Car leasing is extremely well known to the large population, not affording a new car has become something often encountered, therefore people head for the car lease as a solution of driving a new car for a couple of years. The thing is that many dealerships have placed the option of purchasing the car at the end of the lease for its residual value. This procedure is called a lease buyout or payoff. You can purchase the car with a loan or with cash (if you can afford it).
Usually a lease contract will allow early buyout but others may not. Ones might restrict the period of time you are eligible to make an early buyout or simply have to wait until the end if the lease to purchase the vehicle. Before you sign any leasing contract you should always read the clauses carefully so that you will be aware of any restrictions related to the car.
If you like the car and you think it’s worth keeping that a buyout is probably your best bet. It represents a great advantage since you know the overall condition of the car because…well… you were the one driving it for the past three years. This makes the safest purchase possible on the car market. No hassling with used car dealers, no surprises with the car, you are completely sure on the car’s history and you know it inside out. Of course there could be other reasons for considering a buyout such as exceeding the mileage limits by far so instead of paying steep fees for excessive mileage, why not divert those money for purchasing it and make give you complete ownership over it.
You can perform a buyout in two ways, you either wait out on the lease and buy the car then, or you can transform the lease contract into a purchase early. Each of them has its own set of advantages and disadvantages.
One of the advantages of the end of the lease purchase, is that you will know exactly how much you will have to pay for the car since its residual value as been established at the beginning. Even better, if you’re lucky and work with popular and flexible dealership, then you can hope for a little negotiation, since a big dealership can afford to drop a couple of bucks to make a big sale. If the dealer doesn’t want to negotiate, than you will have to figure out if the residual value resembles the car’s used market value.
They are the ones that should be flexible if you stop to think about it, since, at the end of the lease you’re returning an used car, they can’t exactly place it back for sale so they will have to be satisfied with whatever they can get from an auction house. Therefore your price should be better than any other option they have.
If you decide to purchase the vehicle before the end of the lease, than you are performing an early buyout. This technique is a bit more complicated and could get you in a little bit of trouble if you’re not careful. Consider that the residual value of the car is determined at the end of the lease. So if you show up with the car earlier they are forced to calculate another residual value (which usually is more than the car is worth). This is the main danger in performing an early buyout. Since you cannot control the calculations made, you don’t have a saying anymore because you broke the lease contract early.
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