About a quarter of new cars in the U.S. are leased (28%), but not everyone wants to give the car back when their contract is up. If you are thinking of leasing a car, but are wondering if you will have the option to buy when the lease ends (or even earlier), read on.
We’ll also take a closer look at auto lease buyouts and the common questions asked about them. Learn more so you can lease your next car with confidence.
Can you lease a car and then buy it?
Yes, when your lease ends, you usually have the option of returning the car to the leasing company, extending your lease, or buying the car.
If you decide you want to buy the car, there will typically be a purchase option price within your lease agreement, known as the residual price. It is the amount the leasing company and leasee agree the car will be worth at the end of the contract.
You will need to pay that price plus any applicable fees, taxes, and other unpaid amounts if you decide to buy it.
One downside to a lease is all of the restrictions. There are limits on what you can do to the car and how much you can drive it. If you go past the limits, you have to pay when you return the car.
For example, if your lease says you can only drive 40,000 miles and you drive 45,000, you will be charged for every mile over the limit. Some rates are as high as $0.25 per mile, which would cost $1,250.
However, if you purchase the car at the end of your lease, you will usually not be responsible for the penalties for mileage or excess wear-and-tear (but always check your lease agreement to make sure).
Further, the disposition fee (like a return fee) is usually waived. But there may be a purchase option fee of a couple hundred dollars, so look out for that.
- Yes, you can usually buy your car at the end of the lease
- You may have to pay taxes and fees
- Some fees will be waived (disposition, extra mileage, excess wear-and-tear)
Can you negotiate the price when you buy a leased car?
In many cases, you can negotiate the price of a car lease. Leasing companies sell their returned cars at auctions or directly to dealers, which comes with shipping expenses and auction fees.
It is often less of a hassle and less expensive for the company if you buy the car. So, they may be willing to lower the purchase price to make a deal.
How do you better your chances?
As the end of your lease is approaching, research how much your car is worth and check your residual price. Also, if you’re not paying cash, shop around to find out what kind of rates you can get on a loan. Then, wait for your leasing company to contact you.
Most will do so toward the end of your lease to find out what you plan to do. It’s best to act like you are not very interested in buying the car. Mention the high cost of the residual value combined with the purchase option fee.
By not appearing too eager to buy, the company will be more likely to offer you a discount. If you are offered a discount that works with your budget, go with the lender that offered you the best rate.
If you aren’t, let the leasing company know you will think about your options. You can follow up later to try another negotiation tactic, buy at the price available, or return the car.
Can you buy out of a lease early?
Yes, you can buy out of a lease at any time during the contract. However, there will be a buyout or early termination fee. The fee varies depending on your contract and how much time is left on it.
Fees typically range from $200 to $500. Additionally, you may be on the hook for your remaining payments.
How can you break your lease without penalty?
Can you get out of a car lease early without paying an arm and a leg? There are a few ways.
You could buy the car and keep it. Then sell it to a dealer or private party. You can also trade it in, or transfer the lease to someone else (see swapalease.com and leasequit.com).
You may incur fees from all of those options. However, the fees will often cost less than breaking the lease and paying for your remaining payments.
Transfer fees: $50 to $500
Buyout fees: $200 to $500
Read the details of your lease and figure out the cost of the other options in order to find the best solution.
Are leases a good deal?
From a financial standpoint, leases don’t usually turn out to be the best deal because you are not gaining any equity. It is like renting a home versus buying one.
How can you finance a lease buyout?
If you decide you want to buy the car you are leasing, but don’t have the cash-on-hand, you will need a financing solution.
Some auto loan lenders, such as Wells Fargo and Bank of America, offer financing for lease buyouts while others like Capital One do not. It can be a little tricky finding those that do, as it’s often disclosed in the fine print. The lenders below all offer lease purchase financing.
To make it easier, you can get personalized auto loan rates from dozens of top lenders without hurting your credit score. Then, you can conveniently compare lenders side-by-side, all in one place, to find the right one for you.
It doesn’t hurt to see what you qualify for – the more you know, the easier it will be to qualify for the best deal available.