So, your car lease deal is nearing its end, but maybe you're enjoying your set of wheels so much that you're wondering whether it's possible to buy it?
Well, the good news is that you can buy a lease car, although it is still relatively uncommon in the leasing game, and you're going to have to pop the question to the leasing company. (No, not THAT question!)
In this post, we'll be telling you more about how it's done and whether or not it could be the right option for you. So, sit tight . . .
What is Leasing and How Does it work?
For the uninitiated . . .
Leasing is basically a long-term rental agreement whereby you make monthly payments to drive a car for a set amount of time (typically 2 to 3 years) before handing it straight back to the provider.
Can You Buy a Lease Car?
Again, yes.
Lease agreements aren't typically designed for you to buy and keep the vehicle at the end. Otherwise, there wouldn't be much to differentiate them from a HP (Hire Purchase) PCP finance company agreement. That being said, it's far from impossible.
A few months prior to when your lease term ends, the leasing company will usually contact you to explain the end-of-contract process and to schedule any inspections to check that your leased car meets fair wear and tear standards and doesn't have any excess mileage before you hand it back. So this is a good time to start thinking about whether you want to buy your leased car.
That's where a lease buyout can come in handy.
How Does a Lease Buyout Work?
As you might have already guessed, a lease buyout involves purchasing a lease vehicle either at or before the end of your contract. Your lease agreement might include a purchase price option which is set in stone when the lease is signed, or in a rare event your provider could offer one when asked. In any case, if you're considering a lease buyout, you're best confirming with the leaser first as to whether it's an option.
If permitted, you'd need to pay the amount of the vehicle's residual value (in other words, its projected end-of-lease value that's worked out at the beginning of the lease) in addition to any of the remaining lease payments on the contract, plus sales tax for the purchase and a disposition fee to the dealership (lot of fees, eh?).
You can end your lease early by buying the car before the end of the agreement, but you'll still have to pay what was due.
Unfortunately, the lease payments you've been making on the car don't go towards buying it, so you'll have to either summon up that cash separately by yourself, or secure some sort of financing that will cover the leased car buyout price.
Here's some reasons why you might want to go for a buyout . . .
1. You Like the Car and took Good Care of it
Probably the most obvious reason here.
You like and feel at home in your leased car. So why give it up, right? Plus, assuming you've took good care of it, stuck to the factory maintenance schedule and haven't been running it into the ground, it should still drive perfectly fine, warts and all.
2. You Want to Avoid the Hassle of Car Shopping
Although the internet can be a massive help these days in simplifying and dumbing down the car-buying process, car shopping online can still prove to be a very stressful experience.
So unless you're the sort of person who really enjoys the mental thrill of chasing down deals and scrolling through sites, it's probably easier for you to take the path of least resistance by buying the lease car that you're already been driving.
3. New and Used Car Prices are Higher
Having the funds at hand to buy a car outright can be tough even at the best of times, but even more so now that car manufacturers are struggling to keep up with new car demand. And the current electric car microchip shortage is yet another dent in the industry. That combined with the shortage caused by the war in Ukraine all contributes to a slightly bleak picture.
And because of the short supply of new cars, not as many used cars are making it to dealers' lots either, meaning that the supply of used cars is also rather thin.
4. You Can Buy the Car for Less Than it's Worth
It's obviously great to do this, as you'll be able to save money AND possibly be able to sell it on for a decent price further down the line.
When you first leased the car, you would have signed a lease contract specifying the vehicle's residual value. This is essentially a guess made by the leasing agent, and of course, guesses can often turn out to be wrong. Of course, if that's the case, then the stated residual value could well be less than the actual current market value for the vehicle.
The good news is that it's not the current market value but instead the residual value that you'll end up paying for the vehicle. The residual value is what you will pay (plus the usual fees) to buy your leased vehicle. Long story short: take advantage of it!
And the way the used car market is shaping up in 2021, there's a good chance you'd be able to sell it on fairly easily.
Can You Negotiate a Lease Buyback Price?
Not usually.
Depending on the leasing company, you probably won't be able to negotiate the price of your lease buyback. However, some leasing companies are willing to bargain with you in order to avoid the costs and time involved in reselling the car at auction or on the lot.
Can You Extend a Car Lease?
If for some reason a lease buyout isn't an option for you, then you could always request to extend your car lease for a little while longer. Companies will be less hesitant to consider this, and it's a simple case of you getting in touch.
If you want to extend your contract on a leased car for less than 6 months, then ask for an informal extension, or a formal extension if you want to extend for more than 6 months.
Ultimately though, whether you can renew or extend your lease contract is up to the leasing company. For some, it's no problem; but for others, not so much. It's just a case of ringing them up and telling them that you want to renew your contract. They will then recalculate your monthly costs based on how long you have had the car and how many miles you've done.
How Long Can I Renew My Lease Contract For?
Generally speaking, you could renew your contract for anything up to 12 months. However, the leasing company holds all the cards here, so it is mostly up to them. Some may have a maximum possible term whilst others can be flexible based on your personal circumstances.
Extending a car lease can be especially useful when you are waiting on a new car and need something to keep you going until it's delivered.
However, it's not going to let you hold onto a car forever. Only a lease buyout can do that.
Summary
We've hopefully answered any questions you may have had about being able to purchase your leased vehicle at the end of the lease agreement. And now that you know the basics of a lease buyout, we'll leave it up to you to decide whether it's something you'd be eager to do.
Of course, even if you're crazy about your lease vehicle, the decision to buy it should be made with the head and not just with the heart. Carefully consider your budget and the car's condition and cost before you make the lease company an offer.