How Lease Buyouts Work

A comprehensive guide to understanding your lease-end options and whether buying out your lease makes financial sense.

What is a Lease Buyout?

A lease buyout is when you purchase the vehicle you've been leasing instead of returning it to the dealership. At the end of your lease term, you have the option to buy the car for a predetermined price called the residual value.

This residual value was set at the beginning of your lease and represents what the leasing company estimated the car would be worth at the end of the lease period.

Understanding Residual Value

The residual value is the key number in determining whether a buyout makes sense. It's found in your original lease agreement and represents your purchase price if you decide to buy the vehicle.

Here's where it gets interesting: the actual market value of your car may be different from the residual value. If the market value is higher than your residual, you have positive equity. If it's lower, you have negative equity.

When Does a Lease Buyout Make Sense?

A lease buyout might be a smart choice if:

• You have positive equity - The car is worth more than the buyout price
• You love your car - You know the vehicle's history and want to keep it
• You're over mileage - Buying avoids excess mileage charges (typically $0.15-$0.30 per mile)
• There's wear and tear - Buying eliminates disposition fees and repair charges
• New car prices are high - In a tight market, your current car may be a better deal
• You want to sell it yourself - Buy the car, then sell privately for profit

The Buyout Process

Costs to Consider

When calculating your total buyout cost, don't forget these additional expenses:

• Sales Tax - Varies by state, typically 4-10% of the purchase price
• Registration & Title Fees - Usually $150-$500 depending on your state
• Documentation Fees - If buying through the dealer, typically $100-$500
• Purchase Option Fee - Some leases include a $300-$500 purchase fee

Frequently Asked Questions

Can I buy out my lease early?

Yes, most leases allow early buyouts. However, you'll typically need to pay all remaining lease payments plus the residual value. Check your contract for specific terms.

Do I have to buy from the dealer?

Not necessarily. You can often complete the buyout directly with the leasing company. Some manufacturers do require you to go through a dealer, so check your specific situation.

What if I owe more than the car is worth?

If you have negative equity (the car is worth less than the residual), a buyout may not make financial sense unless you have specific reasons to keep the vehicle. In this case, returning the car might be the better option.

Can someone else buy out my lease?

This depends on your leasing company and state regulations. Some manufacturers now restrict third-party buyouts, while others still allow them. Contact your leasing company to confirm.