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So a dealership offered to buy out your lease. Is that allowed? Yes, but not in all cases.
How and when a dealer can buy out your lease depends on your contract and the dealership’s policies. Some car dealers don’t allow third-party buyouts of their leased vehicles, but others do. When allowed, the buyout can happen mid-lease, or at lease-end. Depending on market conditions, a dealership buying out a lease could be a win-win for both parties.
To help you decide if this kind of lease buyout is the right move for you, learn how a buyout works and tips for negotiating a lease buyout with a car dealership.
When a dealership buys out a lease, it pays your leasing company the agreed-upon payoff amount listed in your lease agreement. Then, the dealer buying out the lease either sells the vehicle or keeps the car. To help you understand a lease buyout when a dealer is involved, here’s how it works in more detail.
First, check your leasing contract to be sure a dealership buyout is possible under the terms you signed. If so, the dealer that is interested in your car will confirm the payoff amount with your leasing company. A buyout amount includes the residual value of the vehicle, plus any remaining lease payments and fees.
Next, you’ll sign paperwork that terminates your lease and allows the title to transfer to the dealer. You may need to provide a photo ID and document the vehicle’s mileage during this process.
With the buyout amount confirmed and paperwork settled, the dealer transfers the money to the leasing company, finalizing the transaction.
If the current market value of the vehicle is greater than the lease payoff amount, the dealer may cut you a check for the positive equity. Or, they may offer to apply positive equity to a new vehicle sold through their dealership. It’s up to you what you’d like to do with the positive equity you may have.
Dealers are in the business of making money on cars. They often buy leased cars because they can sell them at a profit in the used car market, especially if the vehicle is worth more than the lease payoff amount. Current demand in the used-car market makes this more common, especially as some dealers are critically low on inventory. Buying out your lease gives them another vehicle they can sell.
A dealership buying out your lease could make good financial sense for you, too. A good offer from a dealer could save you time and hassle compared to conducting the buyout yourself with the leasing company. Plus, the dealership can help you get into a new car at the same time, streamlining the vehicle purchase process.
There are several important differences between a dealership buying out your lease and you buying it out yourself.
If you buy out the lease, then you pay the buyout amount and fees, plus the sales tax and the cost to register the vehicle in your name. You deal with the leasing company yourself, and the vehicle is yours to keep, sell, or trade, giving you greater flexibility and control over negotiations.
With a dealer lease buyout, the dealership pays the associated costs of the buyout. With some leasing companies, the cost for a third-party buyout could be higher than for a personal lease buyout. While it can be more convenient to let the dealership handle it, you’ll have less control over the price. You might find it better financially to buy out the lease yourself and then trade in the vehicle for a new one with the dealer.
If you’re not at the end of your lease term, you’ll need to do a lease payoff. The difference between a lease payoff vs. a buyout is whether you need to pay off the remaining portion of the lease in addition to the residual value and fees.
Just because a dealership offers to buy out your lease doesn’t make it the right move for you. Here’s what to consider first:
When it’s time to move on from your current lease, you have options. You could simply return the car and pay the end-of-lease fees, like a disposition fee and any mileage overages.
Or, you could buy out the lease, purchasing it for the agreed-upon residual value and keeping any positive equity for yourself. A third option is to let a car dealership buy out the lease and take ownership of the car, then put that money toward a new car.
RefiJet offers lease buyout loans that give you the flexibility to end your lease and move forward on your terms.
This depends on your lease agreement and whether it allows third-party lease buyouts. With some car brands, like Ford for example, that may not be an available option.
If the dealer buys out your lease, that effectively ends your lease agreement. They purchase the vehicle from the leasing company and pay the costs to close out the lease. Then the vehicle belongs to the dealer to sell, and you’re free to buy or lease a new car.
You’ll need to read the fine print of your lease. Look for the section about end-of-lease terms and see what your options are. If it’s not clear, call your leasing company and ask. They’ll let you know whether a third-party buyout is an option and what the costs will be.
Yes. When the value of the car is higher than the payoff amount, that’s positive equity, and it’s cash that can go directly into your pocket by selling the vehicle or applying the value toward a new car.
If the car is worth less than the payoff amount, it’s negative equity. If you buyout the lease, you’d be paying more than the car is worth.
Before rolling over your car loan, understand the benefits and drawbacks. Discover your options on a negative equity loan.
