How Lease Buyout Auto Loans Work

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Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


, Contributing Writer - August 11, 2021

A lease buyout loan is what you want if you decide to keep the car you’re leasing. These loans allow you to purchase the leased vehicle, which may or may not turn out to be a good deal.

How to Calculate Lease Buyout Price

Your lease buyout amount is largely based on the estimated value of the leased car. You should already have this figure, called the residual value, since it's included in your original lease contract. In order to find out how much you're likely to be paying, you need to add a few numbers to the residual value.

The main figures you need are typically the costs of tax and title fees. To figure out the cost of putting the title in your name you can normally contact your local DMV or Secretary of State.

Next, you need to figure out the sales tax you owe, if any. This is calculated by multiplying your state’s sales tax rate by the vehicle’s residual value. Contact your local DMV or Secretary of State to see how leased car sales taxes are calculated in your state.

Add together the tax, estimated residual value, and fees to register the car in your name. This is the cost of buying out your lease vehicle. Once you have this total cost, you can apply for an auto loan which covers this amount for the purchase of the car.

Is Buying Out Your Lease a Good Idea?

Whether or not buying out your lease is a good idea financially comes down to whether the buyout price is lower or equal to the leased car’s actual value. If the lease buyout price is lower than the car’s estimated value, then it could very well be a good idea for you to go through with a lease buyout auto loan.

Leasing companies determine a leased vehicle’s residual value at the beginning of a lease. While they’re typically pretty close, it’s not always perfect. Many things can influence a vehicle’s value. For example, the recent pandemic has inadvertently caused the values of used cars to skyrocket due to the shortage of new ones. As a result, a vehicle that’s coming off lease may be worth more than the leasing company predicted at the beginning of the term.

To compare the total buyout price to the leased vehicle’s estimated value, visit some vehicle valuation sites such as Black Book, Kelley Blue Book, and NADAguides. After you enter the leased car’s information (trim, mileage, condition, etc.), you can get an estimated value at your convenience.

Getting a Lease Buyout Loan

To get a loan for your previously leased vehicle, you likely need to seek a direct auto lender such as a bank or credit union. Direct lenders typically require that you have good credit (above 660) to qualify.

For a lease buyout loan, you may not need a down payment. If you managed to stay current on the lease payments, you’ve already put a decent amount of money into the car. However, whether or not you need a down payment can depend on your credit situation and the lender you’re applying with. Even if you’re not required to have a down payment, putting cash down on a car loan can save you money on interest charges and land you a lower monthly payment.

For borrowers in need of a bad credit auto loan, we want to offer some guidance as well. CarsDirect has a nationwide network of special finance dealerships signed up with subprime lenders – they’re equipped to handle many unique credit situations. Get on your path to an auto loan by completing our free car loan request form.

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, Contributing Writer

Bethany Hickey is a graduate from the University of Michigan-Flint, with a bachelor’s in English-Writing. She is a content writer for Auto Credit Express, CarsDirect, and many other automotive blogs, as well as the Poetry Editor for UM-Flint’s writing magazine.


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