Quick Facts About Buying Out Your Car Lease
- If the value of the vehicle is higher than the buyout amount, it could be wise to do a lease buyback if you’re able to financially.
- Before you decide, research the current value of your vehicle and weigh all financial costs associated with a buyout and a new loan.
- Consider buying the car if the current value is higher than the lease buyback amount.
It’s possible that doing a lease buyback may make sense if you leased a car several years ago and are just a few months shy of the final payment, and it’s a good deal for you. If you are weighing if you should buy out your lease or turn in the keys, start here before you decide. According to Brian Moody, executive editor of Autotrader, you’re at the best possible spot in this challenging environment for buying used cars. Here’s what you need to know.
- What Is a Lease Buyout?
- Should I Buy My Leased Car?
- How to Buy Out a Lease on a Car
- When to Avoid a Lease Buyout
- Can I Immediately Sell My Car After I Buy Out Its Lease?
What Is a Lease Buyout?
A lease buyout is the amount of money it takes to buy out your lease to own the car, regardless of how many payments are left. It’s based on the car’s residual value when you first leased it, plus any remaining payments and early buyout charges, if applicable.
To determine the car’s residual value, the leasing company uses a formula that forecasts the estimated resale value, along with expected economic conditions, reliability records, and more.
Should I Buy My Leased Car?
Of course, if your buyout value is lower than what the car is worth, yes, it’s a good idea. You may have heard that used car values returned to normal levels from pre-pandemic times. However, inventory for used cars remains tight, which leans in your favor if the buyout price on your lease is at or below the car’s market value. Used-vehicle inventory volume is expected to remain tight until at least 2026.
Still, there are other factors to consider, such as your budget, the condition of the car, and more. Ask yourself the following questions:
- Did you stay within the mileage limit allowed in the lease?
- Is the car in great working condition?
- Can you afford to buy the car?
Moody says, “Consider buying your leased car if simply returning it will result in paying more for the car you’ll get to replace it.”
Lease Buyouts on Tesla Models
On Tesla’s website, terms state, “Starting November 27, 2024, all leased Cybertruck, Model S, Model 3, Model X, and Model Y vehicles are eligible for purchase.” If you lease a Tesla before that date, it may not be possible to purchase your vehicle. For people who lease vehicles, a purchase fee of $350 applies at the end.
Pros and Cons of Buying Out the Lease
As with any purchase, there are pros and cons. Read on to see what you should consider.
Pros
- Known history. If the math makes sense, you’ll own a car you’ve been driving already for several years. One that you have maintained and experienced.
- Potentially costs less. It costs less than buying a new car and perhaps even a used car, plus you may get a better deal if the car is worth more than the lease buyout price.
- Cuts your losses. It may help you out of a bind if you exceeded your lease miles or had excess wear and tear.
Cons
- The math doesn’t add up. If the car is worth less than the buyout price in the lease, it’s not worth the loss.
- Future car problems. It may not be worth buying the leased car if it has had many recalls and is not living up to its potential.
- Financing. If you can’t qualify for the best interest rate to finance a car loan, it may be worth waiting because it could cost you more in the end.
How to Buy Out a Lease on a Car
Here are the steps to take to buy out the lease on your car.
1. Check Your Lease Agreement
The first step to take is to check the terms of your lease agreement or ask your lessor to see what you must pay to buy the car out of its lease terms now. This information is usually easy to find online by logging into the account where you make your monthly payments. However, making a phone call to the lessor can also be helpful.
When checking, ask about any associated fees or an early termination charge. Contact the lessor directly to determine exactly what you will owe if you have any doubts.
2. Research the Value of Your Vehicle
Using the car valuation tool from our sister site, Kelley Blue Book, calculate the approximate value of your leased vehicle. You’ll want to note your car’s current mileage and its current condition. Plus, you should be aware of any significant optional equipment the vehicle offers. It could be useful here if you kept the original window sticker that came with the car.
Now, the math is simple. Is your car worth more than the buyout? If so, it may make a lot of sense to buy it. For instance, if the buyout value is $25,000, but the car now shows a trade-in value of $30,000, you would be $5,000 ahead.
3. Determine Your Financing Options
If you can pay cash to buy out your car lease, you’re lucky. But many drivers don’t have the cash to spend on the lease buyout. As a result, shop for a loan to buy out your lease as you would a regular used car loan. Used car loan interest rates started to come down after the Federal Reserve lowered its key lending rate several times in 2024.
According to Cox Automotive’s Dealertrack, the used auto loan interest rates were about 13.5% on average at the end of 2024. Cox Automotive is the parent company of Autotrader.
4. Negotiate the Buyout
There are several situations where you may want to negotiate a buyout of your leased vehicle.
- High-demand vehicle. Sometimes, it’s possible to get better terms for buying out your lease. For example, if a used vehicle is in high demand, a dealership may be willing to negotiate the terms of the agreement with you and the lessor. In this case, you may end the lease early without penalty, and the dealership plans to get you in another car, usually with the condition that the car is in great shape.
- Exceeded the lease miles. However, you may want to end the lease early because you’re over your lease miles. In that case, check for some strategies in our article: I’m Way Over My Car Lease Miles, What Do I Do? Strategies include negotiating a buyout.
- Accident or damage. It’s also possible to negotiate the end of the lease if the car got totaled or has damage that could cause you excess charges. In this case, you may need to work with your car insurance provider, and if the accident or damage was not your fault, the other driver’s insurer. Just be sure to include any fees it might take for you to end the lease as part of the negotiation.
- Car value decreased. In some cases, you might choose to negotiate the lease buyout if you really want to buy it, but the value of your leased vehicle is lower than the buyout amount set in the lease. For example, some electric cars have come way down in price and value. Of course, you can walk away. However, if the buyout price can be made right and you like the vehicle, why not try?
- Car value increased. If the value of your car is higher than your lease agreement buyout price, the math works in your favor. It is worth considering the purchase of the vehicle. However, the only negotiation power you hold is to request lower financing on the loan, presuming your good credit allows you to do so. You could also ask that any fees be waived for the purchase.
5. Sign the Paperwork
Once you negotiate the buyout, if it works in your favor, sign the paperwork and drive away in your car.
When to Avoid a Lease Buyout?
It may be best to turn in the keys and walk away from the leased car if the math doesn’t work in your favor. Be sure you factor today’s higher loan interest rates into your calculations.
A more complex decision might involve looking at the car’s reliability history. A manufacturer’s warranty likely covered your leased car, but that may not extend much — if at all — beyond the end of the lease.
“You might be inheriting problems that you now have to pay to fix along with your monthly car payment,” Moody said.
You may want to turn in the car if it has had frequent mechanical or electrical problems or if you were involved in an accident that resulted in major damage repairs that could affect your vehicle’s long-term value.
Can I Immediately Sell My Car After I Buy Out Its Lease?
Some drivers may see dollar signs when they find out their leased car is worth thousands more than the lease buyback price. However, you’ll want to do a little local research first. And yes, if you buy out a car you lease, you can sell it. Still, you could encounter speed bumps.
“But many states and counties have laws that prohibit anyone without a dealer’s license from purchasing a car to sell it immediately,” Moody said.
You will likely need to pay to register the car and obtain new license plates. The time it may take to do that may be enough to put the brakes on your plans to turn the car into an immediate profit-maker.
“Still, once it is your car, you’re free to keep or dispose of it as you see fit,” Moody said.
If selling privately, check out Autotrader’s Private Seller Exchange. Otherwise, a dealership can work with you to buy the car out of its lease as you immediately trade it in to them. In that case, you may only own it on paper for a few moments. That could give your replacement car shopping the budget boost it needs.
Editor’s Note: This article has been updated for accuracy since it was originally published.
