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, - May 25, 2016

A lease buyout loan is what you want if you decide to keep the car you’ve leased. These types of loans allow you to purchase the leased vehicle at a little more than the estimated residual value, which may or may not be a good deal. It’s up to you to decide. If you’re debating about whether or not to keep your leased vehicle, knowing some facts about determining the buyout price and how lease buyout loans work will help you to make a well informed decision.

Calculating a Lease Buyout

The lease buyout amount is mainly based on the estimated residual value of the car. This value will be included in your original lease contract, so dig that out and find what that value is. You will then need to add the cost of the fees to transfer the title to your name, which varies by state. Contact your local DMV if you have questions about this amount. Finally, calculate the sales tax for purchasing the vehicle. Take your state sales tax and multiply it by the estimated residual value. The sum of the tax, estimated residual value, and DMV fees is the amount you will need to pay to buy out your leased car.

Is a Lease Buyout Worth It?

The estimated residual value on which your lease payments were based, and the actual residual value according to Kelley Blue Book, are the important quantities here. Look up your leased vehicle on KBB to determine the actual residual value. If the actual value is more than the estimated value, you will technically be getting a deal by buying out your car (remember, you’d have to pay title fees and sales tax regardless of what new or used vehicle you buy). Of course, the most important factor is how much you want to keep the car. If you love the way it handles and don’t want to switch to a new one, you should by all means do so unless the discrepancy between actual and estimated value is too great.

Getting a Lease Buyout Loan

Should you decide to keep your leased vehicle, you will need to finance the car with a lease buyout loan (assuming you can’t just pay in full). Since you have already made significant payment with your lease payments – and hopefully built up some good credit in doing so – you likely will not have to place a down payment on the vehicle. Of course, you can always negotiate better finance rates by making a down payment, so the decision is up to you.

Lease buyout loans can be acquired mainly through banks, though other lenders may be available as well. Lenders will want to see information about the vehicle you intend to buy. The year, make, model, mileage, estimated residual value, and actual residual value. So make sure you have that information handy when you apply.

Lease buyouts are good options in some cases, but it’s important to do your research ahead of time. If you decide that a lease buyout is right for you, getting a loan from a bank is a pretty straightforward process.

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