Leasing a car gives people access to vehicles they may not normally be able to afford. The rental process is a low-hassle experience. However, when the lease comes to an end, people may want to buy the vehicle. Sometimes it’s a good idea!
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Should you buy a car when the lease is up? That’s a million dollar question that could save you, or cost you, thousands of dollars.
When it comes to leased cars, people have a lot of questions if they are first timers:
- How does a lease work?
- When should you buy out your lease?
- What are my payment options for buying a lease?
- Is buying a leased car a dumb idea?
Of course, everybody has an opinion these days, and when it comes to this topic, that trend goes double. There are huge advocates for buying a leased car as well as people who are really against the idea.
Today’s post shares both perspectives so that consumers can make informed choices for themselves.
What do I do When my Lease Ends?
When your lease is coming to an end, you may have a lot of emotions: sad, nostalgic, scared, confused, happy, excited – maybe all at once! You’re wondering if you should buy the leased car.
You have to turn in the car, buy it, or take out a new lease. The deals are cut differently based on the route you choose to go.
Many people decide to buy their leased car because they’ve simply fallen in love with the vehicle. We have to be careful as consumers. Sometimes our emotions get the best of us. Is the car really all that or are we afraid of change?
If that question sounded silly to you, and you know you’re ready to lock down this vehicle, then perhaps the time to buy the car that you’re currently leasing has come.
How Does a Lease Buyout Work?
Leases and purchases are similar in that they both take money out of your checking account in exchange for the rights to drive a specified vehicle. However, when determining whether buying a leased car is a good idea you should understand the nuances better.
A leased car requires a deposit and a slew of fees. Then, you make your monthly rental payment so you can drive the car like its yours, except it isn’t. Instead, when the contract is up, you have to head back to the dealership and work out a new deal.
People like leasing cars because the payments for rentals are often more affordable than the payments would be in a traditional automobile loan. People who could only afford to purchase a Chevy fund an Audi experience instead.
When the deal ends, though, a new choice comes: should I buy my leased vehicle?
Before responding to that, let’s go back and check out what a car purchase agreement looks like.
You either pay for the car in cash or take out a loan on the vehicle. When you finish making payments on the loan, the finance provider sends you the title. The car is yours.
The lease, however, leaves that last part hanging – do you want to buy this car or do you want to buy or lease something else? In some cases, people walk away from driving cars altogether, turning instead to walking, cycling, and taking the bus or train.
When the lease is about to conclude, the company should reach out to you to talk about your options. They may schedule an inspection (another thing – if you damage that leased car, you will pay for it!).
Hot tip: when the leaser contacts you, don’t tell them what you’re going to do. Ask for the options and write them down. Then, talk to people who know cars and finance or read up on the matters so you’re prepared to make the right choice.
Lease contracts generally include a purchase/buyout price. Sad news is that the lease payments you’ve been making don’t go toward that price tag. This is why some people hate leases – they say you’re paying into something that isn’t yours.
On the other hand, car values are known for being poor investments. For some people, renting a new (or newish) vehicle every single year is better than driving around an old vehicle that’s paid off but needs a lot of repairs. It’s a personal decision.
When Does Buying a Leased Car Make Sense?
If you want to know if it’s a wise idea to buy a leased car, you have to look at the situation from an economic perspective.
For example, if you can’t afford a cash buyout and can’t qualify for a loan, this discussion may not even have a point. You have to be able to afford or finance the decision. If you’re financing, you have to look into total amounts paid, monthly payments, and interest.
If you’re worried about a low monthly payment, be careful. Extending loan terms usually spells out money lost when talking about cars.
This vehicle may not even be worth buying. You should know better than anybody else. If you’ve been driving a particular van, SUV, truck, or car for 12 to 36 months, you’ll know if the brakes are bad or if the steering wheel is a little wobbly.
On top of that, the Internet provides a wealth of resources so that consumers can determine the actual trade-in and retail value of the vehicle. If you are looking for a trade-in/retail value of $20,000 but the company wants $30,000 for the buyout, forget it. Buy a different car.
The condition of the car counts for a lot, as stated. Perhaps as you’ve been leasing, you’ve been careful about miles. You never smoke in the car. You don’t even eat in the car. You have no children nor pets. This car is in pristine condition. You might consider the buyout option!
If you’ve been a little rough on the car, but not so much that you’ll be charged for the damage, you might consider letting the vehicle go.
Sometimes mileage limits are a factor. If you were only able to drive 17,000 miles a year, and you drove 20,000, that’s a lot of extra miles. You will be charged for those miles. Sometimes, though, if you buy the car, the charges are dropped. That can change the game.
Some financial experts point out that buying an “older car” could lead to some savings, at least upfront. For example, your insurance rates could be lower. You may not need to transfer the registration. You can save on this end.
Down the line, however, you could find yourself needing to shell out some serious cash for repairs, often unexpectedly. If there isn’t a factory warranty that extends into the car’s new life with you, you might think twice about buying the leased vehicle.
Buying the Leased Vehicle: How Does it Work?
Buying a leased car may be a sensible idea (or not), but you have to know how it works to make the right choice.
Leasing companies and dealerships work hand in hand to work out the financing for the buyout.
One recommended hack is to find your own financing. Ask your credit union, bank, or insurance company about auto loans. You will have some cards in your favor by doing so.
Be aware of your credit score as well. Don’t run a “hard credit report,” though. Instead, use a free service just to get the score without all the details. If you’re looking at something above 700, you should be okay. If you’re below that mark, proceed with caution.
Is A Lease Buyout Negotiable?
If you can negotiate the lease, why wouldn’t you? It all comes down to the mood and policies of the lessors.
Some leasing companies are willing to “work it out” with potential buyers. Others drive a hard bargain, take it or leave it.
If there is room to negotiate, you’ll have to do some market analysis to ensure you’re putting forward a fair offer.
If the lessor won’t negotiate, at least insist that some fees are removed. The key to any negotiation is to think “win-win.” You want to drive this same car, and they want to make a profit. How can you meet in the middle?
Buying a Leased Car: Benefits and Drawbacks
When somebody is making a decision, they should look at the pros and cons; this is especially true when looking into buying a vehicle you are currently leasing.
As explained, when the lease is over, you have options. You can buy the car. You can lease a different car. You can decide to buy a new pair of walking shoes and go green.
Probably the most important aspect of the choice will be the budget. How much is the company charging you to buy the leased car? Is that in line with current market value? Better? Worse?
There’s no point in spending thousands of additional dollars just to avoid taking a new car. In many cases, it is cheaper to buy a new car or to take out a new lease. Compare your options.
For some, the question is about maintenance. If you’ve been meticulous with the leased car, maybe giving up a shipshape vehicle is too hard.
If you were a little loosey goosey on the oil changes and car cleanings, maybe passing the car on to the next person is the right idea. If you pushed this too far, though, then a purchase could save you from paying maintenance and repair fees that lessors tend to charge.
Let’s talk numbers. If a car goes for $30,000 new, and down the line, it’s only worth $15,000, that’s not too bad. If the lessor wants to charge you $20,000 for the buyout, then it’s a raw deal. If they want to charge you $13,000, you could be winning in the arrangement.
Most of the time, the numbers work out neutrally, but the homework is necessary to understand whether you’re coming out ahead.
Those in the know have stated that the best bet is to look up the retail prices (via private sellers) to know if you’re getting a deal. If the guy on Facebook Marketplace is selling the same car for $9,000, a $15,000 price tag sounds questionable.
Of course, if you buy the car, and it turns out to be a major dud down the line, you can always send it to the junkyard. You might even make a few bucks in the arrangement as they’re known to pay cash on the spot at pickup.
Note: You can’t sell a leased car to the junkyard.
To Buy or Not to Buy, that is the Leased Car Question!
Look, if you’re trying to buy a leased car, the attributes basically boil down to the following:
- What is the purchase price of the car?
- Is it a fair value for the car in its current condition?
- Do you like driving this car? Do you want it for two to ten more years?
- Will you save money or lose money by doing the buyout?
- Do you have the means to afford a buyout?
Doing the analysis of these questions will help you find the answer to a complicated question. Every situation is different.