A lease buyout is the option to buy the vehicle you leased. If you like your car and you've had no problems with it and don't expect to; this is a good option to keep driving it. It is a great option since you know the history of the car. You know you changed the oil and rotated the tires on a regular basis. This car will make a good second vehicle for the family, and you can either pay cash for the car or you can secure a loan.
In a lease you have a limit on the miles you can drive the car during the lease period. If you want to avoid paying costly penalties on these things it is a good idea to go with a lease buyout. The price you will be offered to buy the vehicle is called the residual value. This would have been stated in your contract. Often times the dealership will not negotiate on a price, but in some cases it is better for them to negotiate than to have a car on their hands that they have to sell at auction.
Many lease companies have residual insurance on vehicles they lease. This insurance pays them the difference between the auction price they would get if you turned it in and the contract residual value. If they have this insurance there is no reason they would want to negotiate a lower price than the one on your lease contract since they'll get the full price anyway. The only way you can tell if the company has this insurance is if they will or will not negotiate.
When you lease you pay for the car's depreciation over the monthly payments you make. Whatever is left over on the negotiated price at the time of the lease is the residual value. You are purchasing the vehicle for the part of its original price you haven't already paid. Look at the buyout price and then look at what it would cost you to purchase another vehicle at the same value and condition. Normally doing a lease buyout will save you money.
When you decide to take a lease buyout you finance the amount owed just like you would any other used car purchase. You can go through the dealership to get a loan or you can go to a financial institution to get it. This is easy because you already know what the price will be and often you can get a better deal if you get your own used car loan. You will probably have to pay sales tax so factor that in as well.
Purchasing the vehicle before the lease end is sometimes permitted, but it is complicated because you haven't paid off what you were supposed to per the contract. A new price for purchase is calculated which is a combination of the end of lease residual value and the amount you still owe on your lease. Watch out, because what you owe may be much higher than you think. Your lease will be recalculated and you will find that the money you've been paying every month only went toward the finance charges and not toward paying down the lease. It's better to wait until end of lease to buy the car.
Related Questions and Answers
Is an Auto Lease Assumption and a Lease Buyout the Same Thing?
An auto lease assumption is not the same as a lease buyout. An assumption refers to a transaction where a person takes over the lease payments of another person's lease. If the original lease holder no longer wants the vehicle or can no longer afford it, they may look for someone to take over the payments. Lease assumptions are fairly common and are easy to do. A lease buyout is when a person buys out the remainder of their lease and owns the car outright. This is also a fairly common practice. A person may get tired of the lease payment or have come into a large sum of money, so paying off the lease makes financial sense.
How are Lease Buyout Rates Calculated?
Lease buyout rates vary depending on when you do the buyout. If you have completed the lease and made all the required payments, then the residual value which was agreed upon at the beginning of the lease is the amount due to buy out the lease. The residual value is basically the amount that the leasing company calculated the vehicle would be worth at the end of the lease. If you are buying the lease out prior to the end, it is a bit different. In most cases, you will need to make all of the remaining lease payments in a lump sum, and then pay off the residual. Buyout formulas vary by leasing company, so make sure you read through your leasing documentation.
Are there any Fees for Ending a Car Lease Early?
There are definitely fees for ending a car lease early. A lease is a legal contract between you and the leasing company. The leasing company expects you to live up to your end of the deal, and if you choose not to, there will be penalties. The majority of leases will require that you buy out the remaining lease payments as well as an early termination fee. This can be quite expensive. There are companies like swapalease, that help people looking to get out of their leases. They find people willing to take them over. This can be much less expensive than terminating your lease early.
What is Required to take over Someone's Vehicle Payments?
In order to take over vehicle payments, you must meet whatever qualifications the leasing company requires of lease holders. When taking over a lease, the leasing company is basically rewriting the lease in your name. In order to do that, one of the criteria to pass will include a credit check. If your credit score meets their guidelines, you should be allowed to take over the lease. Moving a lease into another person's name requires a fair amount of paperwork, and most leases will require the first and last month's payment. While taking over a lease can be time consuming, it can be a great option for both you and the current leaseholder.
Are My Payments the Same If I Choose to Buy the Car at the End of My Lease?
If you are buying a car at the end of lease, in most cases your payments will be different. All leases have a residual value, which is the amount due at the end of the lease if you want to buy the vehicle. In most cases, this amount would be paid in a lump sum. If you want to finance the residual value, you will need to work out a new loan with the leasing company or other financing company such as a bank. You can lower your monthly payments with a large down payment. As with all loans, it is best to shop around for the best interest rate.
Where Do I Get an Early Termination Agreement Form?
In most cases, you will have to contact the leasing company for a termination agreement form. It is also possible that the form can be found on the leasing companies' website. The availability of the form online will vary depending on the company being used. Terminating a lease early can be quite expensive. In most cases, you will be required to pay the remaining lease payments as well as an early termination fee. The fee will vary depending on your particular lease, so check the leasing paperwork for the exact amount. Using a company like swapalease to find someone to take over your lease is often a less expensive option.