When You Should (and Shouldn’t) Buy a Lease Car
If your car lease is coming to an end, you have a decision to make: Should you sign up for another lease right away, buy out your current lease to own the car in the future, or choose a different car altogether?
While leasing is generally not the smartest choice financially , as it may well cost you more in the long run than financing a car you own, in some cases, purchasing a leased car near the end of the lease term or at the end lease term may make sense. . Here’s when you should (and shouldn’t) buy a lease car.
When should you buy a leased car?
The decision to buy out after your lease ends (or in some cases before it ends) depends on your balance of finances and the condition of your car, and whether you want to continue driving it. Here are a few factors that could tip the balance in favor of buying:
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The purchase price is less than the market value of the car . This may be the case if the mileage is low, the condition is like new and/or the value has increased significantly since the start of the lease – and is more likely if you have taken excellent care of your car with regular servicing and repairs, as well as regular cleaning.
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You have driven fewer miles than stated in your lease agreement . You won’t get a refund for unused miles, and that low mileage can increase the value of your car beyond the trade-in price.
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The vehicle has damage or excessive wear . On the other hand, keeping your car in poor condition can significantly reduce its value, and you could owe a large amount in penalties to the dealer when you return it (in addition to the cost of repairs). In this case, it will be cheaper to buy a rental and do the repairs yourself.
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You must pay fees in accordance with the terms of the contract . In addition to damage fees, some leases charge for excess mileage. You’ll want to take this into account when determining the cost to buy out your lease or return the car.
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You are planning to resell and resell the car . Depending on the make, model, and condition, you may be able to make a profit by buying a leased car, upgrading it, and reselling it. The used car market has calmed down over the past few years, but some sought-after vehicles may still be worth selling.
Of course, none of the above matters much if you don’t enjoy driving your rental car or it doesn’t suit your current (and immediate future) needs. But if you love your car, comparing the trade-in price to the price of buying the same thing elsewhere will help you decide whether buying a lease or buying it off the market makes more sense.
When not to buy a leased car
Obviously, the converse of the above is a good indicator that a lease buyout may not be the best choice. If your car’s market value is lower than its trade-in price—due to high miles, wear and tear, or low demand for that make and model—you’ll have to pay a large amount in fees or expect to have to continually make costly repairs and repairs. maintenance, then it probably doesn’t make financial sense to buy the car after the lease ends. Likewise, if your needs and preferences have changed, this car may not be the best option in the future.
Another consideration is whether you can pay cash (and avoid financing) or whether your current loan will give you a good rate and a reasonable monthly payment if you need credit.
How to buy out a lease
First, review your lease agreement to determine whether buyout is an option and what the costs and fees are. You should also do extensive research on your car’s current market value (use a site like Kelley Blue Book ) and compare financing options, that is, if you need to get a loan to cover the redemption and any remaining payments. Be sure to factor in other costs such as registration, sales tax, and insurance premiums.
The timing of the redemption may also matter. Buying a lease mid-contract may be more expensive because you’ll have to cover the remaining lease payments, and you may have more leverage once the leasing company contacts you about 90 days before the end of the lease to discuss your options. . As with any car purchase, you can negotiate.