Many times when a lease is up, we do not want to necessarily get rid of the car. Depending on how long the lease, you may want to keep the car by buying it in a way similar to buying a used car. However, you still want to check all the options to make sure you get a good deal.
- You will want to check out your lease terms and see what the cost is for you to buy out your lease.
- Check the fine print that is part of your lease terms. There should be a purchase option price within the contract. This was created by the leasing company and has the value of the car at the end of the lease contract. There will be a fee of $300 to $500 to buy out the car.
- Since your lease payment is comprised of the difference between the car price and the value it will be at the end of the lease contract, along with the financing fee.
- The value of the car at the end of the lease is the depreciation of the car over the course of the lease. Here is an example, say the car is $40,000 and at 50% residual value, makes the car worth $20,000 at the end of the lease.
- However, there is the market value of the car or blue book value; this will differ from the residual value. Using Cars.com, Edmunds.com, or Kelly Blue Book will give you the car’s market value, which is how much it is actually worth on an open market.
- Compare the residual value in the contract and the market value. Of course you want the market value to e higher. However, usually the residual value is higher.
Leasing companies know that the residual value is usually higher and at this point you will need to negotiate a lower buy price through the dealership.
Typically when negotiating a price, going lower than the market value or your target price, will get you near the price you want. You definitely do not want to pay the residual value price, you will end up upside down on your loan or you will need to put down even more money on a car that you will be paying too much for. Car dealerships would rather sell the car and usually will negotiate.
Deciding to buy out your lease can work out great depending on the car and your own needs. Just make sure to read all the fine print and terms of your agreement, so that you get the best deal at the end of your lease.
