Lease Buyout Calculator: How to Calculate a Lease Buyout

• Calculate a lease buyout if you want to buy the car you are leasing after the lease term ends - and there is a formula to easily determine the cost.
• Lease buyouts may be convenient, but are not always financially sensible, and it's important to compare the buyout price to the car's current market value. 
• FINN car subscriptions are an alternative to leasing and you won’t need to calculate lease buyouts. Terms are as low as six to 12 months and your monthly payment covers insurance, maintenance, and roadside assistance.

Otherwise known as a “purchase option,” a lease buyout describes the option to purchase or finance the car you’re leasing once your lease terms have expired. Many dealerships and leasing companies offer a lease buyout option to give their lessees a chance to purchase the car they’ve been driving for the past two or three years. It makes sense that you’d want to continue to drive a car that’s become part of your daily life. 

Buying out your lease has advantages and disadvantages for you and the leasing company or dealership. Lease buyout options can save time in test-driving other vehicles and ensure a pre-qualified sale for the dealership. However, some lease buyout options just don’t make sense financially or logistically. 

The best car lease deals offer a competitive purchase price and an affordable monthly lease rate. Depending on how long your lease is on a car, you’ll probably see the lease buyout offer come through about three months before your lease is up. You can also request a lease buyout packet. 

Types of lease buyouts

Some leasing companies also offer an early lease buyout, which allows you to purchase your lease before you’ve made a handful of payments. These early lease buyout options come with predetermined terms and conditions but offer less negotiating room than lease-end buyout options. The most common lease buyout option is lease-end. 

However, some leasing companies don’t offer a lease buyout option at all. Check with your leasing company before you sign the paperwork. Ask if the car you’re leasing comes with a lease buyout option. You may find yourself reconsidering your decision, depending on the availability of a lease buyout. 

Knowing how lease payments are calculated will give you the information you need to determine your lease buyout price. Calculating your lease buyout can help you understand the factors determining how much it costs to purchase your lease and whether or not it’s worth the investment. You can also use these calculations to help support your negotiations. 

Here’s how to calculate your lease buyout: 

(Residual value + Lease buyout fee + Remaining lease payments) + (Residual value x Sales tax) + Additional fees = Lease buyout price 

Consider a two-year lease agreement on a Ram 1500 with a residual value of $25,000 and a monthly lease payment of $600. Additional fees total $500 from the dealership, your sales tax is 6%, and the lease buyout fee is $300. With four remaining lease payments, you can calculate your lease buyout price: 

($25,000 + $300 + $2,400) + ($25,000 x 0.06) + $500 = $29,700 

Lease agreements contain the residual value of the leased car, which puts a price on how much the car will be worth once the lease terminates. The dealership or leasing company predetermines the residual value when you sign your lease. The relationship between the actual market value and the residual value can help you determine if a lease buyout is right for you, but more on that in a minute. 

Additional fees can include costs such as: 

• Registration fees
• Transfer fees
• Titling fees
• Licensing fees

You can negotiate the lease buyout price with the dealership or leasing company. Use the market value to bolster your negotiations. Many dealerships would rather sell you a car with minimal negotiating than face the task of acquiring buyers interested in that particular vehicle, especially if you’re leasing a car that’s in low demand. 

When calculating the lease buyout price, it’s time to look at the bigger picture. You have the following choices: 

• Return your leased car
• Finance the lease buyout 
• Purchase the car outright

Determining the car’s market value can help you decide what to do. You can use Kelley Blue Book or Edmunds to determine a rough market value based on the car’s mileage, condition, year, and make or model. You can also visit a dealership to see what they’d offer you for your car. 

You can finance your lease buyout the same way you’d finance a car purchase. Choose between financing with the dealership or leasing company (if offered) and an independent lender. Many independent lenders offer lease buyout loans, though some may categorize these loan rates differently. 

If you’re strongly considering a lease buyout, start looking for the best rates about 30 days before your lease ends. Most lenders offer 30-day terms on their quotes. You can also avoid several hard credit checks if you submit a handful within 14 days of each other. Credit bureaus will treat multiple credit checks within two weeks like one hard pull on your credit. 

Many people are unsure of what happens at the end of a car lease. If you don’t take the lease buyout option, you can walk away or lease, finance, or purchase another car. You can also subscribe to a car with FINN. With a FINN car subscription, you can select which car you want to drive, pay one monthly fee, and avoid worrying about calculating your lease buyout price. 

It’s worth taking the time to consider a lease buyout. Once you’ve calculated the lease buyout costs, it’s time to decide which path you’ll take. The following chart can help you determine whether a lease buyout is worth it given your situation: 

Return for a moment to the example above, with a lease buyout price of $29,700 for a Dodge Ram 1500. If that same Ram 1500, in its current condition, were worth more than $29,700, you could buy out the lease and sell it for profit. However, if the market value is less than $29,700, buying out the lease may not be worth it. 

Looking for a leasing alternative? Check out car subscriptions from FINN that offer flexible terms, home delivery, and a single monthly payment that covers registration, insurance, depreciation, and maintenance. With a FINN subscription, you can subscribe to the car you want for six or 12 months for up to 1,500 monthly miles. 

A lease buyout can be worth it if you can walk away from the deal with terms that work in your favor. For example, you might purchase a lease buyout and sell the car for profit. Excess mileage or wear-and-tear are two of the most expensive car lease fees to avoid, and a lease buyout option can help mitigate those costs. You can also buy out your lease to own a car you know has been well taken care of. 

Even with the odds in your favor, a lease buyout might not make sense. For all those times, FINN car subscriptions can give you the freedom to choose the car you want, the terms you need, and pay for it all with a single monthly payment. FINN even includes insurance, maintenance, and depreciation, so all you have to do is wait for your subscription to arrive at your door. How’s that for convenience?