Your car lease is coming to an end but you're not ready to part ways with your vehicle, should you buy out your lease? Buying your leased car can be a smart move in some situations. When you buy the car you were leasing, you'll know exactly how it was treated and its maintenance history as opposed to the mystery of buying any other used car. Another reason to buy your leased car is if its condition doesn't meet the requirements of the agreement or if you surpassed the mileage limit which leads to hefty fines. Finally, getting a good deal on a lease buyout can save you money compared to buying a new car. Learn what your car's buyout price is, how to evaluate the current value of your vehicle, and how to negotiate the best price.
What is the Car's Buyout Price?
Most car lease contracts include a buyout price which tells you how much it'll cost to purchase the vehicle when the lease is up. This price is the residual value of the vehicle after the lease term ends which factors in depreciation, plus additional buyout fees charged by the leasing company.
The vehicle's residual value is estimated by the leasing company when they first write your agreement and it plays a role in the monthly payments you made over the lease terms. The leasing company can't look into the future to know exactly what your car will be worth 3 years down the road, so they have to guess. Because it's just an estimate, the buyout price may not be the fair market value for the vehicle.
Understand the Vehicle's Value
Before speaking with your leasing company to buy out the vehicle, make sure you have negotiating power. The best way to do this is to understand the car's current market value. The buyout price typically reflects the retail value of the vehicle which is how much a customer pays for the car when they buy it from a dealer. The wholesale price, on the other hand, is how much a dealer pays to purchase the car at auction. When you buy out your leased car, you're saving the leasing company money on shipping and auction fees, so your goal is to get a discount on the retail value of the car.
Research the prices of comparable vehicles on car shopping sites like Kelley Blue Book, Cars.com, TrueCar, and Edmunds. Note the prices you see on vehicles with the same make, model, year, mileage, and condition. You'll be able to use this information to evaluate if your vehicle's buyout price is fair or if it's time to negotiate.
How to Negotiate your Lease Buyout
Although negotiating the buyout price of a leased vehicle isn't as common as negotiating on the price of a new car, there are some strategies to get the best possible deal. The first is to use timing to your advantage. Buying out your vehicle before your lease expires can result in extra fees or financing charges (these should be listed in your lease agreement). As your car lease is coming to an end, avoid the temptation to call the leasing company to discuss the buyout which can make you look eager and kill any chance of a lower price. Instead, wait for the leasing company to contact you. Usually, you'll hear from them 90 days before the lease is up.
When you are contacted by the leasing company, make sure you are speaking to the person who has the authority to offer a lower price. Ask to speak with the lease-end manager for the best chance at a price reduction. When you have the right person on the phone, use the research you've done on the vehicle's current value as a bargaining tool to get a lower price.
Sometimes the leasing company isn't willing to budge on the car's buyout price, but you can take a different route and ask about purchase incentives, financing discounts, or waiving the extra purchase-option fees. By researching and understanding the true residual value of your leased vehicle and approaching the buyout process in the right way, you'll increase your odds at scoring the best deal.