One of the advantages of leasing a car is being able to buy your leased car or just return it to the dealer and walk away. However you don’t want to jump into buying your lease vehicle without doing some research. There are many advantages to buying a vehicle that you have been leasing, but there can also be a downside. I will help you decide if you really want to buy your lease car by laying out the pros and cons to purchasing a leased car along with what you need to do to see if buying makes good dollars and sense.
If you are happy to move on and drop off your lease car at the dealership, but would much rather get a new car with all the latest bells and whistles rather than buy he car you have been driving for the last few years you are probably better off leasing a new car than buying your leased car. Just start the leasing process all over again and you are on your way, but if you are really happy with the car you have been leasing you might want to make it yours.
Does it Makes Sense to Buy Your Leased Car?
To determine if it makes good economic sense to buy your leased car you need to start with your lease residual value. This amount will be printed on your closed end lease contract and this is the purchase price if you want to buy the car. The first thing you want to do is figure out if the value of the leased vehicle is more or less than the residual value. For example; if the residual value is $14,000, but the vehicle the same year, make, model, mileage and condition are selling for $13,000 then buying your leased car does not make sense. On the other hand if it will cost you $17500 to go out and buy a comparably equipped car then it makes sense to buy.
A good way to determine the value of the leased car is to visit Edmunds and check the market value. They will give you trade value, private party price and retail price. Retail price it what you would probably pay at a car dealer to buy the same car and the best number to use, as a guide is the private party price. This is the amount that you pay a private party to buy the car is wasn’t your lease. This number is a bit more realistic and a better choice to determine market value.
So based on the example above if the private party value is $17500 and you are very happy with the car and it will continue to fill your needs it makes sense to buy your leased car.
Pros and Cons of Buying Leased Car
Pros Buying Out Lease
- You know whether you like the car or not and if it fills your needs.
- You know how the vehicle was maintained.
- You know the price of the car based on the residual value, no hassle and no haggling with sellers.
- You know what your insurance will cost.
- You are familiar with the MPG and the overall condition
Cons Buying Out Lease
- Warranty is likely expired which means you will want to buy an extended warranty or pay for repairs out of pocket.
- You may need tires and brakes soon, which is not an item covered by a warranty.
- If you finance your leased vehicle you may be paying as much per month as leasing a brand new car.
- Depending on where you live you will likely pay sales tax on the purchase again.
- The Interest rate will likely be higher than a new car lease or purchase special.
- You will purchase the vehicle through the dealership and they will grind you to purchase warranties and optional services.
There are pros and cons of buying your leased automobile are fairly balanced so it all comes down to how it works for you. Just remember, if you don’t buy your leased car you will need to lease a new car or buy something else unless you no longer need a car.
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