If you have been leasing for a while and have the opportunity to finance a car lease buyout loan at the end, should you do it? Should you get an auto loan to pay for it?
That’s the question our team has been tackling this week. Whether car lease buyouts make sense and whether using an auto loan is the right way to finance it.
Car Lease Buyouts
When you get towards the end of your lease term, you may be given the opportunity to buy your lease car or return it for another. Many lease contracts include the buyout clause, which is voluntary, to give you the opportunity to buy the car at the end.
For some, this is a way of keeping a car you have grown to like for longer. For others, it’s not an option, which is why this is an optional part of a lease.
Are Car Lease Buyout Loans a Good Idea?
Whether it’s a good idea to buy out your lease or not depends on the price the leasing company is asking. If it’s a reasonable price at, or less than, market value, it might be a good idea.
If it’s above market value, it usually isn’t a good idea.
We recommend checking the value of cars like your lease car to see whether you’re being offered a fair
deal or not. Make sure you compare make, model and exact trim. Include the exact colour if you can too as that can make a difference to the value.
If other cars are being sold at a similar price, it might be worth buying the car. If it’s above market price, it isn’t a good idea.
Also consider:
- The mileage of your lease car and whether you would pay excess mileage
- Whether you’ll be liable for reconditioning or excess wear and tear charges
- Whether you can afford an auto loan to cover the cost of the car
If you’re coming towards the end of your lease, you could wait until you have the car inspected for condition and mileage. The report will give you an accurate idea of what extra charges you may be liable for.
Financing a lease buyout
If you decide you want to buy your leased car, you have a couple of options. The leasing company may offer a car lease buyout loan to cover the cost. Or, you could use a standard auto loan. If you leased direct from a dealership, they may have finance options too.
Make sure to compare all your options for costs, interest rates and fees. An auto loan will usually be the simplest way to finance the car as they can be obtained independently of the leasing company so are more subject to market forces.
Check all of your options carefully, work out whether you can afford the repayments and go from there.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!