Most of the cars leasing companies offer their clients the possibility to purchase the car either before the agreement ends or after the contract is over. Car lease buyout at the end of the lease means buying the car from the company by cash or loan for the price that is written in your contract.
There are lots of companies that will allow you to make an early buyout, but others won’t. Some of them will limit the time period during the lease in which you can buyout the car lease. To give you an example, these buyouts may be prohibited during the first and last months of the contract, which is why you should read it very carefully before signing the deal. If you want to continue driving the car after the lease ends, you will have to take into consideration this buyout option. You might want this because although you will be buying a used car, you’ve been driving it before and you know its full history and there won’t be any uncertainties. This option also should be taken into consideration if you exceed your mileage limit or if the car suffers from excessive wear and tear. In this case, you will certainly want to avoid paying the penalties.
Let’s talk more about the car lease buyout at the end of the contract. The price you will have to pay after the leasing agreement is over consists of the residual value that you will find in the lease contract. Keep in mind that there is room for negotiations in most cases and if there isn’t, it is up to you to decide if the asking price is fair.
When leasing a car, you basically pay for the deprecation that it suffers during the contract. What remains after that is the residual value which is what you pay if you want to buy the car after the lease agreement is over. In other words, buying the vehicle for the residual value means that you pay the part of the vehicle’s original price that you have not paid. It is a pretty fair deal as nobody gets cheated.
However, things are not that simple if you think about it. We say this because if you look from a market value point of view, things may look a little bit different. Take for example a car just like yours that has the same mileage and equipment. How much would it cost? This basically depends on the leasing company, the make & model of the car and other factors.
Moving on to the car lease buyout before the contract ends. This is considerably more difficult in comparison to the first type of buyout because there are lots of things to take into consideration regarding the amount of money that you will have to pay. The price is in most cases a combination of the residual value of the lease-end and what you still owe for the lease. It may sound simple, but it isn’t. Usually, the amount of money that you still owe for the lease is a lot more than you might think. Why? Because those comfortable low monthly payments that you have been making for several months have not been able to keep up with the fast depreciation of the car’s value. In addition, the leasing company will recalculate the lease balance in a totally different way than before.
For these reasons, in most of the situations it would be wiser to wait until the lease is over and then buyout the car. In the end, it is up to you to decide what the best way to handle this is.