Once your lease is up, you can purchase the car for its balloon payment, which is the buyout price stated in your contract. Unless you can pay cash for the remaining balance, you'll have to finance instead. Technically, this requires a new finance, not a refinance, as you are purchasing the vehicle from the bank for the first time.
Lender Options
To finance your balloon payment, apply at any lender you'd like. Be sure to check around for competitive rates. Local banks, such as credits unions or nationally based lenders with a local presence, such as Chase or HSBC, offer local convenience; you can apply at a local branch. You may also apply to your leasing bank, or the manufacturer's bank. Compare rates against your leasing bank. Many leasing banks are not competitive for used car financing, which is the kind of loan you'll need to pursue. New car rates are lower than those offered for used cars.
Application Process
Call your leasing bank to confirm your car's balloon payment amount. It should be the same amount as stated in your lease contract. Gather your vehicle's information, including its year, make, model, level, identification number (found on your insurance card), mileage and options. Note options such as alloy wheels, a sunroof or other advanced features to increase the car's lending value. Expect to provide the lender with your address, employment information, Social Security number, address and date of birth for the credit application. Once your loan is approved, your lender will pay the leasing bank for the balloon payment amount.
Warning
The bank is the official owner of the leased vehicle, not you. Even though you have driven the vehicle since it was brand-new, your balloon payment serves as an initial purchase for a used car. Expect to pay taxes. Contact your state motor vehicle office to determine your tax rate so you can budget appropriately. Plan for title and registration fees, as well. Your tax is based on your balloon payment amount, so check ahead to determine if you will need to add the tax amount to your finance or come up with a down payment.
Other Options
If you're purchasing your vehicle for its balloon payment to avoid excess mileage or wear-and-tear fees, you have other options. If you don't want to keep the car, you can trade it in to a dealer toward another purchase or lease. This process is similar to trading a vehicle with a current loan. The dealer will pay the leasing bank for the car's balloon payment. If your vehicle's value is more than the balloon payment, you can use the profit toward your next purchase. If not, the negative balance is applied to your new purchase instead.
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