Thanks to the current increasing market value of used cars, lessees could either get out of the lease they can’t afford, or even better they can earn some cash with the third-party buyout.
So, should I buy out my lease and sell it to another buyer? in this article we’ll show you why a lease buyout is favorable for you. Likewise, if you’re planning on selling it, this is a good time to do so.
The COVID-19 pandemic has reshaped everything and that includes the market for used cars. With that said, it has unprecedently affected the used car industry which was unseen for a number of years.
Today, car dealers are scrambling for used cars because of the used car shortage. Here’s another interesting piece of news. Used cars are increasing in current market value by at least 30% or more compared to last year.
Whether you want to get out of a lease contract early or you want to earn some cash using your lease buyout option, this article is for you. Continue reading and we’ll show how!
Why should you buy your leased car?
If you take a closer look at your lease contract, most likely you’ll find a clause that stipulates the vehicle’s purchase price at lease-end. This is also known as the leased vehicle’s buyout price.
In almost all cases, the buyout price is significantly lower than the car’s current market value but thanks to the recent surge in used car prices, it’s now more viable than ever to buy your leased car and sell it for a profit. Moreover, you can also keep the car and save some money.
Additionally, buying the car will save you from paying excess mileage, turn-in fees, and even unforeseen wear and tear. When you proceed with buying the leased car, make sure you comply with paying sales tax and or other state taxes in your area. It will be in your best interest if you try to understand tax implications before you sell your leased car.
On the other hand, you can talk to your local dealer about the rules when selling or buying a leased car.
How to know what your leased car is worth
The most important part of the whole process is to find out how much is the residual value of your leased car in the market. After all, you don’t want to overspend on a vehicle that’s not even worth as much as the buyout price.
To do this, you can use an online car valuation tool like Edmunds or Kelley Blue Book. All you need is the car’s make, model, year, and trim. With this information, the tool will generate an estimated value of the car.
For a more accurate estimate, you can also include the car’s mileage and current condition. These two factors will play a significant role in knowing your car’s residual value.
Once you have an idea of how much your car’s value is, the next step is to find out the buyout price.
What is a lease buyout?
The process of buying a leased car from a dealership is called a “lease buyout.” This usually happens when the lessee wants to keep the vehicle after their lease contract expires.
Most of the time, a lease buyout is an attractive option for people who have leased a vehicle for more than three years. That’s because the value of the car has depreciated significantly and it would be cheaper to buy the car outright than to return it and get a new car.
Moreover, this is also a good option for people who can’t afford the monthly payments of a new lease. In this case, they can buy the leased vehicle and sell it to offset the cost of the new car.
The process of buying a leased car is pretty straightforward. First, you need to find out the buyout price from your dealership or leasing company. Once you have the price, you can start negotiating with the dealer.
You can either pay the buyout price in cash or finance it through a loan. Keep in mind that the dealership will most likely try to get you to trade in your leased car for a new one.
If you’re not interested in their offer, make sure you’re firm and tell them that you’re only interested in the buyout option.
Once you’ve agreed on a price, the dealership will prepare the paperwork, and you can drive off with your new car.
Here’s a lease buyout calculator to help you determine the current market value of your leased vehicle.
What are the risks of buying a leased car?
Of course, there are always risks associated with any financial decision. When it comes to buying a leased car, the biggest risk is that you might not be able to sell it for a profit.
If the current market price of the car depreciates faster than expected, you might end up losing money on the deal. Additionally, if you can’t find a buyer who’s willing to pay the price you want, you might have to settle for less.
Another risk is that you might not be able to pay the buyout price in full. In this case, you might have to finance the purchase through a loan, which can add more debt to your plate.
Moreover, if you’re not careful with your finances, you might end up defaulting on the loan, which can damage your credit score.
Buying a leased car can be a great way to get a new car at a lower price. However, it’s important to do your research and understand all the risks involved before making any decisions. Otherwise, you’ll find yourself on the losing end.
If you’re not sure if buying a leased car is the right move for you, it’s always a good idea to speak with a financial advisor. They can help you understand all your options and make the best decision for your situation.
Ready to take the next step? Visit our car lease page to learn more about how you can get started.