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How To Negotiate A Car Lease Buyout

Most dealerships aren't too keen to share it, but the terms of your lease are often up for negotiation. If you take the time to research the vehicle you intend to drive, you can often haggle for much better monthly payments, lower fees, and better mileage restrictions. But what about the price to buy out the car completely? Your car lease buyout amount is one of the most important parts of your lease, and can be the deciding factor in taking full ownership of your vehicle.

What is a Car Lease Buyout?

A car lease buyout is the price set by the dealership that allows you to purchase your vehicle during or after the expiration of your lease terms. The number a buyout is set at is usually defined by its residual value. A vehicle's residual value is the amount the car will be worth once your lease is over, which is determined by several factors:

  • Previous Sales For That Specific Make And Model: Previous sales usually help define a car's value and are generally separated by make and model.
  • The Current Demand For That Vehicle: If your specific model happens to be in high demand for whatever reason, that will increase the residual value.
  • The Current Conditions Of the Vehicle Market: If the new and used car market is elevated due to external factors like supply chain disruptions, that can increase the final value of the vehicle.
  • The Age Of the Car: A car's age can be an indicator of the condition a vehicle is in, and therefore has a significant effect on its residual value.
  • The Mileage of the Car: While the age can help you determine the level of maintenance a car has received, its mileage can be an even more important factor. Older cars that have low mileage can often be in good condition, but higher mileage cars have almost always been the victim of significant wear-and-tear.
  • The Current Vehicle Condition: Whether a car is in Excellent, Good, Fair, or Poor condition can drastically affect its residual value.
  • The Car's Color: Some car colors, like silver, white, and black, often resell easier and at a higher price.
  • The Car's Brand: More reputable car brands hold their value longer and are easier to resell than lesser known brands.

Once your residual value is determined, dealerships will factor in fees like a car purchase fee and any remaining payments you have to make on the lease. All these numbers will combine to give you your car lease buyout amount, which you can use to take full ownership of your vehicle. You can use GoodCar's residual value calculator to determine your cars' value in advance.

How Does a Lease Buyout Work?

After your lease buyout amount has been determined, a lease buyout works by talking with your dealership and negotiating payment. If your lease is still active, and you have time left in your terms, you'll likely have to compensate the dealership for the remaining monthly payments. This in addition to the buyout amount can make the cost rather exorbitant, which leads many leasing a vehicle to take out a loan. Lease buyout loans are usually offered by banks or other lenders, and depending on your terms, can be a very cost-effective way to take ownership of a leased car.

If the buyout amount is too high, you can also just turn the leased car in. You'll pay any small fees leftover and be done; this does mean you'll be without a car, so you'll either need to start a new lease, find a new or used vehicle, or get another means of transportation. You can also trade-in your lease for another vehicle if the lender offers that option; this may involve some trade-in fees, and if there is time left on your lease you may also need to cover all remaining monthly payments.

What Should I Do During a Car Lease Buyout Negotiation?

Unfortunately, most car lease buyout numbers cannot be negotiated. This is especially true at the end of a lease, after all paperwork has been signed and you've reached the conclusion of your terms. The only chance you have to negotiate your buyout would be at the beginning of your lease before your terms have been finalized.

Your dealership or leasing company will estimate the vehicle's residual value and put a number up for the buyout cost; this is rarely subject to change, and unless you go through a bank or credit union, that number isn't likely to budge. The only thing you can do is to reject the terms completely and shop around, looking at other dealerships to see if they offer better buyout prices on that same vehicle.

Overall, negotiating a car lease buyout is difficult, or in most cases, impossible. Lenders have little reason to lower a buyout price due to high vehicle demand and low profitability. If the vehicle has a set residual value, offering a lower buyout amount would only cost them money.

Car Lease Buyout Negotiation Frequently Asked Questions

Is it Smart to Buyout a Leased Car?

Whether it is smart to buyout a leased car depends on several factors:

  • The Buyout Price: If the buyout price that's been set is higher than your budget allows for, or you just believe the vehicle isn't worth the price after driving it for a couple of years, you may not want to purchase it. If the price seems fair, you have the money, and you enjoy driving the car, then buying out the lease could be your best option.
  • The Car's Current Market Value: If the car's current market value is lower than the buyout price, it would not be wise to buy the car out. You can try talking to your leasing company about the buyout price if this scenario happens, but again, negotiating a buyout price can be an uphill battle.
  • The Time Remaining On Your Lease: If there is significant time left on your lease, you will likely have to pay the remainder in full before you can take full ownership of the car. If your lease is close to concluding, a lease buyout could be a wise choice.
  • The Current Market Conditions: If the car market is elevated, and your terms were set when it wasn't as hot, a lease buyout is a very smart decision. Since this number was set earlier and isn't usually subject to change, the amount you'll have to pay is likely lower than the car's value.

Can You Negotiate the Residual Value at the End of a Lease?

While it can occasionally be possible to negotiate a residual value at the end of your lease terms, most residual values are predetermined by lenders and dealers. Certain market factors or changes in the vehicle demand may make negotiations a higher likelihood, but it usually isn't something you want to bet on. Make sure to check what residual value a dealership sets at the beginning of your lease terms, and prepare to pay the buyout amount in full if you decide you want to keep the vehicle for good.

How is Lease Buyout Amount Calculated?

Your lease buyout amount is usually calculated by combining the residual value of the car at the beginning of your lease with the total remaining payments and any associated fees. Your buyout amount will be listed on your lease terms and usually with your monthly statement. Other factors can affect the lease buyout amount, like the car's condition, the current vehicle market, and what the demand is for that particular make, model, and year.

Does a Lease Buyout Hurt Credit?

As long as you make your payments on-time and do not default on your lease, a lease buyout should have no effect on your credit. You may need to take out a loan to get the funds required to buyout your lease; this can have a negative impact on your credit if you fail to pay the loan in full. Make sure to make all payments regularly and completely to ensure your credit score remains high.

Is it Better to Buyout a Lease Early?

Usually, it isn't better to buy out a lease early due to the agreement made within your lease terms. Many dealerships or lenders require compensation for any remaining monthly payments in full, which can make an early lease buyout unnecessarily expensive. Unless you have a significant surplus in your budget, it's generally better to finish out your terms and make reasonable monthly payments.

Where Can I Research A Vehicle I Want to Lease?

The best way to negotiate better lease terms is to do extensive research on any vehicle you are considering for lease. Vehicle history reports are an efficient and comprehensive method of finding this information; these reports can provide you with essential details about a car you want to lease, including:

  • Title Records
  • Junk/Salvage Records
  • Insurer "Total Loss" Records
  • Pricing
  • Sales History
  • Problem Checks
  • Auto Specs
  • Location History
  • NHTSA Crash Test Ratings
  • NHTSA Recalls
  • Awards and Accolades
  • Manufacturer Information

For even more information, you can use invaluable tools like GoodCar Lease Calculator and GoodCar Loan calculators. GoodCar provides the best lease calculator and loan calculator on the market, allowing you to figure out your monthly payments before your lease terms are finalized. That way you can ensure you are getting the most financially sound plan possible and stay within your budget.

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