Is Buying Out Your Auto Lease the Right Option?

Most people find it hard to return their leased vehicles back to the dealership after the expiry of their lease. Fortunately, you don’t always have to return your vehicle, especially if you’ve developed strong connections with it. Most car dealerships allow vehicle lessees to return the vehicle, trade it in for another, or buy out after the end of the lease period. Buying out your leased vehicle might be the right option for some, but not always the best. You should consider several factors before buying out your leased vehicle.

How Much Does Lease Buyout Cost?

Buying out your car lease essentially means purchasing the vehicle once your lease agreement expires. While this is common, not all dealerships allow auto buyouts. Some have contracts allowing lessees to buy the car before the agreement expires. That said, dealerships have different approaches for auto lease buyouts.

The cost of your auto lease buyout depends on several factors. While the exact value may vary, a lease buyout calculator can help you estimate the value. However, you should have the following figures:

• The original value of your vehicle in the lease agreement
• The dealership fees
• Payments made during the lease term
• Sales tax, which varies from state to state

While dealerships have minimal flexibility, you can negotiate the final auto buyout price. Below are a few things to consider before negotiating for a better purchase price:

• Understand the contract – Review your lease agreement before negotiating with the dealership. Most car leases are under the manufacturers’ finance departments, also called captive lenders. There’s no chance of negotiations if your lease agreement is under captive lenders. However, you can negotiate if non-captive lenders, such as banks, wrote your agreement.
• Research – You should have an idea of your vehicle’s worth before buying it out from the dealership. If your vehicle’s current market price is lower than the lease buyout price, consider buying out your lease. You can also use the market price to negotiate a low buyout price.
• Negotiate the fees – You can also reduce the buyout price by negotiating the dealership fees. Most auto dealerships have flexible document or transaction fees, especially if you intend to resell your vehicle for a profit.

When to Buy Out Your Leased Car

Buying out your auto lease isn’t always the best option. However, it is an attractive option if:

1.  You are below or over the allowed mileage

Most dealerships have three-year or 36,000 miles lease contracts, beyond which you’ll owe the dealership some amount. The dealership also refunds if you are under. Consider buying out a vehicle if you’ve exceeded the mileage to avoid paying mileage penalties and the $300 to $350 deposition fee, a fee charged by dealerships for preparing the vehicle for sale. Similarly, you shouldn’t return a vehicle you’ve only driven for 8,000 miles out of the allowed 36,000 miles.

2.  If the market price is higher than the buyout price

The market price of your leased vehicle may be higher than the buyout price for various reasons. Dealerships may offer low prices to encourage buyouts to avoid auction and shipping fees. You should take advantage of the shift in market prices and buy out the vehicle for resale. However, you shouldn’t buy out the lease if the market price is significantly lower than the buyout price.

3.  If the vehicle is excessively worn out

You should make several evaluations before buying the car. Vehicle dealerships charge significant penalties for vehicle wear and tear. Scrapes, tears, and dings in vehicle upholstery can quickly accumulate. Buying out a worn-out vehicle helps you avoid these charges. You can also fix these issues later for a lower cost.

4.  If you like the vehicle

Your preference and liking for the vehicle are other reasons for buying out the lease. This puts an end to your serial leasing and having to make monthly payments. However, remember that buying out before the expiry of your lease voids the bumper-to-bumper warranty. However, the powertrain warranty remains active.

Endnote

Buying out your auto lease is a good option in some situations. However, it doesn’t make sense if the leased vehicle has high mileage or is highly priced. You should also consider the timing, as it determines the buyout price. For instance, you’ll be charged extra finance fees if you make an early buyout.