End of Car Lease Buy Options

A lease on a new car is your chance to drive a vehicle for several years and, at the end of the lease, decide whether to buy the car or walk away from the lease and start over. As you approach the end of your lease, it's important to consider all of your lease-end buying options so that you make the best decision based on your finances and the condition of your vehicle.

Cash Buyout

One of the simplest ways to buy a vehicle at the end of a lease is to pay the buyout price, which is noted in the original lease agreement you signed, and keep the car for yourself. Besides the predetermined buyout amount, you'll be liable for state and local sales tax on the buyout price, as well as an administrative fee. However, you won't pay if your vehicle is above the allotted mileage for the term of the lease, or for any excessive wear and tear.

Buy With Financing

Most auto leaseholders will allow you to buy your leased vehicle by financing the buyout price. This has most of the same advantages of a cash buyout, but you'll pay interest on the full price of the buyout, including taxes and fees. To reduce the cost of financing your buyout, you can make a down payment. If you made a security deposit with the leaseholder, you can apply it to your down payment, in addition to any savings you contribute yourself.

Third-Party Buyout

A third-party buyout is a more unusual option that select leaseholders allow. In this scenario, you make an arrangement with a third-party buyer who makes an offer for your leased vehicle. The buyer pays you, and you pay the leasing agency. This option removes the need for you to pay sales tax, since the third-party buyer pays the sales tax on the buyout. A third-party buyout requires permission from the leaseholder and a willing buyer who is patient enough to go through the buyout process with you.

Walking Away

Another option when it comes time for a lease buyout is to simply walk away from the lease and turn over the vehicle. If you've exceeded the allotted mileage or damaged the vehicle in any way, you can expect to pay an excessive mileage or wear-and-tear cost, which the leaseholder can deduct from your security deposit, if you made one. However, even with a minor penalty, turning in a lease is often the most cost-effective option. The buyout prices for most leases are set above what the depreciated value of the vehicle will be, which means it will cost less to turn in the vehicle and buy a similar used model at market value.