How to Buy Out a Car Lease

How to Buy Out a Car Lease
Buying out your lease allows you to keep a car you love.

The Contract

Read through your lease thoroughly. Look for the term residual value. This is the estimated value of your car at the end of your lease, and the amount you’ll probably have to pay to buy out the lease. Some leases may also include a purchase option fee, which is an additional fee to process the paperwork for a purchase. If your lease isn’t up yet, check to see if you’ll owe a penalty for buying out before the end of the lease. Also, verify if your contract has a purchase notification requirement. Some leases require you to notify the dealer a month ahead of time if you want to purchase the car.

Negotiating

Though your contract states a residual value, this figure isn’t set in stone. When you first leased the car, this is the value the dealer predicted the car would have at the end of the lease. If the economy has changed, or if the dealer estimated wrong, the vehicle may be worth more or less than this residual value. Consult an auto value guide to determine the amount you could expect to pay for a similar car purchased from an individual or a dealer. Compare the price to the residual value listed in your leasing contract. If the value listed in the guide is lower than the residual value shown in your leasing contract, you can either ask the dealer to lower the buy-out price, or be prepared to walk away from the deal.

Adding up the Costs

In addition to the payoff price for your leased car, add in any fees you’ll have to pay, such as an early payoff penalty or paperwork fees. Don't forget to include the purchase option fee, if your contract has one. This fee varies, but Edmunds.com cites an example of one dealer who charged a non-negotiable purchase option fee of $150. Sales tax, insurance and registration fees can also add to your final costs. If you need to finance the purchase of your leased car, you don’t have to go through the dealer. Check rates at banks and credit unions and compare these to what the dealer is offering to make sure you get the best deal.

Buying Time

If you’re near the end of your lease and need a little more time to shop around or decide if you want to buy the car, ask your dealer about a lease extension. This option allows you to extend the lease -- and the monthly payments -- for a few months with no additional fees or penalties.