A car lease buyout allows you to purchase the vehicle you've been leasing at the end of the lease term, or sometimes even before it ends. The price is typically predetermined and stated in your original lease agreement as the "residual value" or "purchase option price." This decision involves comparing this fixed price against the current market value of the car and considering the additional costs involved.
What is Involved in a Lease Buyout?
The cost to buy out your lease is not just the residual value. You must also account for several other significant expenses:
Residual Value: The pre-set price of the car at the end of the lease.
Sales Tax: You will be required to pay sales tax on the buyout price of the vehicle. The rate depends on your state and local laws.
DMV/Title/Registration Fees: Since ownership is transferring from the leasing company to you, you'll need to pay for a new title and registration.
Lease-End Fees: Some contracts include a "purchase option fee" that you must pay to exercise your right to buy.
Should You Buy Your Leased Car?
Deciding whether to buy your leased car is a financial decision that depends on several factors:
Market Value vs. Residual Value: If the car's current market value is higher than the residual value stated in your contract, buying it is often a good deal. You are essentially buying the car for less than it's worth.
Vehicle Condition: If you've maintained the car well and it has low mileage, it may be a better purchase than a used car of unknown history. Conversely, if it has mechanical issues or you've exceeded the mileage limit, buying it might avoid costly excess wear-and-tear or mileage penalties.
Financing Costs: Unless you have the cash to buy the car outright, you'll need to secure a used car loan. The interest rate and term of this new loan will affect your monthly payments and total cost.
How to Use This Calculator
Our Car Lease Buyout Calculator helps you estimate the total amount required to purchase your leased vehicle. Here's how to use it:
Enter the Current Lease Buyout Price found in your lease contract or provided by your leasing company.
Input your local Sales Tax Rate.
Estimate the DMV/Title/Registration Fees for your state.
If you plan to finance the purchase, enter the proposed New Loan Term and Interest Rate.
The calculator will then provide a breakdown of the total cash cost, including taxes and fees, as well as estimated monthly payments and total interest if you choose to finance the buyout. For example, if your buyout price is $25,000, tax rate is 7%, and fees are $500, your total cash cost would be $27,250. Financing this amount at 6% for 60 months would result in a monthly payment of approximately $526.