Quick Facts About Lease Buybacks
- Check your lease and ask your lessor what you need to pay to buy the car out of its lease.
- Research the current value of your vehicle.
- Consider buying the car if the current value is higher than the lease buyback amount.
If you leased a car in pre-pandemic times and are just a few months shy of the final payment, weighing if a lease buyback makes sense or if you should turn in the keys, start here before you decide.
According to Brian Moody, executive editor of Autotrader, you’re at the best possible spot in this challenging environment for buying cars.
Here’s what you need to know.
- Check Your Lease Buyout Agreement
- Research the Value of Your Vehicle
- When Should I Buyout My Lease?
- When to Avoid a Lease Buyout
- Can I Immediately Sell My Car After I Buy Out Its Lease?
Check Your Lease Buyout Agreement
Ask your lessor to see what you must pay to buy the car out of its lease terms now. This information is usually easy to find online by logging into the account where you make your monthly payments. However, making a phone call to the lessor can also be helpful.
When checking, ask about any associated fees or an early termination charge. Contact the lessor directly to determine exactly what you will owe if you have any doubts.
Lease Buyouts on Tesla Models?
As of April 15, 2022, Tesla ended the option of lease buyouts. If you leased a Tesla before that date, you could purchase your vehicle using the agreed-upon buyout amount. For those who leased vehicles after April 13, 2019, a purchase fee of $350 applies.
Tesla’s website says, “All Tesla vehicles delivered on or after April 15, 2022, are not eligible for purchase. It also says, “Third-party dealerships and third-party individuals are not eligible to purchase leased vehicles.”
Research the Value of Your Vehicle
You can use the car valuation tool from our sister site Kelley Blue Book to find the approximate value of your leased vehicle. You’ll want to note your car’s current mileage. Plus, you should be aware of any significant optional equipment the car offers. If you kept the original window sticker that came with the vehicle, it could be useful here.
Now, the math is simple: Is your car worth more than the buyout? If so, it may make a lot of sense to buy it.
For instance: If the buyout value is $25,000, but the car now shows a trade-in value of $30,000, you would be $5,000 ahead.
When Should I Buy Out My Lease?
Lessees should consider buying out their lease in a few circumstances, Moody said.
“First, if the buyout price is at or below market value. Most leased cars usually have low to moderate miles and have been well cared for,” he said.
If you’ve got a good car that you like and have kept maintained — it might be a vehicle you can see yourself driving for another year or more.
You may have heard that used car values remain high. Beginning in mid-2021, used car values rose rapidly due to limited new cars on dealership lots. According to a Cox Automotive analysis, average used car transactions were $26,068 in February. The figure is down 1.7% from January’s price, but it’s still higher than a year ago.
“Consider buying your leased car if simply returning it will result in paying more for the car you’ll get to replace it,” Moody said.
When to Avoid a Lease Buyout?
It may be best to turn in the keys and walk away from the leased car if the math doesn’t work in your favor. Be sure you factor today’s higher loan interest rates into your calculations.
A more complex decision might involve looking at the car’s reliability history. A manufacturer’s warranty likely covered your leased car, but that may not extend much — if at all — beyond the end of the lease.
“You might be inheriting problems that you now have to pay to fix along with your monthly car payment,” Moody said.
You may want to turn in the car if it has had frequent mechanical or electrical problems or if you were involved in an accident that resulted in major damage repairs that could affect your vehicle’s long-term value.
Can I Immediately Sell My Car After I Buy Out Its Lease?
Some drivers may see dollar signs when they find out their leased car is worth thousands more than the lease buyback price.
However, you’ll want to do a little local research first. And yes, if you buy out your leased car, you are entitled to sell it.
“But many states and counties have laws that prohibit anyone without a dealer’s license from purchasing a car to sell it immediately,” Moody said.
Additionally, you will likely need to pay for a new registration, and it may take some time for license plates, registration cards, or stickers to arrive. That may be enough to put the brakes on your plans to turn the car into an immediate profit-maker.
“Still, once it is your car, you’re free to keep or dispose of it as you see fit,” Moody said.
Additionally, a dealership can work with you to buy the car out of its lease as you immediately trade it in to them. In that case, you may only own it on paper for a few moments. That could give your replacement car shopping the budget boost it needs.
Related Car Buying and Selling Articles:
- Tips for Buying a Car During the Chip Shortage
- Buying a Car: Should You Focus on the Monthly Payment?
- Why is Trade-in Value Lower Than Retail Value?
Editor’s Note: This article has been updated for accuracy since it was originally published.
