What is a car lease buyout, and when should you do it?

Leasing a car is a very popular option for many these days. But what happens when you love your car, and you just can’t bear to say goodbye?

When your car lease comes to an end, you typically have three options to choose from: lease trade in, lease turn in, and lease buyout. Here, we'll discuss your three options and help you decide if a car lease buyout is the right move for you.

What is a car lease buyout and does it make sense for you?

In short, a car lease buyout lets you buy your existing car from your lender.

When your lease term comes to an end, you have three main options to consider. About three months before your lease end date, your lender should contact you to review your courses of action.

Understanding Your Options

Lease Trade In

A lease trade in is when you trade your old car in for a new car lease. In this case, you should determine your car’s value and compare it with the lease-end residual value that is listed in your lease contract. If the trade in value is higher (which is rare), you can use the difference to put a down payment on a new vehicle.

In most cases, the residual value will be higher and it will make more sense to return the car and start a new lease.

Lease Turn In

A lease turn in is exactly that; you return your car to the dealer as is. You will have to look at your contract carefully and determine if you are responsible for any fees. An inspection will be performed when you trade in your car and you will be responsible for excessive wear and tear, any dents and dings on the exterior of the car, and any stains or tears on the car’s interior. Excessive mileage fees may also apply, which can add up fast.

Lease Buyout

A lease buyout lets you buy your car directly from your lender. If the first two options are less than ideal, a lease buyout might be the right option for you.

In most cases, you can buy your car lease at any point during your lease period. If you want to buy out your loan early, you will need to discuss this with your lender as it will affect the residual value of the car. It is often not financially beneficial to buy a lease out early. It is much more common to wait until the end of the lease period to broach the subject of a lease buyout.

How a Buyout Works

A car lease buyout is different than buying a new car. You already have knowledge of your car’s condition so you should have fewer concerns over the investment. The buyout loan amount will also be significantly less than buying a new car. Let’s look at what you should consider when deciding if a lease buyout is right for you.

Valuing Your Car

First and foremost, you should determine the value of your car. There are two main factors that you should consider:

Residual Value. Your car’s residual value is listed in your existing loan contract. The residual value of a car is based on your car’s expected depreciation over the life of your loan and is predetermined by the leasing company. This number is usually non-negotiable.
Market Value. The demand for your car will greatly affect the market value of your car. If it is a popular make and model, it will have a higher market value. Use websites such as Cars.com, Edmunds.com. Or Kelly Blue Book to determine the market value of your car.

When you are buying out your lease, you are bound to the residual value of the car. It is important to know what the market value is of your car to determine if it makes sense to purchase it. If the residual value of your car is $16,000, but the market value is $13,000, it would mean that you are paying $3,000 more than what your car is actually worth.

There is no rule on when exactly it is worthwhile to purchase your car, but if the residual value is within a few hundred dollars of the market value, it is probably a fair deal.

Additional Buyout Considerations

If you are happy with the residual value of your car, there are a few more factors to take into consideration.

Excessive mileage. Have you exceeded the mileage amount allotted in your lease agreement? If so, you will be subject to per-mile penalty fees that can vary from $.10 to $.30 per mile. If you were consistently driving several thousand miles per year over your limit, that can add up to several thousand dollars. If you choose to buy your vehicle, you will not have to pay these fees, so this money can instead be put towards your buyout.
Your car’s condition. Your car is subject to inspection when your lease period is up. You will be charged a fee if there is excessive damage, such as exterior dents and dings, interior tears and stains, or mechanical issues that the dealership considers beyond normal wear and tear.
Disposition Fee. The disposition fee covers all costs associated with reselling your car, and can be a few hundred dollars. This pays for the dealership to clean and detail the car, and make any necessary repairs before reselling.
Cost of maintenance. If you want to keep your car, it is important to do additional research to determine what your cost of maintenance will be in the next several years. If there are several expensive maintenance costs that will pop up, you will need to compare this cost with the savings from the other fees.

How to Buyout Your Lease

You’ve run the numbers and you think that buying out your lease makes the most sense and is your best option. What next?

Call your existing leasing company.

Get a comprehensive list of all costs associated with the buyout. Make sure this number includes sales tax, which can be a significant amount.

Shop around for rates.

Go online and look around at different rates. Not all lenders offer buyout loans, so you will have less options than when you originally financed your loan. It is also important to note that lease buyout loans are used car loans, which tend to have higher interest rates than new car loans. At Auto Approve, we work with lenders that do offer lease buyout loans, and can help you get the best rate available.

Your rates will be based on prevailing interest rates in the industry as well as on your personal finances, just as your initial loan. Make sure you have all necessary documents for your loan application:

Photo ID
Your Vehicle’s Information
Proof of Income and Financial History
Proof of Residence
Proof of Insurance

Having all necessary documents ready to go will help to streamline this process. Be sure to apply to all lenders within a fourteen day period. The credit bureaus allow all credit inquiries in a fourteen day period to count as one credit hit, so it will not adversely affect your credit score more than necessary.

When the lenders respond with their offers, compare the rates and terms. At AutoApprove, we can help you shop around to compare rates and terms to find the best option for your buyout loan.

Call Your Insurance Company

You will need to notify your insurance company of your new lender. This is also a good chance for you to review your insurance needs. On a leased vehicle, you are typically required to have high levels of liability coverage. You may decide that you do not need such a high level of coverage based on where you live or how much you drive, and you can opt for lower payments by reducing this coverage.

Make Sure All of Your Paperwork Is In Order

Talk to your lender and be sure to visit your state’s motor vehicle department to transfer the title and make sure all of your paperwork is in order. Your lender should be able to guide you specifically through what steps you need to take. And when you work with Auto Approve, we handle the DMV paperwork for you!

Ready to buy out your lease? Auto Approve can help

If you have considered all of your end of lease options and determined a lease buyout is the right option for you, we're here to help you with the next steps so you can keep your car, hassle-free.

At Auto Approve, we never mark up rates on car buyout loans or vehicle refinancing, so you know you're always getting your best possible rate. We pass all of the savings right on to you. We know car financing can be complicated and stressful, but we're here to streamline the process and save you as much money as possible.

Check out our auto lease purchase options and get started today!

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The 3 Best American Road Trips To Take This Year

Thinking about a road trip this year, but not sure which of the many amazing classic American road trips to take? You’re in the right place.While it’s hard to say that any one singular road trip is the best most beautiful roast trip to take – the United States has tons of interesting terrain, stunning vistas, and cultural landmarks from sea to shining sea – we’ve compiled three favorites that you can start planning right now.There are many more great options. Traveling Route 66 or visiting the Grand Canyon are evergreen classics. But these uniquely excellent drives were selected for weather, accessibility, and combination of natural wonders and modern conveniences. American Road Trips to Take In 2025What’s the best road trip to take for you? Only you can decide that, but it’ll depend on who you’re driving with (or if you’re flying solo!), where you’re starting your journey, and how long you want to spend in the day, per car and overall. 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Useful Skills You Can Learn While Driving

Have you ever considered learning while you drive? Whether you want to make better use of a daily commute or are heading out on a long solo drive, if you want to learn a skill from behind the wheel, we have some ideas for you!The key to learning on the road is to choose something you can do with just audio media – and to make sure nothing you do is so engrossing that you lose focus. It’s important that you still drive safely, no matter what. Essentially, we recommend skills you can learn from an audiobook or podcast and repetitive activities that allow you to build up your knowledge or talents over time.Let’s take a look.Things You Can Learn While DrivingThe average American driver spends, according to a AAA survey, just over an hour in their car every single day. Why not find ways to be productive with all that time? Here are some things you can pick up while you drive.1. Learn a LanguageThis is probably the most popular skill to tackle in the car. 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Whatever you choose, expanding your worldview and learning something new is always a good choice!And Those Are Seven Useful Ways To Spend Your Driving TimeMost of us spend quite a bit of time behind the wheel, trying to make something of that time is an admirable pursuit! From language learning to amateur opera performance, there’s always something interesting to do to pass the time and challenge your mind.But refinancing your vehicle doesn’t take any time at all.You could be paying less monthly on your auto loan, putting more cash back in your pocket for the things that matter most. Find out how much you could save with just a few clicks and no commitment. Get your free quote now.

5 Things Every Car Owner Should Know

Let’s talk about five of the essential things every car owner should know.There are tons of skills you come by naturally as you start driving. Some things you learn for your drivers license exam, some skills you pick up as you start driving. But there are a few things not everyone knows how to do that can make you a better car owner and help you feel more confident on the road.These are some of the top skills you need to take time to learn once you own a car. Let’s take a closer look.Essential Skills for Drivers and Car OwnersTake a peek at the list. Do you know how to do all of these things? Most people will have learned at least some of these skills naturally, but taking time to really master them can help you drive safer and keep your car in great condition longer.1. How to Check and Change a TireIt’s important to get to know your tires, and recognize the right tire for your vehicle. 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How to Deep Clean Your Car YourselfWhile automatic car washes are handy and typically fairly affordable, deep cleaning and detailing your car can get expensive and time consuming. Knowing how to keep your car clean and how to handle stains and wear and tear on the inside and outside can improve your driving experience. After all, according to AAA, American drivers spent an average of 60.2 minutes behind the wheel every day as of 2022. Making that space clean and comfortable can help that hour of driving feel less stressful.Plus, deep cleaning your car yourself can save you money, and some people find it meditative!Speaking of saving money…Here’s one more thing every car owner should know how to do: lower their car payment quickly and hassle-free with Auto Approve!Get a free quote to see how much you could save.3. How to Read A Paper MapOnce a ubiquitous skill, knowing how to read a paper map is less and less common with the rise of GPS and digital map apps for the phone and in-car systems. However, it’s important that drivers of all ages master this skill and keep it sharp to be safe. You never know when you could lose service or battery power. Having a map in your glovebox and knowing how to read can help save headaches should you land in a tough spot. The last thing you want in the case of a breakdown is to add not knowing where you are to an already stressful situation.And reading a map isn’t all – all drivers should have on hand and know how to read their vehicle’s manual. 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Once you choose your refinance, Auto Approve does the paperwork, making the process quick and easy!Get your free quote to see how much you could save today.

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What is a Car Lease Buyout?