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Should I Buy My Leased Car?

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With used car prices higher than they’ve ever been, millions of leased-vehicle drivers are asking themselves the same question: Should I buy out my lease?

There are several reasons buying your car at lease end is a good idea, though there are also times when it isn’t. Fortunately, the process is relatively simple. Your dealer draws up the paperwork, and you only have two jobs: signing said paperwork and coming up with the funds to cover your buyout payment, which you can do through a borrower-friendly lender like Consumers Credit Union to save even more money.

But before you get to that point, you still want to ensure buying out your lease is the right move.

Should I Buy My Leased Car?

There are several great reasons to buy out your leased vehicle but almost as many reasons you shouldn’t. 

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Reasons to Buy a Leased Car Reasons Not to Buy a Leased Car
The buyout price is lower than the market value. You no longer need a car.
You’ve racked up excess mileage or you’re way under the mileage limit. You want a different car.
The car is in excellent condition or needs repairs. The buyout price is higher than the market value.
You like the car and want to keep it.

Reasons to Buy a Leased Car

There are more reasons to buy out your lease than not to. If any of these apply to you, it might be time to hit up a borrower-friendly lender.

1. The Buyout Price Is Lower Than the Market Value

Your lease contract includes a buyout clause that says how much it costs to buy your leased car at the end of the lease period. That amount is based on the expected market value of the vehicle at the time and is locked in at the start of the contract.

In normal times, dealers are pretty good at calculating lease-end values. But these are not normal times. For various reasons, cars are holding their value better than ever, and the used car market is red-hot. That means your leased vehicle is worth much more than the dealer thought it would be when your lease began two or three years ago.

If you buy out your lease at the agreed-upon price, there’s a good chance (though no guarantee) you’ll have a significant amount of equity remaining in the vehicle — thousands of dollars, if not tens of thousands, depending on the make and model. Even after tallying up the down payment on the lease (if any), the monthly payments, and the buyout, you’ll come out way ahead.

That means you can get a smaller buyout loan that takes less time to pay off. And you can pay it off even faster if you opt for a borrower-friendly lender. For example, Consumers Credit Union only charges interest on the unpaid balance and allows you to pay it off early without a prepayment penalty. 

2. You’ve Racked Up Excess Mileage

Most leases allow 12,000 miles driven on average per year for three years, or 36,000 miles total. Car dealers typically charge $0.15 to $0.30 per mile over your lease’s allowed limit. So if you drive 40,000 miles on a standard lease, you’re on the hook for 4,000 extra miles, or anywhere from $600 to $1,200. 

Over-mileage charges quickly add up. If you’ve driven significantly more than you and the dealer expected during the lease, you can avoid those fees by financing a lease buyout and walking away with the vehicle — which is still probably worth more than your dealer thought it would be at the beginning of your lease.

3. You’re Way Under the Mileage Limit

You won’t pay any surcharges if you drive a lot less than expected during your lease. But if you don’t buy the car afterward, you’re handing the dealer a vehicle with far less wear and tear than expected. Because vehicle depreciation is directly related to the number of miles driven, the dealer can list your used car for sale at a higher price and pocket the difference.

Bottom line: The less you drive during your lease, the more equity you’re likely to have in the vehicle and the more likely it is that you’ll come out ahead if you buy the car outright.

4. You’ve Kept the Car in Excellent Condition

The typical 3-year-old vehicle with 36,000 miles is a bit worse for wear, with dings, dents, worn-down tires, and looming mechanical issues. If you’ve managed to defy the law of entropy and maintain your vehicle in pristine condition, it’s going to be worth more than a comparable car in fair or good condition. 

That leaves you with a similar abundance of equity as a lessee who drove the vehicle less than expected. And the smart play is the same: to buy the car outright.

5. The Car Has Excess Wear & Tear

The flip side of the wear-and-tear equation is that dealers really, really don’t like to take back leased vehicles in worse shape than expected. They will, but not before charging hefty penalties and fees for the damage. You could be looking at a four-figure bill just to get the dealer to take your dinged-up car back.

In this situation, buying out your lease is a bargain. You salvage your vehicle equity, albeit less than you’d have if your car was in excellent condition, and you don’t have to buy a new or used car at jacked-up prices. You can repair the vehicle — or not — on your own schedule and terms.

6. You Like the Car

Deciding to buy a leased car isn’t always a dollars-and-cents thing. You decided to lease the car in the first place because you thought you’d like it, and if your instinct has proven correct, you might be inclined to keep it.

And why wouldn’t you? You get to hold onto a car or truck you’ve come to love while avoiding the headache of buying or leasing another one.

Reasons Not to Buy a Leased Car

Buying out the remainder of your vehicle lease doesn’t always make sense. The common theme in all of these scenarios is that circumstances change. 

1. You No Longer Need a Car

Most of us can’t get by without a car. But if your living situation allows it — say you work from home and can bike or take public transportation everywhere else — then ditching your ride could be a smart financial decision.

Or maybe your leased car is your household’s second or third vehicle and your family can get by with fewer rides. Whatever the reason, there’s no point in paying taxes and insurance on a car you no longer need.

2. You Don’t Like the Car & Want a Different One

So your leased car didn’t live up to expectations. Good news: No one’s forcing you to buy the vehicle after the lease ends. You can return it to the dealership and buy or lease a new one.

If you decide to buy instead of lease, you’ll probably need financing. Whatever you do, don’t take dealer financing without shopping around first. Credit unions like Consumers Credit Union usually offer lower rates and more favorable terms — like interest charged only on unpaid balances rather than built into the entire loan ahead of time. 

3. The Buyout Price Is Higher Than the Market Value

Market conditions can change. While unlikely in the current market environment, it’s possible that buying your leased vehicle will leave you underwater — having paid more in combined down payments, monthly payments, and buyout payments than the car’s lease-end value.

This situation will happen more and more as leases signed after the used-car price spike begin coming due. Should it happen to you, your best bet is to ride out the lease and work hard to find a better deal on a replacement car. 

Bottom Line: Should You Do a Lease Buyout?

The end of a car lease is an exciting time for people who love shopping for new cars. It’s a stressful time for just about everyone else.

But it doesn’t have to be downright awful. These days, it often makes sense to buy your car after the lease expires, if only to pocket the profit on a quick private sale. And while buying your leased car isn’t totally stress-free — you still have to visit the dealership and sign a bunch of paperwork — it’s much easier with a low-interest, low-hassle loan from lenders like Consumers Credit Union.

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