Returning a Leased Vehicle Quick Facts
- Leasing companies don’t know exactly how much a new car will depreciate over the length of a lease. They make calculated guesses.
- If you exceed the mileage on your lease, you’ll be on the hook for the excess.
- You’ll also need to pay whatever the leasing agent estimates as the cost to repair any dings, dents, and damage to the upholstery above and beyond typical wear and tear.
As the final months of your car lease tick down, you must decide to buy your leased car or turn it in. In fact, the leasing company, or the dealer where you leased it, is probably already bugging you to turn in the vehicle early and lease another. Time is running out to pick. Return or keep?
Other than the ease of writing off those lease payments as a business expense, if you qualify, the key reasons for leasing are lower monthly payments and the opportunity to move to a new car every two or three years. All three will factor into your return-or-keep decision process.
- What Does Leasing a Car Mean?
- What Happens at the End of a Lease?
- 5 Reasons to Buy Your Leased Car
- How to Buy Your Leased Car
- Tips for Buying Your Leased Vehicle
- Should You Buy Your Leased Car?
What Does Leasing a Car Mean?
The key to leasing is depreciation, or the amount of lost value. It begins the moment you drive a new car, truck, or SUV off the dealer’s lot. On average, vehicles depreciate as much as 20% in the first year and by as much as 40% over three years. Chances are, you’re sitting on a 36-month lease. Your monthly lease payment was calculated to cover that lost 3-year value plus interest on that money.
Leasing companies don’t know exactly how much a new car will depreciate over the length of a lease. So, they make a calculated guess based mostly on past depreciation experience with that brand and model. Like Las Vegas oddsmakers, some third-party outfits also weigh in with educated estimates of a new car’s market value two or three years down the road. The remaining value of a leased car at the end of the lease is known as the “residual” in the residual value.
What Happens at the End of a Lease?
At the end of a lease, the best-case scenario comes when you have a well-maintained vehicle that hasn’t exceeded the total annual mileage cap.
- If you owe nothing and have completed the terms of your lease without excess mileage and the car is in excellent shape, you may hand the keys to the leasing dealership and walk away.
- It’s far from uncommon, however, that you have either exceeded the mileage, for which you may owe up to $0.25 per extra mile, or there is more than normal wear and tear on the vehicle. The leasing company determines what is “normal” wear and tear.
- You will be on the hook for excess mileage and whatever the leasing agent estimates, the cost will be to repair those dings, dents, and any damage to the upholstery. You didn’t even notice that spot on the backseat, did you?
- You can extend the lease if your contract allows. It’s usually a quick process. You’ll likely need to sign a new agreement; sometimes, the terms may be month-to-month, though the leasing dealer may only offer a longer extension of six to 12 months.
- For some vehicles, the end of the lease is the end of the line for you and that car. Some leases do not allow you to purchase the vehicle at the end.
5 Reasons to Buy Your Leased Car
We’ll outline the instances when to buy your leased car, including in the current marketplace.
1. You Can Buy the Car for Less Than It’s Worth
The lease contract you signed many months ago specifies the residual for the vehicle. This is the leasing agent’s guess on the deal’s front end. If the leasing agent guessed wrong, the residual could be less than the current market price for that model vehicle. The good news: You will pay the residual (plus the usual fees) to buy your leased vehicle. You already ate the initial three-year depreciation with the lease. Why not take advantage of that?
As the used car market shapes up, your leased vehicle could be worth more than the price (residual value) at which the leasing agent must sell it to you. According to Cox Automotive data, used car prices dropped to $27,147 in June 2023, or $109 less than in May. While used car prices have dropped from record highs, they’re still inflated.
2. You Like The Car and Took Good Care of It
So, the love affair with that new car with which you were smitten years ago isn’t over. Nor should it be. If you like and feel at home in your car, why dump it? You’ve taken good care of it, followed the factory maintenance schedule, and didn’t drive it like you stole it, right? So, keep it. You had perfectly good reasons for leasing it in the first place. If they still hold up, why replace the vehicle?
3. You Are Facing a Big Punitive Assessment
Maybe you didn’t take as good care of your vehicle as you thought. Suddenly you are facing a hefty fee for excess wear and tear, or even worse. On top of that, you exceeded the mileage cap of 36,000 miles over three years. Missing it by just 1,000 miles will cost you $250 or more. You can avoid that big balloon fee at the end of the lease by simply buying the car.
4. You Want to Avoid the Hassle of Car Shopping
Although the internet has somewhat streamlined the online car buying process, shopping for a new ride can be exhausting. Unless you love the thrill of the hunt, you may want just to take the course of least resistance and buy the leased car. This is particularly true if you like the car. End-of-lease dealmaking with a lender is generally quicker and easier than starting from scratch with a new car.
5. New and Used Car Prices Are Higher
Popular vehicles may still be hard to find. During the microchip shortage of the past several years, carmakers found it difficult to keep up with new car demand. While supply shortages have eased, fewer used cars are making it to dealer’s lots. Consequently, the supply of used cars is thin, as well.
When you factor in higher interest rates, you will pay more right now for used cars and some new ones.
How to Buy Your Leased Car
When you’ve decided to buy your leased car, alert the leasing dealership. Unless you used an independent leasing company, your contact is probably the dealer where you struck the deal. Whoever started nagging you about leaving your lease early to lease another car is likely your leasing dealership.
From there, take the same steps you would follow to buy any new or used car.
Tips for Buying Your Leased Vehicle
Use these tips when buying your leased vehicle.
- Read through your lease terms. Before heading out, know the terms of your lease before doing anything.
- Check your lease car value. We recommend checking your specific car’s value and comparing it to the lease contract so you can enter the dealership with the information you need to make a great deal.
- Let the dealership make the first move. They usually reach out ahead of when your lease ends.
- Know your credit score before you go. Armed with this knowledge will help you understand your wiggle room in the deal for financing if needed.
- Shop around for financing. Interest rates are higher for used cars. Use our monthly payment calculator if you need to finance the remaining buyout amount.
- Watch out for fees. Just like a new or used car, you can negotiate on any fees the dealership may wish to tack on to the deal.
Should You Buy Your Leased Car?
Buying your leased vehicle should be a decision you make with careful consideration. If the car’s value is higher than the lease buyout price, no question buying the vehicle is a great deal. If the car’s value is lower than the buyback price, it’s probably not worth it.
These days, market conditions may dictate you can do nothing else but buy the vehicle at the end of the lease due to a potential lack of similar cars. Higher interest rates may also prevent you from getting a similar vehicle that’s new.
Whatever you decide, it’s a personal decision based on your finances and situation. Read about lease buybacks.
Editor’s Note: This article has been updated for accuracy since it was originally published.
I started a lease for 3 year/36k miles, and then a year after got a new job where I had to commute 40 miles each way. Obviously way over on mileage now. I’m fine buying my car at end of lease since it’s in great shape and I’ve loved it. Any suggestions on how to go about the buyout process in the cheapest fashion? I looked at my residual and it’s about 5k higher than the blue book value (which probably means I’m a terrible negotiator when I started the lease?).
A Hyundai will never hold its value and be worth what you owe plus interest and taxes. You’ll always be better of just releasing a new vehicle with the newer technology and warranties. Unless you’re purchasing a car outright with cash, or have the pink in hand. You don’t own it anyways. All cars only depreciate.
My lease ends June 2019 and my mileage is over, no fault of mine. I’ve been fighting with them about the mileage issue after a repair that took place when they had the car for two weeks waiting for part from California (they are in Md) for some kinda computer gliche. Car went in at 4,500 miles. I picked it up after repair completed at approx 4,560. Week later I brought it back because it was acting up. The mileage had jumped to 8,000. I had only driven it back and forth to work, 8 miles round trip. I questioned them. They couldn’t explain. I continued to see the mileage double and I’ve complained to no avail. My question, if I go to another dealership to purchase a car, can I trade the lease in and not be charged for over mileage cause they will pa the car off? It’s a 2015 Acura
If you trade the car in, you will not be penalized because the manufacture is not receiving the vehicle back and the contract is fulfilled.
over in miles for the lease , will another dealership pay for the overage in miles?
If you decide to purchase your leased vehicle, never negotiate a leased vehicle buy with with the dealership. Instead negotiate with the manufacturer. My Hyundai leased vehicle was financed through Hyundai Motors Finance. I was able to get a much better deal. The dealership was out to make money, while Hyundai is interested in selling their vehicles.
How do you bypass the dealership to negotiate a better buyout with the (brand) Finance Company, do you not legally have to return the car to the dealership even for a buyout?
so did you just contact someone directly at the finance company? Did you do this towards the end of the lease?
How does one go directly to Hyundai?
You were able to receive a much better deal because 1) Hyundai already made money off of interest charges during your lease term.
2 ) The dealer has a set cost that they have to purchase it for, which the manufacture can beat, partly because they are basically making money off you twice.
If I decide to lease a new car with the same dealeriship and I went over my allowed miles, will the dealership forgive those excess miles or roll it into the new lease?
They can roll the penalty miles into the new lease. I had to do that when i turned in my old lease.
Yes. Negotiate everything
We got rid of a brand new Totota pick up before its lease end date and replaced it with a small Prius. We carried over a huge penalty without thinking. Our Prius lease will be up in two years meanwhile we have been paying a whopping $500 pm lease. To make things worse at the lease end the pay off apparently will be $16000.00! The car will only be worth 6-8$K. Whats the best thing to do?
BUY a 1-2 year old car with a current factory warranty remaining, and let someone else take the HUGE depreciation hit!
Let me ask this. Just least a car at end of 3 yrs will be 15000 left therefore if I decide to buy I would need to get another 6 year loan or they negate that 15000 so maybe can only get a 3 year loan??????
We have a 2017 dodge big horn hemi, we are under the 30000 miles by a hair. We wanted to buy but the dealer is talking us out of it because the car will no longer have a warrantee, something I didn’t think about before we leased it. Now we will need tires and then brakes, is it still worth buying the truck without the warrantee? The truck is in great shape and we love it but now I’m wondering if we should buy it.
You can always buy an extended warranty if you want one. There’s a lot of them out there to choose from.
I am in florida and I leased a 2015 charger the price to purchase the vehicle is 16,956.00 at lease end my lease is paid now when I called Ally bank they said they can only give a car dealer the price I was under the inpression I just send ALLY 16,956.00 and they sent me the title they I go pay the tax and tile fees
How did ALLY finalize your buyout?
If I bought a car on lease and my annual limit is 20,000 km and my lease term is 4 years and I drove more than the limit but after 4 years I buy out the car then I have to pay how much for above limit kilometers?
You only have to pay the overage if you turn in the car. If you buy it at lease end, the miles are the new owner’s problem (you).
in the USA if you buy car you lease you pay nothing on the miles.
Nothing besides the buyout price. If you buy the car at end of lease they don’t even look at the mileage
I have a 2015 leased passat 4 yr lease due October/18 I only have apx 17700 km its in great shape its the sport model 19 inch wheels it shows the residual payout is $16000 ish but I was wondering if I could negotiate it for less with my volkswagon dealership They want to see me to go over the option and inspect the car. I have never bought out my car lease before. Any ideas would be greatly appreciated. Thanks very Much Ron Decaen in Ottawa
They probably will not negotiate with you if the car is in that great of shape, but I’m not 100% sure since you’re in Canada and I’m in the USA. I’m sure it wouldn’t hurt to try. If you love the car and didn’t violate your lease or pass your mileage limit, then get an auto loan and buy!
I’m coming up to the end of my lease. I put a great deal down so my monthly payments would be low. What happens to all that money at the end of the lease? Should I keep the car or get another from the dealer?
All that money you put down at the start (should have) lowered the purchase price. Personally I would never do that unless I new I was going to buy the car eventually.
Think of a lease as splitting the cost of the car into 2 halves. One half is the value they estimate the vehicle to be worth at the end of the lease (residual value). The other half is the amount you will ‘finance’ over the term of the lease.
The money you put down, simply reduces the half you are financing over your lease. For example, if you have a $40k car, and it has a residual value of $20k at the end of the lease, you are responsible for paying $20k (plus some interest, called a money factor typically) over the course of the lease. If you put $10k down (cap cost reduction), that lowers the amount you will finance to $10k… the residual value remains unchanged.
In the example above, $40k is what you are *buying* the car for.
$20k is the residual value at the end of the lease
$20k (+ interest) is what you owe on the lease
36 month lease would be something like $580/mo
36 month lease with $10k down payment would be like $305/mo
Residual would still be $20k… The car is worth what is worth at the end. You aren’t losing money when putting it down, you are simply securing a lower monthly payment for the time you have the car.
That money is gone whether you turn in the car or buy it all you did was prepay some of the monthly payments which is why you should NEVER put down a large deposit on a lease.
I want to buy my 2015 chevy Equnonx I want to try not to deal with lthe dealer
I am on a 36 mo. lease agreement of which I owe the last 6 mos once I make next month’s payment. The car is in excellent shape, I have driven only 8200 miles. Should I wait till the last 6 payments to fiance the pay-off amount? Also I’ve heard that by the time I owe the last 6 payments, an offer by Toyota Financial to forgive the last 6 lease payments will be available, Is this true? Can I renegotiate a buy out price, and with whom? Also my mile limit is 12,000 miles a year.
If it’s a Toyota they will definitely contact you when you get within 6 payments. They will forgive the last payments IF you lease another Toyota. To buy this one it’s better to wait until the lease is up. You will have 6 more months to decide and drive for the same money. Toyota will try hard to get you into another new vehicle
Can you renegotiate a buy out price?
Who did you deal with?
Can you make payments on the car to buy it after the lease is up?
Of course. You just have to find a lender. The leasing company, a bank, a friend. Up to you. But start looking a month or two before it’s up. The leasing company would rather lease you a new vehicle not finance this old one. But you can always get a 6 month extension on the lease if the miles are low
I have a 36k miles/ 3 year lease- I am about to hit 36k miles but am a year away from lease term. Is it better to bring my car in before going over the miles and buy the car (or buy another car at same dealer if that’s an option)? OR wait until the lease is over, go over mileage and buy the car then? (not interested in leasing again) Please help!
Just wait until the end of your lease so you won’t have breech of contract. If you are planning to buy just use you mileage, theyre not going to charge you anymore but you have to pay for the dispoition fee when you either return or buy out you lease
Has anyone experienced an odometer error? I’ve calculated every possible trip I’ve made in this car and then some, over estimating on all. It comes to 10,000 less than the odometer reading, which is 4,000 miles over my limit.
the leasing company probably RIGGED the odometer so it would run faster than miles actually traveled so they can charge you extra at the end !
Impossible
My question is this. If the vehicle resale value is higher than the loan that would take to purchase the vehicle. Could you essentially flip the car? (Meaning purchase the leased car, and than quickly flip it for a profit?) Is it legal?
Flip it to a private seller. Selling it to a car-thief, I man dealer is laughable !!!
It’s your car after you purchase it. You can sell it the next day, next year or simultaneously. Nothing to hide
what if my mileage is up before the end of my lease?
If you want to lease a new car after your first lease is up, do you need a new down payment?
It depends. You have to negotiate. They will tell you no downpayment but you monthly will be higher because they will add your downpayment to your monthly. But if you have money for the downpayment its better … in my opinion
Found this great blog on what to do if you go over your miles, check it out, this site also has a lot of good insight on car leasing in general: https://carvoy.com/blog/38-overmileage-what-to-do-after-you-combust
Can I buy my car before the lease is up?
Yes
I am 2 1/2 yrs into my lease. I went to see about buying the car. The salesman told me the monthly payments would go up 55 dollars more a month and would be for 6 yrs. Somethng wrong here. It’s a KIA Forte not a Lexus. I have no one to help me understand how to negotiate or guide me in this matter.
If I decided to buy my lease do I have paid any money at fron?
you can either put down payment or not to do it…
I am upside down in my current lease of a 2014 Nissan Rogue SL FWD, premium package. My originally lease was $410/mo for 36 months only 12,000 which I am about 450 miles from exceeding. I have also, unfortunately, had 2 accidents in the vehicle. This is the 2nd car I have leased through Nissan and have always made my payments on time so I have been approved to participate in their VRU program. I got a offer from a dealer for a 2016 Nissan Rogue S FWD for $335/month for 36 month at 15,000 but am still apprehensive about taking the offer.
It really depends on what your buyback price is, what shape the current car is in, how much is any you will be charged to return your 2014. Also what are details on the 2016 Rogue? Residuals, MSRP, money down?
When buying your leased car, can you avoid going through your dealer and deal directly with the auto company?
You can often avoid going through the dealer, but you’ll have to deal with the finance company – that might be Nissan Credit or a bank like Bank of America.
Yes, actually better you don’t involve a dealer if you plan to finance since they might try to third party fiance and tack on points or sell you something or trade in your car
yes, call your leasing company and/or call the manufacture’s financing company
What I really want to know is what Hyundai fetched at auction for a very clean, low-mileage car, and they are trying to bill me for ‘repairs.’ 15,000 miles, 3 year lease, no damage. Hyundai is the absolute worst I’ve ever dealt with, and this is my second experience with them. I will never have another.
During your end of lease consultation what did they state were the charges and why? To give you an idea auction price normally goes for around dealer buyback price, which is the price we would pay to buy back our lease but with no tax or fees.
Some cars make sense. When leasing a Honda, the buy-out was $11,000 and they were selling for $15,000 to $16,000 at the time (and that was on e-bay). I bought it. I leased a Hyundai, and they don’t hold value The buy-out was about $13000 + and they were selling for about $12 K on e-bay, which I consider more realistic pricing, and in accordance with KBB. However, I saw a car dealership take my very car and they currently have it listed for almost $17K.
same with some luxury cars that highly overshoot their residuals and their actual value is much lower.
Ridiculous only the 1st point makes sense…Who Would ever buy a their car to avoid the 380$ excess ware penalty or just to avoid the hassle of car shopping.
Great idea if you want a new car. Not such a great idea if you would rather not pay for another car’s depreciation.
My friend leased a car and someone hit her. She got it fixed but should she buy it after her lease is up or trade it in.
My friend had the same thing happen. She had it prof repaired. At the end of the lease the lease company was able to tell it had been repaired. They charged her $1200, she wound up keeping it because of that and plus she was over the mileage.
really depends, how bad was the accident? Was it reported on a carfax? Have the damages been fixed and are they noticeable? What is the buyout of the car and compare that to the value of the car.
Lease up on Audi 6 exceptionally low mileage great condition. Thinking of buying out the lease. Would like to purchase car with certification Warranty for additional two years 1000000 mi. Expect low mileage agin. Yesterday I was told the cost was 2000. This morning shot up to 2500. This afternoon 2900….what is the average cost.
I want to buy my leased car but don’t want to pay all of the extra fees the dealership tacks onto the purchase. Who should I talk to about a walk out the door price that is in my favor?
Negotiate that with the dealer. Tell them what your willing to pay out the door including the tax and other fees
Hi Norma, did you ever get an answer? I am curious too.
I know this post is old but incase anyone is reading, the dealer doesn’t own your leased vehicle, the leasing company does. Your lease end buyout price is clearly stated in your leasing contract, no fees other than state sales taxes can be added on to this number. Dealership fees were tacked into the overall cost of the vehicle when you initially bought it, in other words they were part of your lease payments.
Dear Russ, how do we end up purchasing our car at the end of a lease period of 3 years? If we still owe approximately 12 grand, do we end up financing with the car company or do we go to a bank on our own? How are we expected to come up with the large amount at end? Thanks for thoughts. TK
You either get financing from the dealer or banks. Your purchasing the agreed residual value of car from the begging of the lease. Which from it looks like what your saying is 12k. You’re not having to come up with 12k. You’re financing 12k. In your case $20 per $1,000 is a safe purchase rate including interest with decent credit over a 5 year purchase. All in all with 0 down and a fair interest rate look to pay about $240 on a 60 month term. If you residual value is lower than what the car is worth you can always sell the car to CarMax make a little money and use it for a down payment on a new lease. Make sure you know if there are any purchasing fees to the car. Kia has a $400 purchasing fee as do others. Hope this helps.