Are Car Lease Buyouts a Good Idea?

A woman signing her car lease buyout papers from a guy at the car shop. The car is behind her and ready for her to use.

Planning for a car lease buy-out may sound like a good idea. But take note that when finalizing a lease agreement, you will negotiate several different details with the salesperson. These details will include the upfront cost, the monthly payment, the lease length, and the predetermined lease-end buyout amount. The lease-end buyout is the amount you will need to pay to purchase the vehicle once your lease has finished – the residual value of the vehicle.

Do you have to wait until the end of the lease to buy the car?

The majority of leases will allow you to complete an early buyout of the vehicle. You do not have to wait until the end of your lease term to purchase the car. You need to review your lease documents to see if this is allowed under the terms and conditions of your lease.

Are lease-end or early car lease buyout a good idea?

Much like with any significant financial decision, many essential criteria must be analyzed to determine whether or not any buyout is a good move. In particular, you will want to look at: 

1. The true market value of the vehicle: The buyout amount and the vehicle’s true market value will not always match. This is because the residual value makes certain assumptions about depreciation, which is not an exact science. If the vehicle’s market value is higher than the amount you need to pay, you should consider completing the buyout. 

2. The vehicle’s performance: When it comes time to complete a buyout, you will most likely have been driving the vehicle for several months or years. As such, you will have good knowledge of the performance of the vehicle. If it has been reliable, it may be a good decision to consider buying it. If, however, you have been having ongoing trouble with the vehicle, you may want to consider looking at alternative options. 

3. Your finances: Your finances can change a lot over the course of a few years. If your situation changed and you may have an issue affording the buyout, you may want to look at more affordable options. The one thing you should also take note of is if the vehicle needs to be transported to another state. Check out our post on car transport reviews. By knowing things to avoid, you’ll be able to save your finances and your sanity at the same time.

Ultimately, only you will determine if any lease buyout is a good option for your situation. However, if everything lines up correctly, it can be a great way to purchase a reliable vehicle below market value.

Lease or Buy? The Decision is Yours

So, what’s the verdict? Have you decided whether leasing a car can work for you? Do you think the disadvantages are too big to ignore and the benefits are too few?

If you’re still on the fence about leasing a car, don’t worry. Most consumers need time to think about financial commitments, and car leasing is definitely that. Like a car loan, you will be spending the next year or so paying a monthly fee to drive your car. Plus, you also need to deal with the nitty-gritty of insurance and taxes.

The important thing is to make an informed choice. Some friends or family members can help you decide, if they’ve tried leasing at some point. You need referrals and testimonials to know which leasing companies are better than others. Ask around to find out which dealers are trustworthy and which deals seem legit.

As with anything that has to do with money, there are shady individuals who will try to take advantage of your business.

Just don’t forget the basics and you’ll be fine when selecting a leasing company and a dealer. Also, remember that you will need to find a good insurance company. Insurance or the price thereof is frequently the reason why people are hesitant about leasing vehicles.

One other factor for the hesitation is the price of a new car. If you’re not particularly concerned about driving the best models, you can easily find an older car for less than the price you’d pay for a newer car. Remember that vehicular value depreciates yearly and your car will definitely cost less after a few years. An older model is also attractive to others who are more concerned about price than features, so you can resell an old model faster because the price is lower.

You can even turn a profit if you take care of your car and if you choose a car that will always be in demand (a.k.a. family car).

But then, if driving luxury cars is your thing, go ahead and lease one. Some people go by the principle of personal value, which simply means their choices in life reflect their philosophy and worth as people. Meaning, if they drive the latest model cars, they will be giving out the message that they can afford such a car and are therefore considered successful.

Dressing for success, or getting a car that reeks of success, can be great for the career-minded individuals who have a status to maintain. By leasing, you can change cars every four years and drive the best ones.

The thing is, car leasing is not a good long-term strategy if your goal si to save a lot of money in ten years. There’s no equity in the leased car that you can use to purchase other stuff, like a house or another car. You can’t hand the car down to your children because you’ll have to turn it over to the leasing company after your lease is up (unless you buy it). These are some of the consequences of leasing. In the end, it all boils down to priority.

Leasing is for you if you’re a really careful driver. Most drivers of leased cars understand the consequences of driving roughly. Just because the car isn’t “yours”, don’t drive it like it doesn’t belong to you. In fact, you should be more careful because you’re technically borrowing the car from someone who will charge you a lot if you don’t take good care of your car.

If you’re careful with your car and understand the pros and cons of leasing, you’ll be fine. Expect many fees when you start your lease and when you end it.

Not everyone is able to lease a car, especially because the companies you will be dealing with are likely to run background checks. Credit problems in the past will nearly always surface when you’re negotiating the price of your lease. Your credit score is one way to prove your credibility to the dealer and the leasing company.

Thus, if you are able to lease a car because you’re one of the people who are credit-worthy enough to take on a lease, just try it for a few years.

Hopefully, we helped you make an educated decision about leasing a car. In the end, leasing is also a financial strategy you can use for the short term. This strategy is particularly helpful if you’ve always wanted to drive a particular car model.

Just remember the differences between renting and leasing (and buying brand new) and you’ll be fine.

Interstate car transport is a huge industry with some reputable and some not so reputable companies out there.
Let us help you find one of the good guys. Get a Free Quote