Transitioning from a Car Lease to a Purchase

Leasing can be a smart way to test out a car for a few years without buying it. A lease can give you all of the latest technology and some time to determine if you like the car enough to buy it.

If you want to buy it before the lease expires, read the terms of the lease agreement to see if an early buyout costs extra, typically charged in finance fees. It may be worthwhile to wait until the lease ends.

To make sure you’re getting a good deal, research the different ways the car is valued. The first is retail value, which is how much you’d pay to buy it from a dealer. The second is wholesale value, or how much the car would cost at auction. Pricing is available at various websites such as Kelley Blue Book and Edmunds. Be sure to compare the same make, model and mileage.

Compare these numbers with the residual value—that’s an estimate of the car’s value at the end of the lease and will be stated in the lease agreement. A purchase-option fee may be added. Your research will help you compare your car’s value to the residual value to see if it’s close to what you’ve estimated it to be.

Don’t contact the leasing company first if you’re thinking of buying. They’ll come to you, usually 90 days before the lease expires. If they already know you’re interested in buying, you lose an advantage when negotiating.

Start the negotiations by finding financing elsewhere, since that is where the leasing company is likely to start as a way to make more money off you. Check with your bank and other lenders for lease-buyout loans.

Some leasing companies may have a policy against negotiating a buyout price, but it doesn’t hurt to ask. Request that they waive the purchase-option fee and offer financing discounts and other incentives to buy.

Remember that you have some leverage when offering to buy a leased car. You can walk away and find another car, leaving the leasing company the work of finding another buyer for the car when they already have a ready and willing buyer in front of them. Remind them of this opportunity and how much higher their price is than what you’ve found elsewhere, and you hopefully can move them toward a deal.