Can You Refinance a Leased Car or Only Buy It Out?

Sometimes a car that once fit perfectly into your budget turns out to be a financial strain. If you’re leasing your vehicle but wish you had a lower monthly payment, you might be curious: Can you refinance a leased car? Unfortunately, you cannot. Lease agreements are legal contracts, and you can’t change the terms.

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However, while you can’t renegotiate a lease, you can buy out your lease with a loan. Using a loan to pay off your lease could give you more flexibility, including the potential for a lower monthly payment. Learn how to refinance your leased car.

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Key takeaways

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• You can’t technically refinance a car lease, but you can use a car loan to buy out the lease and give yourself lower payments in the process.
• When you finance a lease buyout, you use a car loan to pay the dealership the lease buyout amount, plus any other fees.
• A lease buyout loan gives you ownership of the car, instead of you having to return it when the lease expires.

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Can you refinance a car lease?

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Refinancing means replacing your current financing with an all-new loan. Since you don’t own the leased vehicle, you can’t refinance it. Instead, you can buy out the lease and replace it with an auto loan, allowing you to choose new terms that better suit your needs.

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A lease buyout is the closest thing to refinancing a leased vehicle. Once you buyout the lease with a new loan, you’ll own the car and can make your own decisions about its financing. You can even apply for refinancing down the road if you want to change terms again.

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How a lease refinance (buyout) works

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You can “refinance” a lease through a lease buyout. Basically, that means you’ll take out a car loan that covers the cost of the buyout. You’ll use that loan to pay the lease buyout amount and any fees associated with purchasing the car. The lease is complete, and all you need to do is make your new loan payments.

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“Refinancing” a lease this way means you’ll own the car at the end. If you stick to the lease agreement, you’ll have to return the car to the dealer at lease-end. 

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It’s important to understand the difference between a lease payoff vs. a lease buyout. A lease payoff is when you end the lease early, making any remaining lease payments per your contract. There may be an early termination fee, too. A lease buyout is when you pay the leasing company to purchase the car at the end of the lease.

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Should you refinance a leased car?

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You can “refinance” a car lease with a buyout, but it’s not always the best option. Here are a few things to think about when deciding whether you should buy out your lease.

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• How much time is left on the lease agreement? 
• How much could you save by lowering your monthly payment?
• What will it cost to end the lease early? 
• Do you want to own this vehicle? 
• Does the car have higher-than-normal mileage?
• What’s the car worth, and how does it compare to the residual value stated in your lease agreement?

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When it makes sense

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Situations where buying out your lease could be a smart move:

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• Your vehicle is worth more than the buyout amount.
• Returning your vehicle could trigger mileage overage charges or wear-and-tear fees.
• You can afford to properly maintain the car without the free services bundled into your lease.
• You really like the car and don’t want to return it.

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When it doesn’t make sense

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In some cases, buying out the lease may not work financially, such as when:

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• The car is worth less than what it would cost to buy it.
• You’re content to return the car and get something else.
• The interest rate on the loan would make it too costly to borrow.
• The prepayment penalty or other buyout fees are too high to make it worth it.

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How to refinance a leased car

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You can “refinance” a car lease by shopping around for an auto loan and using it to cover the lease buyout cost.

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If you decide a buyout is the best option, here’s the process you’ll follow:

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• Check your lease agreement to find out the car’s residual value, which is the price to buy out the lease, plus whatever other charges you’ll owe.
• Next, apply for a car loan large enough to cover the lease buyout quote, plus any fees or penalties. 
• Compare lender offers to find the best terms.
• Calculate the cost of the auto loan, including your monthly payment and total interest costs, to see how it fits into your budget.
• Finalize your loan and complete the buyout paperwork with the dealer.

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Use an auto refinancing calculator to see how different interest rates and loan amounts could affect your monthly payment.

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Other ways to get out of your lease

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A lease buyout is a potential solution that can lower your monthly payments if you’d like to keep your current car. If you want out of your lease because it’s too expensive, but you’re not sure you want to purchase this particular car, a different tactic might be better. 

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You might be able to transfer your lease to someone else if your lease agreement allows it. You could also see about trading in the leased car to finance a less expensive one, but the penalties and fees can make this a pricey solution.

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FAQs

Can a car lease be refinanced?

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You can’t change the terms of a lease, but you can take out a loan to finance a lease buyout. It’s not technically a lease refinance, but it can help you get a lower car payment.

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How do I lower my car lease payment?

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If your lease payment is just too high, you have a few options. You could buy out the lease with an auto loan, making sure to choose terms that lower your monthly payment. You could also transfer the lease if your lease agreement allows it. 

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What are the differences between refinancing a lease and lease buyout loans?

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Actually, refinancing a lease and doing a lease buyout are essentially the same process. You use a car loan to pay off your current lease, often with a lower monthly payment. This gives you ownership of the car, too, so you don’t have to return it to the dealership.

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Can I refinance my lease with a different lender than the leasing company?

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Yes, you can. When you use an auto loan to buy out your lease, you can shop around and compare offers from many different lenders. You choose the lender that offers a loan with the best terms for your needs.

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What are my options if I can't refinance my car lease, but my payment is too high?

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If a lease buyout isn’t possible to lower your payments, you still have some options. You could trade in your lease to buy a cheaper car, transfer the lease to someone else, or swap the lease with someone else for one with a lower payment.

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