If you like driving the car you have leased and want to continue driving it in the future, an auto lease buying is the best way to keep it for good. You don’t have to dread the day you return the keys, as a lease buyout loan helps you keep the car you are already driving. Visit eAutoLease.com to find out more about buying out your auto lease, how it works, and what to do if you do not have the cash to purchase the vehicle.
How Does a Lease Buyout Work?
If a buyout option is a part of your lease agreement, you can buy your leased vehicle when your lease contract comes to an end. If you are not interested in purchasing the car, you can return it to the dealership.
If you choose to go for a lease buyout at the lease end, the price is calculated according to the residual value or the purchase amount of the car set at lease signing. This cost is based on the predicted value of the vehicle at the end of the lease. This amount is also called the buyout amount or purchase option price.
As you reach the end of the lease, you can take an available buyout option or return the car. You will have to pay the set amount, as well as any additional fees if you decide to use the buyout option.
If you are considering a lease buyout, you will have to do some thinking and calculation before making a decision. Doing a bit of research and calculating figures will help you determine if buying out your auto lease is right for you.
Here is what you need to do about lease buying if this prospect sounds interesting to you:
Look Into Your Lease Contract Closely
Review your original leasing agreement to determine how much you must pay to purchase your car. The leasing agreement outlines the residual value or the purchase option price. If you have decided to keep the car, you will have to pay the residual value amount, along with taxes and Department of Motor Vehicles (DMV) fees. In some cases, you also need to pay an administrative fee, predetermined by the leasing company for covering transaction costs.
Here are some key facts you should know about the residual price:
- It is based on previous sale price for that specific make and model
- It reflects the demand for the car in the market, and a popular make or model commands a higher residual price
- It is usually non-negotiable
You can check used car websites to compare your vehicle’s lease buyout price with other vehicles in the open market.
Focus On Buyout Considerations
If you are satisfied with the residual price of your vehicle, focus on other aspects of the deal to see if they work for you. Here are three key lease buyout considerations:
Mileage agreement terms – Check out if you have exceeded the number of predetermined miles in your lease. If you have gone over the mileage limit, you will have to pay-per-mile penalties that can add up when your lease ends. If, for example, you are 10,000 miles over your lease, you may end up paying as much as $2,500. This money can be better used for buying out your lease.
Car condition – Focus on the condition of the car and how well it is doing. When you return your car, it will be carefully inspected. While minor wear and tear are considered normal, any damage beyond that will cost you. You may end up paying hundreds or thousands of dollars in repairs so do not forget to check the car for inspection before buying out your lease.
Maintenance costs – You must have an idea of how much it will cost you to maintain the vehicle. Do not rely on the dealership too much, do your own homework as well to get an idea of what you may have to spend during a year for your make and model. Include these costs in your decision to purchase your leased vehicle.
Read more: Car Lease Calculator: Estimate Your Monthly Auto Lease Payment
How Much Money Do You Need to Buy Out Your Auto Lease?
If you do not have sufficient cash on hand, you will need financing. You can seek financing by getting a loan from a bank or some other financing company as an alternative to dealership financing services. Just as with any other loan, shop around for the best interest rates and terms.
Also, remember that the annual percentage rate (APR) on a lease buyout is usually higher than on a new-car purchase. If you go with a short-term loan, you may have to pay high monthly payments, but the good thing is that it comes with lower interest charges over the loan term. Traditional loan terms range from 36 to 72 months.
You can also compare loans to see how different loan amounts, APRs, and terms will affect your monthly payments. Don’t forget to read about how car loans work to enjoy a hassle-free driving experience.
How to Buy Out Your Auto Lease Successfully?
If you have made up your mind about buying out your auto lease, you will have to decide whether you want to do it with a bank or other finance sources. First of all, you need to contact the leasing company to confirm the process for ending the lease. The lender’s loan officers can help to determine the loan amount based on your leasing agreement and with the leasing company to facilitate the buyout. If you choose to finance this way, you will have to settle any fees with DMV.
Read more: Three Things to Know About a Short-Term Car Lease
An auto lease buyout may be a good option depending on your situation. Check out your budget, the price of the car, and whether you really want the car before going ahead with your decision. Factors like the vehicle condition and your contract with the dealership can help determine if or not a lease buyout is a good investment. Read more about car leasing and lease buyouts at eAutoLease.com to understand how the process works and what you can do to get the best deal without hassle.
