If your auto lease is up, should you buy the vehicle?
If the end of your auto lease is on the horizon, you're likely approaching a fork in the road. Many people who lease believe they have only two options: return the vehicle to the dealer and lease a different vehicle, or return the vehicle to the dealer and purchase a new or used car. But a third option exists that may be a better fit for your finances — an auto lease buyout.
What Is an Auto Lease Buyout?
Most lease contracts contain a purchase option that allows the person leasing the vehicle to buy it at the end of the lease term, or sooner, for a pre-set amount. If you like the vehicle you’ve been driving, this option sets you on the path to owning the car you've found to be a reliable mode of transportation for the past several years. While purchasing your leased vehicle has numerous benefits, it's wise to consider the pros and cons before deciding whether or not to buy that car.
Auto Lease Buyout - Benefits
With new car inventory low and used car prices higher than ever, an auto lease buyout could be the right move for your finances.
“With the increase of vehicle pricing due to supply-chain issues and low inventory, you may find it makes sense to purchase your vehicle when it comes off the lease,” noted Shoshannah Rausch, Car Buyers Associate at CAP COM. “Think of it this way. You know how the vehicle was driven and maintained. So if you’re considering buying a used vehicle, why not make the leased vehicle your own? The chances of finding the same vehicle, or a similar one, at the cost of your lease buyout are slim.
By transitioning from leasing the vehicle to owning it, you can potentially:
Bypass typical delays that result from ongoing vehicle shortages
Finance the vehicle using a low-interest rate loan, which can help keep payments low
Lock in a lower sales price because the vehicle likely costs more in today's market than the amount that was pre-set when you signed the lease
And you’re liberated from mileage or customization restrictions.
You could also potentially sell the vehicle back to the dealership at a price higher than you paid and purchase a different vehicle.
More people who lease are choosing to own their own cars via a lease buyout these days.
Auto Lease Buyout - Disadvantages
Despite the perks of an auto lease buyout, buying the vehicle isn't the best option for every situation. The timing might not work in your favor if you're not financially prepared to:
Adjust your budget for a monthly auto loan payment that’s slightly higher than leasing. Lease payments are calculated by using the vehicle's expected depreciation during a limited lease term. Auto loan payments are figured on the larger buyout amount.
Pay for the vehicle maintenance and repair costs previously covered by the lease agreement. You are now responsible for the upkeep of the car.
Reminder: Schedule a lease-end inspection if you plan to return the leased vehicle and walk away. Inspection results determine how much you might need to pay in excess mileage charges or other fees described in the lease agreement. Unless your leasing contract states otherwise, this amount and any additional fees are due when the vehicle is returned.
5 Steps to an Auto Lease Buyout
As a CAP COM member, you can experience the benefits of an auto lease buyout in five simple steps:
Contact the lease company and request an auto lease buyout packet.
Review the packet before you apply for a Lease Buyout.
Upon approval, we will mail a check for the buyout balance to the lease company.
The lease company will then send you the bill of sale and vehicle title to finalize your purchase.
You must then retitle the vehicle in your name by taking the bill of sale and vehicle title to the Department of Motor Vehicles.
Consider the advantages of an auto lease buyout whenever vehicle prices are rising sharply. Contact us at (800) 634-2340 to explore your options today.
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