If your car lease agreement included a buyout option, then you have the choice to purchase the vehicle at the end of the lease term. There are a few common instances where it makes sense to buy out your lease, but you’ll want to be mindful of the numbers involved.
Reasons People Buy Out Car Leases
Let’s get started by running through a list of reasons why you might want to exercise your buyout option:
1. You Like the Car
Oftentimes, the desire to buy out a car lease is simply fueled by preference. Whether it’s fun to drive, reliable when you need it or fits seamlessly with your lifestyle, you’ve taken a liking to your leased car and you don’t want to lose it.
2. The Mileage Is Significantly Low or High
Most car leases are three years in length with a 36,000-mile limit. If the mileage is notably lower than that, you may end up forfeiting quite a bit of value to the dealer unless you buy out the lease.
On the other hand, you may be responsible for hefty fees if the mileage is notably higher, potentially amounting to thousands of dollars. Rather than losing that money for nothing in return, you might consider buying the lease out.
3. The Car Requires Maintenance and/or Repair
You’re usually required to resolve any issues with a leased vehicle before you turn it in, or you’ll face additional fees. If the car’s seen its share of wear and tear, it may make more sense to purchase it so that you’re not paying to repair a car you’ll never drive again.
Factors to Consider Before Buying Your Leased Car
The reasons people buy leased cars listed above don’t always make sense, so it’s important to assess the decision from a financial perspective. There are a few factors you should weigh before buying out a car lease:
- The value of the car compared to the buyout price
- The mechanical condition of the car
- The amount of money you’d pay in mileage and/or repair fees
- Whether you can afford the buyout price
- Whether you can buy a similar car for less than the buyout price
Take a look at the following examples to help you understand how these factors affect the financial sense it makes to buy your lease out.
When You Should Take the Buyout Option
Let’s say the buyout price of your car lease is $15,000. However, because you only totaled 15,000 miles throughout your three years with it, suffered no damages and kept it in great mechanical condition, its value is actually $18,000. You’d essentially be handing $3,000 back to the dealer by not buying out the lease.
Consider that same buyout price of $15,000, but this time you owe $1,500 in fees due to excess mileage and hardly noticeable blemishes. However, the car remains in great mechanical condition and its value is about the same as your buyout price. In this case, it might make sense to purchase the car so that you’re not paying significant penalties with nothing to show for it.
When You Should Decline the Buyout Option
In this example, you drove just slightly under 36,000 miles throughout your lease but incurred $500 in repair fees for a mechanical issue. Despite a $15,000 buyout price, the vehicle’s value comes in at only $13,000. So, you’d save $1,500 by returning the car and finding a similar model on the market.
The Bottom Line: Do the Math
When deciding whether you should buy out your car lease, it’s important to understand how the value of the car and any post-lease fees you’d incur compare to the buyout price. Avoid paying a buyout price that exceeds the value of the car and consider taking the buyout if the car’s value is greater than or equal to your buyout price, especially if you really like the car or would incur notable fees by turning it in.