Should You Buy Your Leased Car?

Part of learning how to lease a car online in 2023 is understanding how leasing a car works and what rights you have as a lessee. As your lease expiration date nears, you have a couple of options. Your dealership or leasing company will likely appraise you of these options a few months before the actual lease end date: 

• Walk away
• Lease another car (through the same dealership or another) 
• Buy another car (at the same dealership or another)
• Extend your lease 
• Buy out your lease (if allowed)

If you want to buy your lease, the lease agreement should include a purchase option price, potentially listed as the residual value. This purchase option price may also include any fees associated with purchasing the car, sometimes called a “purchase option fee.” You should also account for paying any sales tax, documentation fees, and additional dealership fees on top of this fee. 

Should you choose to buy your lease, you can pay for the car in several ways: 

• Cash
• In-house financing (direct from the leasing company or dealership) 
• Third-party financing (from your bank or another third-party lender)

Purchasing the car outright with cash will save you the most on interest. Financing offers from third-party lenders can help you negotiate if you plan on financing. However, some dealers offer incentives if you finance with their internal department instead.  

Buying your leased car can be a big decision for anyone. As you ponder whether to buy your leased car, consider the following scenarios where a purchase option can work in your favor. You should also consider how buying a leased car can work against you in certain circumstances. 

1. You want to get out of leasing

A lease buyout calculator can help determine if getting out of the leasing world works in your favor. You might also consider buying the car you’ve been leasing as a matter of convenience. After all, you know where it’s been, how it’s been treated, and what maintenance has been completed. Keeping the same car can help you avoid switching up car insurance, registration, and many other details associated with owning a car. In the after-effects of the pandemic, supply and demand continue to drive prices and create cut-throat competition among buyers nationwide. 

2. You don’t want to part with the car

As often as automotive experts caution against putting emotional stock into your vehicle, it’s hard to ignore the memories and sentimental attachment you share. If you genuinely enjoy driving your leased car and want to keep it, that might be enough reason to consider taking over ownership. Again, it’s not always the best financial decision in some cases, but the benefits are often multi-dimensional. 

3. You have cash or financing to cover the cost

If you can purchase your leased car outright with cash, you avoid paying any interest fees. However, financing can help you find affordable monthly payments that may cost less than your lease money factor. Remember to multiply your lease money factor by 2,400 to find the equivalent interest rate percentage. 

The same lenders that offer traditional auto loans typically also offer lease buyout loans. While these loans may have higher interest rates than their conventional counterparts, they’re otherwise closely related. Comparing rates between financing companies can help you find the best deal. 

4. You can take advantage of positive equity to make a profit

Toward the middle to end of the pandemic, lessees found that they could purchase their leased cars for less than what the current market conditions appraised them, simply based on the unique supply and demand conditions COVID created. Positive equity happens when the residual value of a leased car is lower than the market value. If you can buy low and sell high, you’re well on your way to making a profit like any stock trader worth their salt. 

5. You treated the car well, and it’s in good condition 

Dealers and leasing companies assume you’ll drive the limited number of miles you’re allotted in a lease when they determine the residual value and purchase price. However, you're already ahead of the curve if you drive fewer miles and keep the car in immaculate condition. Most of the time, driving fewer miles translates to higher positive equity if you plan on buying your leased car and selling it for profit shortly after.  

6. Your leased car is still under warranty 

Extended warranty coverage can be a prudent cost to incur with a leased car, but driving one still under the manufacturer’s warranty can save you money in more ways than one. If your leased car still has warranty coverage, it’s worth looking into how much is left and what extending that coverage costs. Most manufacturer warranties cover powertrain components, which can quickly spike your repair bill. 

7. You want to avoid costly lease-end penalties 

Buying your leased car can help you avoid the disposition fee (typically a few hundred dollars) dealerships often tack on at the end of a lease. However, you often trade that fee for the purchase option fee, which can be a similar amount. The most significant difference in your fees comes with penalties you incur with excess mileage or wear and tear. 

Given most leasing companies charge anywhere from $0.20 to $0.30 per mile over your approved mileage limit, driving even 1,000 miles over could cost you between $200 and $300. If you have to repair a ding or dent from a mall parking lot mishap, it could also cost you a few hundred dollars. However, you should balance saving a few hundred or even a thousand dollars in lease-end fees with the total cost of purchasing a leased car. 

Buying your leased car can be a bad idea if: 

• The car is in poor mechanical or cosmetic condition
• You can replace the car at a better price than the purchase option price
• The car has a high amount of miles 
• You’re not particularly fond of the car

Even though you’d be walking away from a lease and potential positive equity, sometimes avoiding ownership of a particular car can save you money in the short and long term. Considering the disadvantages as the advantages of buying your leased car is just as important. Separating the emotional from the logical arguments can often be the most challenging task. 

If you’re still looking for the answer to the question if you should lease and then buy a car, you’re not alone. Here are some additional tips if you’re considering buying out your lease. 

Research your car’s value

The best way to determine what your leased car goes for in the current market is to look up the value on Kelley Blue Book or the National Automobile Dealers Association (NADA). Research how many cars similar to yours are on the market and what they’re currently selling for. You should also glance at what new cars of the same make and model are going for and incorporate that into your final decision. 

Create a realistic budget

Affording a $500 monthly car payment is one thing, but budgeting for maintenance costs, repairs, insurance, and fuel is another. The more you can purchase within your means, the better your chances of paying that car off. 

Check your credit score and report

Know what’s on your credit report before you start submitting applications. If an error can mean the difference between fair and good credit standings, it’s often worth it to correct those errors. 

Submit multiple credit queries in a short time

Credit bureaus will treat multiple inquiries on your credit as a single inquiry if you submit them in short succession, typically within 14 days. In addition, preapprovals can help you get a realistic feel for what offers you qualify for.  

Negotiate effectively

It’s a good idea to approach a lease buyout like a new or used car purchase. However, some components, such as the purchase price, are non-negotiable. In these cases, it’s best to tackle waiving any fees to reduce what you owe. 

The best car lease deals allow lessees to buy their leased car. Most people start thinking about lease buyouts in the last three months of their lease term when the dealership alerts them to the impending lease-end date. Whether a lease buyout is a good option depends on your circumstances and how you envision car ownership in the next few years. 

If you’re ready to settle down with a car and leave leasing, buying your current car could bring you positive equity and a long-term transportation solution. Care of the leased car transfers to you entirely, but you can modify it how you see fit once it’s paid off. However, buying your lease may not be worth it if you’re unsure you can afford payments or want to drive that car for much longer. If you like driving newer cars, paying for your leased car limits that freedom. 

FINN car subscriptions offer a happy medium between leasing and buying. A FINN car subscription allows you to drive newer cars without locking yourself into lengthy lease terms. Instead, choose six or 12 months for a wide selection of vehicles, from trucks and electric cars to SUVs and luxury sedans.