With cars in hot demand, they’re selling at all-time high prices. That’s why many lease customers are looking at trade-in values for their vehicles and choosing to buy out their lease. While this can be a smart choice for many consumers, it’s important to consider all relevant factors before making a decision. Here’s what you need to know about buying out your lease.
What is a lease buyout?
Buying out a lease involves paying the car’s “buyout price” according to the lease contract, which then makes you the car’s new owner. This may necessitate taking out an auto loan, just like you might do when purchasing a new or used car at a dealership.
How can I determine my car’s buyout price?
Look for the term “residual value” in your lease contract. This tells you what your car is expected to be worth at the end of the lease term. To determine your vehicle’s actual buyout price, add the residual value to any remaining payments. For example, if your car’s residual value is $25,000 and you owe another 10 payments of $500, the car’s buyout price is $30,000.
While your vehicle’s buyout price may be subject to an auto sales tax, the good news is that you won’t be accountable for typical lease-end fees. These can include the costs of reconditioning or repairing the vehicle and an over-mileage penalty. Take note of your contract details so you’ll know the true total you’ll be paying before deciding to purchase your leased car.
What are the advantages of buying out a lease?
Supply is low on both new and used cars. Buying a car that you already lease will give you first dibs at a hot commodity. Plus, it may be challenging to purchase or lease another car.
Some drivers are choosing to capitalize on the high demand for used cars by buying out their leases and then flipping the car to a dealership or selling it privately to a new owner. They assume they will earn enough from the sale to help offset the price of a new car. While this may be true, it’s important to remember that it may be difficult to find a new car in the desired model and at an affordable price.
Due to the state of the market, your car is likely worth more than you’ll pay. However, if it’s worth less than the buyout price, you’ll be upside-down on your loan, and it may be difficult to qualify for a loan for an amount that is higher than the value of the asset.
How do I buyout my lease?
Once you have the total buyout price and determine that a lease buyout is a financially responsible decision for you, your next step is to work on financing. You can choose to take out an auto loan or a personal loan to help cover the costs. Then, contact the company you lease from to complete the purchase. The sale process will be similar to the sale of any car.
Finally, notify your insurance company about the change in ownership of your vehicle. Leases generally require plans with low deductibles and high premiums, so you may want to choose a new plan with higher deductibles and lower monthly premiums.
If you’re looking to finance an auto loan for a lease buyout car, look to 802 Credit Union! Our auto loans offer low-interest rates, easy payback terms, and a quick approval process.
