Most auto leases provide the leasing customer with the option to buy their car at the end of the lease, or prior to the end of the lease. This is called a "lease buyout" or "lease payoff."
To buy out your lease simply means you purchase your vehicle from the lease company - either with cash or a loan.
Most lease contracts allow early buyouts, but some don't. Some restrict the time period during the lease in which you may exercise your purchase option. For example, buyouts may be prohibited in the first few months and/or the last few months. You should read your lease contract to determine if you have any such restrictions.
You might consider a buyout if you want to continue driving your car after your lease ends. Since you know the car's history and know its condition, it makes a great used car purchase without the uncertainties of buying a car from a dealer or stranger. You know the car, how it's been treated, and its condition.
If you've exceeded your mileage limits, or have excessive wear or damages, and want to avoid associated penalties, you may want to consider a buyout.
There are two kinds of car lease buyouts:
- Lease-end buyout (at normal end of lease)
- Early buyout (before lease ends)
Car Lease Lease-End Buyout
Buying your vehicle at the end of your lease is sometimes a good option, and sometimes not, depending on the details of your particular situation. This option should always be considered and compared to your other lease-end options to determine if it's your best move.
The end-of-lease buyout purchase price is typically the residual value stated in your lease contract. This price is often negotiable, and sometimes not, depending on the lease company's policies. If the company won't negotiate, you must decide if the stated price is a fair price to pay.
There are a number of different ways to look at the buyout purchase price and whether it's a fair price to pay:
- When leasing, you pay for the car's depreciation. The remainder is the residual, which is the same as your lease-end purchase price. So, by buying the car for the residual value, you're simply paying for the part of the car' s original price that you haven't already paid. It's a fair price in this respect. Nobody gets cheated.
- However, another way to look at the price is from a market value viewpoint. If you had to buy another car (used), from an individual or dealer, just like the one you've been leasing, with the same equipment and mileage, what would you have to pay? This would be a fair price to you if you bought your leased car from the lease company, although it might not be quite fair to the lease company if your residual had been set high (and you benefited by making low payments).
- Finally, another way to look at it. If you were to return your car to the lease company, they would only expect to get wholesale price (think trade-in value) by selling it at a dealer auction. In this respect, any price you offer them that is more than wholesale is fair to them, and a good deal for you.
Financing a leased-car purchase is the same as financing any used car purchase. You arrange for a used-car loan, get a check written to the lease company for the amount of the purchase, possibly pay sales tax, and you're done. The loan company usually holds the title until you've paid off your loan. Buying out your lease is one of the best ways to get a Silverthorne Used Car that you already know and love.
Car Lease Early Buyout
If you decide that you want to purchase your vehicle before lease-end, this is considered an early buyout. It's more complicated than a lease-end buyout because of the way that the price of the vehicle is determined. The price is a combination of the lease-end residual value, as stated in your lease contract, added to the amount you still owe on your lease.
The amount you still owe on your lease may be considerably higher than you might think. It's because your low monthly lease payments have not kept up with the rapid depreciation in your vehicle's value. It's also because your lease company recalculates your lease balance in a different way than it was originally calculated, resulting in crediting most of your payments to finance charges rather than paying down the lease.
It's nearly always better to wait and buy out a lease at lease-end than to buy out early. Some people make the mistake of buying out a lease early when they are over mileage. In most cases, it is cheaper to pay mileage fees at lease-end than to buy out a lease early.
No matter what you decide is the right option for you, Vista Auto, your Silverthorne Car Dealer, has a large selection of new and used cars to choose from. We offer a price guarantee to ensure that you will get the best value on your purchase.