If you’re coming toward the end of your car lease, time is running out to decide if buying your leased car before the lease ends makes more sense than turning it in. Since you technically aren’t the owner of your leased car, the leasing company that does own it wants to know if you want to buy the car or if you’d like to return it at the end of the terms of the lease that you agreed upon.
Should You Buy Your Leased Car?
Yes, but it depends on a few details. If the car is in good shape and you have managed to keep the miles driven within the limits spelled out in the lease, you can pretty much just hand over the keys and walk away. If not, you will probably get hit with extra charges and penalties that may exceed whatever deposit you put down up front. In cases like these, it often makes financial sense to buy the car.
Here are five reasons you might consider buying your leased car instead of turning it in:
1) You can buy the car for less than it’s worth
If your lease buyout price is lower than the car’s market value, buying your leased car is like getting a discount on a good used car. Estimating what a car will be worth 24 to 48 months down the road is more of an art than a science. But that number — commonly called the residual value — is what the leasing company uses to set a monthly lease payment. In simple terms, the new-car sale price minus the residual value divided by the number of months in the lease equals the monthly payment.
If the leasing company guesses wrong and sets the residual value too high, the monthly payments are lower than they should be. If the residual value is set too low, you can buy the car for less than it’s worth at lease end. When that happens, it’s like buying a really good used car that you, yourself, have been taking care of and are already used to.
If you need help financing the purchase, well-qualified buyers could get a car lease buyout loan with a monthly payment that could be similar to what you’ve already been paying for the lease. If you want to get an idea for what that would cost, try searching the web for a lease buyout calculator.
2) You like the car and took good care of it
You’ve done everything right while this car was in your care. You’ve maintained it to the manufacturer’s specifications, you’ve driven it responsibly and kept its sheet metal unblemished and its interior spotless. There is not another used car on the market that you can have more confidence in than the one you’ve been driving for the last few years. If you still love this car as much at the end of the lease as you did on the day you picked it out, buying out your car lease may be the smart move.
3) The car shows excessive wear and tear
If you didn’t keep your leased car in showroom condition, you could avoid some fees by buying the car. Buying your leased car if it’s in great shape seems logical, but why would you keep it if it’s in bad shape? If you’ve been driving it like you stole it, your leased car probably shows the scars of your road warrior behavior.
If there is excess wear and tear on the car, you’ll be facing some penalties. The greater the damage, the larger the penalty. Those little dents, dings and scratches that might not seem like a big deal to you will be viewed very differently by the leasing company which needs to turn the car around and sell it if you decide to return it. One way to avoid those lease-end penalties and charges is to buy the car.
4) You went over your mileage
Going over your mileage is a common headache for car lessees. If the actual amount of miles you drove your car doesn’t exactly match up with how many miles you were supposed to drive it according to the lease, you can avoid steep fees by buying the car. The leasing company sets a mileage limit as part of its residual value estimate and going over that number can result in some nasty penalties.
If you go over your miles, the leasing company will charge you for every extra mile driven. The per-mile penalty is spelled out in your lease, but it can run as high as $0.25 per mile. That would be $250 for every 1,000 miles over the limit. Buying a leased car before the lease ends is one way to dodge these penalties.
5) You want to avoid the hassle of car shopping
Let’s face it, shopping for a car takes a lot of time and energy. Buying your leased car can save several weekends on car lots and most of the frustration that comes with the process. You will still need to do a little research and negotiating, but much less than starting the process from scratch. End of car lease negotiations are generally smoother and quicker than starting all over on a new deal on a new car.
Okay, I want to buy my leased car. Now what?
So you’ve decided that it makes sense to buy your leased car. Where do you go from there? Your next step is to notify your dealer (which may have already contacted you depending on how close you are to the end of your lease) with your intention to buy the car. That way you can save some time trying to decide what to do at the dealership and get right to the negotiations on how much you’re going to pay for your car and whether you’ll pay with cash or take out a car lease buyout loan.
We recommend checking your specific car’s value at Kelley Blue Book so you go into the dealership armed with the information you need to make a great deal.
More Car Buying, Selling and Trade-In Related Articles:
- How to Make Sure Your Lease Deal Is a Good One
- What’s the Right Down Payment on a Car Loan or Lease?
- Certified Pre-Owned vs. Off-Lease Cars: Where Is the Value?
Editor’s Note: This article has been updated for accuracy since it was originally published.