Tips for Buying Your Car After a Lease

When your car lease nears its end you have a couple options for you to consider. The most obvious is of course turning the car in and purchasing/leasing a new car. The second option is to buy the vehicle outright.

There are several benefits to each scenario…

Benefits of Returning Your Lease Car:
- Drive a new car that is covered under warranty.
- Avoid maintenance issues that arise after the 36,000 mile mark – brakes, tires, etc.
- Getting a new car gives you access to new safety and comfort technologies.
- If your life has changed, you can find a new car that better suits your needs.

Advantages of Buying Your Leased Vehicle:
- Getting a car you already know the history of.
- If your car is in excellent shape it may be worth more than the lease buyout.
- Financing a lease buyout is relatively easy to be approved for.
- Your monthly payment may actually decrease depending on your finance terms.
- At the end of your lease buyout you will own the car.

Now the most important factor in determining whether or not you should buy your leased vehicle is the purchase price. This figure is included in your current lease contract, and in most cases it is not negotiable. In reality, the purchase price is directly tied into how well you negotiated your lease terms. Leases are not easy to calculate on your own, but comparing the value of your purchase price is relatively easy.

For starters you should go to a website like Edmunds.com and get the current value of the vehicle based on mileage, zip code, and condition. Edmunds generates 3 different price levels, but the one you need to focus on is the “private party sale price”. This represents what you could expect to get out of your vehicle when selling it to another individual. If your purchase price is at or below the private sale price then the option to buy your vehicle is at least fiscally sound.

Once you know the true value of your car, shop around for a car loan with the lowest interest rate. The lease company is the easiest place to start as they can transition your deal without a lot of headaches, but they are going to give you their baseline interest rate unless you can negotiate with them. Compare what they offer to your local credit union or an online lender. In the event you find a rate savings of 1% or more then go with them.

Now the last thing to consider before buying out your lease is the future costs of the car.  As I mentioned before, several maintenance items arise after the 3rd year of a car’s life. Brakes and tires are at the top of the list, followed by little things like fluid changes and battery replacement. As you head into the 5th year you’ll be facing belt replacements, tune ups, and any other parts that fail due to wear and tear. Just keep this in mind when you think about the true cost of buying a car.

In short, buying your leased vehicle can be a good option if the car is in excellent shape and the purchase price represents the market value of the vehicle. The way to think about it is this…if you leased your car for 3 years and you financed the purchase for another 5 years, then you will have made 8 years of payments on the vehicle before you own it. If you are comfortable with this reality then you are a good candidate to make the purchase.

Read more car shopping tips in my car buying guide.