A purchase option is the option to purchase a car or home that is being leased. The option might apply during the entire lease period or at the end of the lease period.
Purchase Options Explained
A purchase option allows someone to buy the vehicle they are leasing, whether it’s for financial reasons or because they like the car enough to keep it rather than return it at the end of the lease.
Leasing a vehicle can be a cost-effective option for people who like driving newer cars and are looking for lower monthly payments. The purchase option is generally in place regardless of the length of the lease, which usually ranges from two to four years.
The reason monthly lease payments are usually lower than monthly payments for the same car is that, you are only paying for the car’s depreciation with a lease. But most leases include a purchase option which allows you to buy the vehicle, either during the life of the lease or when it ends.
When you have about a month left on your lease, the leasing company will usually let you know how much the purchase option will cost. You can then finance the purchase with the leasing company or possibly with another lender.
One disadvantage to exercising the purchase option at the end of the lease may be how long you wind up making payments on the car, and what you wind up having paid for the car when you’re through.
Be sure to inquire about a purchase option when you are negotiating your lease. That way, you keep your options open down the line.