Should You Buy Out Your Auto Lease? What Are The Pros and Cons?
Are you currently a vehicle that is on an auto lease? Do you love driving this car? If so, the option of buying the vehicle at the end of the lease term probably seems very tempting. Buying out your auto lease has many advantages and a few drawbacks as well. Consider these points listed below, before you make a final decision.
- If you decide to purchase this vehicle, you are already aware of its history. Since you’ve been the only one to own and drive it, you will have complete knowledge about its maintenance schedule and previous accidents.
- As part of your auto loan terms, you’ve actually paid for the car’s depreciation. Buying it may prove more affordable than leasing out a new vehicle.
- Once you’ve finished the payments for the car, you’ll be its sole owner.
- If this vehicle was a lot of fun to drive, you will retain the option to continue driving it once the lease is over.
- There is limited space to discuss the purchase cost of the car. This means you might not get a very good price as you would’ve on another used vehicle.
- If your car financing contract specifies it, you may be obligated to pay the lease-purchase fee. The cost varies in the range of several hundred dollars. This depends on the lease terms.
- Your car may be worth less than the cost of buying out the lease.
Deciding Whether To Buy Out The Auto Lease Or Not
This is a big financial decision, so you should consider all the facts. Use the process listed below as a guideline for making this decision.
Look for the residual value in the lease agreement
Once you lease a vehicle, you’re paying a predicted depreciation amount to the leasing company. The monthly payment covers administrative costs and the depreciation amount. Once the lease is up, you’ve paid for the car’s residual value. This value is what the company predicts as the car’s value at the end of the lease term. It serves as the starting price for cost negotiation if you decide to buy out the auto lease.
Determine the Market Value
There are many online sites that will help you calculate the market value of your vehicle. Compare this value to the residual value. You will need to submit the car’s model, make, year of manufacturing, mileage, and condition. Look for market value, not trade-in estimate. Use multiple sources to get the market value.
Compare the Residual and Market Values
If the leasing company’s prediction is correct, the residual value will be near the market value. If the residual value is more, your car’s value may not be that much. In such cases, walking away from the lease would be the best option.
In case the market value is more than the residual value, you should consider buying out your auto lease.
Other Factors to Consider
- Car’s current condition
- Reliability of the vehicle
- The annual cost to maintain the vehicle
Still confused about buying out your auto lease? Visit Sansone Jr's NJ Auto Lending to learn more. Our Neptune, NJ, dealership is located very close to Freehold, West Freehold, and Lakewood.