Maybe you weren’t sure if you’d really like the car when you first got it. Maybe you weren’t sure that it would suit you in a few years. Whatever your reason for leasing a vehicle, if you’re considering buying it now that your lease is up, here’s a guide on when to consider it — or avoid it — and how to get the best deal.
A lease is often equated to renting a car, but a better analogy might be renting an apartment. When you lease an apartment, you’re buying the right to use it for a certain period of time. The same is true for car leasing.
However, unlike most apartments, when a car lease is up, you can’t sign for more time — you can either turn the vehicle in or buy it. Buying your leased car is called a buyout. It can be done by paying cash or by obtaining a loan the way you would for any car purchase.
It’s not uncommon for people to become emotionally attached to their vehicles. After all, you may depend on it to get to work every day, visit family or take a vacation. A lot of memories can be tied to a car — not to mention every time you go down the road at 80 miles an hour, your life depends on it being safe. If you ended up falling in love with your leased car, you may want to buy it.
Buying the car you leased may or may not be affordable to you. There may have been a big life change in the years you were leasing and the higher payment that comes with buying the car may not fit your budget. You can use this auto loan calculator to get an idea of what your payments will be like and you can view lease buyout offers here.
When your lease is up, you’re probably in the market for a vehicle. And if you’re looking for a used vehicle, what car is better than the one you’ve had? If you took good care of it, you know it will probably last a long time, whereas buying someone else’s used car may be a riskier notion.
If you drastically exceeded your mileage limit, you may find out how quickly a few cents a mile adds up. Different companies charge different amounts for each mile you go over your allotted amount. The same can be said of wear-and-tear charges. Rips and tears from the time your dog took a ride in the backseat and dings from traveling down unpaved roads (or that loose shopping cart) may add up to hefty fees. If the bill is high, it may be cheaper to buy the car instead.
Sometimes we need different cars at different points in our lives. For example, if your kids are off to college, why stay in a minivan? But if your leased car still fits your lifestyle, why change? Your minivan still works and now you can haul your spouse, your dogs and your camping gear for weekend trips without a problem.
When you sign an auto lease contract, you and the seller agree on the price of the car at the time of signing, and what it will be worth when your lease is up. The latter is a prediction; it may not be correct. Your leased car could turn out to be worth more or less than what was agreed. If it is worth more, the car is underpriced and it’d be a good deal.
Towards the end of your lease, this is the typical timeline of events you can expect. It includes when the lease company will contact you and when you should apply for loans.
The lender should contact you. If they don’t contact you to go over your lease end options, you should contact them. The three options you have at the end of a lease are to buy the car, return the car or return it and immediately lease or buy a new one. At this point, you should decide which option you want and confirm the process for ending your lease.
Assuming you do want to buy it and that you need a loan, you should get loan offers before the lease officially ends. But be careful with timing — don’t apply more than a month ahead of time, because most loan offers are only good for a month. After the loan offers expire, you’ll have to apply all over again. But, also, don’t apply for loans too late — if you keep the car for a few days after lease-end without buying it, you may receive penalties.
Tell the lender you want to do a lease buyout. They may ask if you’d like to apply for a loan with them for the remaining value of the car. And if you’re satisfied with your experience with them as your lease financing company, why not apply with them to buy the car? But don’t apply to just one place — you won’t hurt your credit by applying to multiple places within a two-week period. Apply to several lenders, see what they offer and take the loan that best suits you.
You may have to go to the DMV or your lender to sign paperwork to finalize everything and officially claim the car as yours.
If the lender that’s financing your lease buyout is the same one that leased the car to you, then you shouldn’t have much to do. If it’s not the same, the new lender will either send a check to the old leasing company, or send the check to you to give to them.
When looking for a new lender, don’t forget to shop around to compare auto loans so you can choose the one with the least amount of interest or the one with the lowest payment, whichever fits you best.