Should I buy my leased car?
To decide if you should buyout your leased car, you'll need to consider the car's value and buyout amount, mileage, condition, and your preferences for a vehicle.
What's the car's value?
When you sign a lease contract, the leasing company estimates how much the vehicle will be worth when the lease ends. That amount is known as the residual value or buyback amount. That's how much you'll have to pay (plus applicable taxes, fees, and remaining lease payments) if you decide to buy out your car lease.
It can be challenging to predict how much a vehicle will be worth in two or three years (the typical length of a lease). If the leasing company guesses wrong, your car could be worth more or less than the buyback amount. You can get an estimate of the car's current value from sources like NADA, Kelley Blue Book, and Edmunds. Compare the car's current value to the buyback amount to help you decide if buying your leased car makes financial sense.
Compare your car's current value to the buyback amount in your contract.
How many miles does the car have on it?
Most lease agreements limit the miles you can put on the car during the lease term. If you exceed the mileage limit, you'll likely have to pay a fee — typically $0.10 to $0.25 per mile, according to the Federal Reserve. Depending on your fee total and the car's residual value, you might prefer to buy out the lease and own the car than pay the excess mileage fee and return the car to the dealer.
What's the condition of the vehicle?
Leasing companies want you to return a leased car in like-new condition. If yours isn't, you'll probably have to pay an excess wear-and-tear fee to fix car dents or scratches. You might decide that you'd rather buy your leased car than pay the damage expenses.
How much do I like my leased car?
If you love the car and took good care of it while you were leasing it, compare the buyback amount to the vehicle's current value. If the buyback amount is comparable to or less than the vehicle's market value, buying out your leased car can be a way to get a well-maintained car you already know you like for a reasonable price. If the car's buyback amount is greater than its market value, you might be able to get a better deal buying a used car of the same make and model.
What should I expect when buying a leased car?
Lease payments only cover the cost of car depreciation — not the vehicle's purchase price — during the term of the lease. If you decide to buy out your lease and don't have the cash to pay for the car, your loan payments will likely be higher than your monthly lease payments. Calculate your payments using this lease vs. buy car calculator.
You'll also be responsible for all maintenance and repairs. Since many bumper-to-bumper warranties last for a couple years, the vehicle's warranty may be over or ending around the time you purchase the car. Consider mechanical breakdown insurance — a more comprehensive alternative to extended car warranties — if you're concerned about not having an active warranty.