Should I buy out my lease?
My lease agreement is nearing its end, and I’m getting many offers to buy out my lease due to the current state of the economy. Should I ignore the hype, or is it really a good idea to buy out my lease?
With cars in hot demand and selling at all-time high prices, many lease customers are looking at trade-in values for their vehicles, intending to buy out their lease. While this can be a smart choice for many consumers, it’s essential to consider all relevant factors before deciding. Here’s what you need to know about buying out your lease.
What is a lease buyout?
According to the lease, buying out a lease involves paying the car’s “buyout price” according to the lease contract, which then makes you the car’s new owner. Therefore, buying out a lease makes the most sense when you are nearing the end of your term.
How can I determine my car’s buyout price?
Look for the term “residual value” in your lease contract. This tells you what your car should be worth at end of the lease term. To determine your vehicle’s actual buyout price, add the residual value to any remaining payments. For example, if your car’s residual value is $25,000 and you owe another 10 payments of $500, the car’s buyout price is $30,000.
Will I need to pay any fees in addition to the buyout price?
Your vehicle’s buyout price may be subject to an auto sales tax, and your lender may charge additional fees on top of that. So take note of your contract details to know the actual total you’ll be paying before purchasing a leased car.
The good news is that you won’t be accountable for typical lease-end fees, including the costs of reconditioning the vehicle and an over-mileage penalty.
What are the advantages of buying out a lease?
Many drivers are opting to buy their leased vehicles due to the current state of the auto industry. Supply is low, and buying a car you already lease will give you first dibs at a hot commodity.
Some drivers capitalize on the high demand for used cars by buying out their leases and then flipping the car to a dealership or selling it privately to a new owner.
Before taking out a loan to buy out a lease, find out what your car is actually worth now.
How do I buy out my lease?
If you decide to buy out your lease, run the numbers described above to ensure it’s a financially responsible decision. When you have the total buyout price, your next step is to work on financing. Then, contact the company you lease from to complete the purchase.
Finally, notify your insurance company about the change in ownership of your vehicle and consider changing your coverage to reduce your premium amount.
If you’re looking to finance an auto loan for a lease buyout car, look to Elevate Credit Union! Our auto loans offer low-interest rates [see for current rates], easy payback terms, and a quick approval process. Call, click, or stop by to get started or discuss available options! And if you like this post, make sure to check out our MoneySmart Tips Blog.
