is considerably less than the average retail price of the car, purchasing the car may be a great deal. You can find the current retail value of the car in a pricing guideline such as the Kelley Blue Book or NADA. Keep in mind that you’ll likely need to pay sales tax on this amount.
You’ll also want to check if the car is in good mechanical condition. Under a lease, usually, the car will be covered by a warranty. Once you buy out your lease, you may not have the same safety net as most warranties end within 3 years. Think about the fact that you may need to replace tires, brakes or the battery at some point during ownership so it’s important to factor these costs for maintenance. If the car is in good overall condition, it may be another sign that buying the car may be a good option.
Call Your Leasing Company
It’s a good idea to deal directly with your leasing company instead of the dealership. Give your leasing company a call and inquire how much purchasing the vehicle will cost.
If you ask about buying the car and the leasing company asks how many miles are on the car, tell them you aren’t sure. Some leasing companies may offer a lower buyout amount to entice you to buy the car. Don’t give a decisive answer if you feel there may be wiggle room. They may give you a better price the closer it gets to your lease end date.
Check the numbers
Unless you are able to buy the car with cash, you’ll need to set up a new loan. As it will be a used car, financing terms shouldn’t be longer than 36 months. By keeping the loan term short, you’ll avoid making payments on a car past its prime and enjoy a few payment-free years to cover any repairs that will pop up.
Keep in mind that your monthly payments may be a little more than when you were leasing but in the end, you’ll be the owner of the car for many more years. If you have some money saved, you could also consider making a higher downpayment to reduce the interest you will pay over time.
Leasing companies are likely able to help you finance your purchase and some companies like Instant Auto Loans specialize in lease buyouts. If you don’t have good credit, you can consider a secured auto loan.
Check the Contract
Remember to review your contract before signing. Check the numbers and make sure items that you didn’t ask for are not included such as an extended warranty or maintenance plan. Use a car loan calculator to double-check the numbers. Lenders will usually help you with the paperwork.
If you’re looking for the cheapest car loan rates to purchase your leased vehicle, apply for a loan with Instant Auto Loans. We offer instant car loans based on the equity in your vehicle. Our car loans are short term, easy to qualify for and straight-forward to re-pay.