Leases are a great option for a lot of reasons, particularly if you don’t have the time or inclination to work on your car when it is required. But what happens when your lease period is coming to an end and you’re not quite ready to say goodbye to your ride? Should you just give it up, or does it make more sense to buy out your lease?
While every person’s situation is different, in many cases it may make sense to buy out your car lease.
There are a lot of reasons for why a car lease might be a good idea for you. Car leases are great if…
You don’t drive a whole lot, and you definitely don’t want to keep up with repairs and maintenance.
You like the idea of getting a new car every few years.
You don’t want to deal with the hassle of selling a car.
You are a business owner and you want to maximize tax deductions.
And while these are all great reasons to lease a car, there are also a lot of reasons that you might want to buy your lease when the term is over.
When you lease a car, your monthly payments are usually much lower than if you chose to purchase the car and finance it. And this is great for some people, but at the end of your lease payment period, you don’t really have anything to show for it. You do not own anything and you have to restart the process of leasing from scratch.
But when you buyout your lease, you will ultimately own the car outright. When the financing payments end, you are the owner and can either sell it or drive it until it will not work anymore.
Leasing a car means that you do not own it; the dealership does. And because of this, you cannot customize it or change it to suit your personality. No paint job, no bumper stickers, no tinting, no custom speaker system. If you love your car and dream of truly making it your own, a lease buyout is the perfect opportunity for you to do so.
When you lease a car, you are often forced to use certain mechanics and parts when your car needs maintenance or repairs. If you purchase your car, you can go anywhere to have it serviced (or just do it yourself!)
The end of a lease usually means you have to pony up for some fees. Those fees will vary based on your loan agreement, but usually include:
The Disposition Fee. This covers the expenses of returning your car at the end of the lease. It pays for the car to be cleaned and for any minor repairs that the car may need. Typical disposition fees run about $350.
The Wear and Tear Fees. You may be responsible for wear and tear fees. Slight wear is expected and factored into your monthly payments, but they will outline in your lease agreement anything that they think is excessive.
The Mileage Fees. Car leases always have limits to the amount of miles that you can put on the car per year, usually 10,000 or 12,000 miles per year. Once you exceed that mileage limit, you will be subject to an additional fee. Every mileage fee is different, but they typically range between $.15-$.30 per mile. If you drive a lot, this can mean you owe a lot of extra money at the end of your lease. Even at a fee of $.20 per mile, a 3,000 mile mileage fee can run you $600.
If you end up purchasing the car, you will not have to pay these fees. So you don’t need to worry about any wear and tear or any extra mileage fees. This can save you hundreds if not thousands of dollars in fees, money that you can use to purchase your car (giving you an asset in the end instead of just fees).
Finding a new (or used) car right now is extremely difficult. There is a low supply of new cars for many reasons:
Shortage of raw materials such as plastic and steel
Shortage of microchips
Labor shortages
Shipping delays
Other supply chain issues
Because of this shortage, the cost of a new car is very high, and the competition for new cars is fierce. This in turn created more of a demand for new cars as well. And all of this means that getting a new car right now is not easy and it is not cheap. So if you are not really looking to lease another car, buying out your car lease can save you from the hassle of finding a new car.
If buying out your car lease seems like a good option for you, follow the steps below to start the car lease buyout process.
Check your contract. See what your options are at the end of your lease. Some lease agreements will not allow you to purchase your car, so be sure that it is an option before you get too far into the process. You will need to tell your leasing company that you are planning on buying out your car lease. Some contracts have additional fees for buying out your lease.
Shop around. Once you determine if you are eligible to buyout your loan, start shopping around for a loan (unless you have the capital to buyout your lease outright). You aim to apply with 3-5 lenders.
Gather your documents and apply. Gather any and all paperwork you may need for your loan applications.You will most likely need the following:
A Photo ID, such as a passport or driver’s license.
Your vehicle’s information, which may include the bill of sale, VIN number, make, model, and year of your car.
Proof of income and financial history, which may include pay stubs, banking information, and your credit report.
Proof of residence, such as a mortgage statement, lease agreement, or utility bill.
Proof of insurance.
Once you have all of your documents together you can apply to the lenders you selected. If you choose to use a company that specializes in car lease buyouts, like Auto Approve, they can help streamline the application process and save you from a lot of tedious paperwork.
4. Compare offers. Once you apply, it won’t take long until you start getting offers. Compare all of the terms and see what works best for you. Be sure to consider the following:
The car loan APR. This will depend on the market rates, your income, your credit score, and the vehicle you are purchasing.
The repayment terms. How long is the repayment period? In general, the longer the repayment period is the higher the APR will be.
The fees. Every loan agreement will have fees listed. Are there prepayment fees? How much are the processing fees? Are there any extra fees?
The customer ratings. Before signing any paperwork, be sure that you check out the customer ratings of each lender. What are their current customers saying about them? Signing on with a company that has bad customer rating and bad customer service can spell major trouble later on.
If you use Auto Approve to look for your car lease buyout loan, we can help you sort through the offers and decide what lender will be the best fit for you.
5. Sign on the dotted line. Once you pick a loan offer it’s just a matter of completing the necessary paperwork. You will need to sign on for the loan and transfer the title. Visit your local DMV to determine what steps you need to take to complete the transfer. Typically the vehicle will be in the lender’s name until the loan is paid off.
And that’s it! Buying out your lease is pretty simple, especially when you use Auto Approve to assist you. We can save you hours of paperwork and can guide you through any questions or concerns that you may have. Our experts know the ins and outs of auto lease purchases, and with a 96% would recommend rating on LendingTree, you can be sure that you are in good hands.
If you are interested in an auto lease purchase loan, don’t wait! Get a quote from Auto Approve today to get started!