When your car lease reaches the end of its term, the dealership may expect you to return the vehicle and start another lease. But that is not necessarily your only option. Comparing two key figures can help you determine whether buying the car deserves consideration.
When you signed the lease, the contract included a predetermined buyout amount known as the residual value. This is the amount used to establish what the vehicle can be purchased for when the lease ends. The residual was based on an estimate of the car’s future value made years earlier, and those estimates do not always match the vehicle’s actual market value.
If the car has held its value better than expected, its current market price could be higher than the amount required to buy it. In that situation, purchasing the vehicle may allow you to retain the difference in value.
Two figures are particularly important: the lease buyout amount shown in your contract and the vehicle’s current market value. Check a reputable valuation service using the exact model year, trim level, mileage and condition of your vehicle. Several other factors can also affect the decision:
- You exceeded the mileage allowance. Lease contracts commonly charge a per-mile fee once you go beyond the agreed limit. For example, 4,000 excess miles at 10 to 30 cents per mile could result in $400 to $1,200 in additional charges. Buying the vehicle generally eliminates the need to pay that lease-end mileage penalty.
- The vehicle has chargeable wear and tear. If returning the car would result in fees for damage or excessive wear, those charges may not apply when you purchase the vehicle. The same can apply to a lease disposition fee, which can often be around $300 to $500.
- You stayed below the mileage limit and maintained the vehicle carefully. Low mileage and good condition can mean the car is worth more than the original residual-value estimate.
- You simply want to move on from the vehicle. If you no longer need a car or would rather drive something different, returning the lease may make more sense regardless of the financial comparison.
You are not necessarily required to arrange the buyout through the dealership. Lease End can handle financing, payoff and title or registration processes online, while some credit unions also offer financing specifically for lease buyouts.
Do the math before your scheduled lease-return appointment rather than waiting until you are sitting at the dealership. Payoff quotes may only remain valid for a limited period, often around 10 to 15 days. The dealership may also not proactively point out that your vehicle’s current market value is higher than its contractual buyout amount.
If your comparison shows that purchasing the vehicle makes financial sense for your circumstances, arranging the financing and paperwork ahead of time can help you complete the process without relying entirely on the dealership.
