What Is the Process of Buying Out a Leased Car?

Your lease is almost over and you’re facing a dilemma: do you return the car, or keep it? 

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Keeping the car through a lease buyout can be a very smart financial move. You get to keep the vehicle and also avoid excess mileage charges or fees for wear and tear. If you can’t afford to pay the total buyout amount up front, you can finance it with a lease buyout loan.

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Learn what the process is for buying out a leased car before you decide whether to buy it or turn it in. We’ll go over the process step-by-step so you know what to expect and whether it’s the right fit for you.

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Key takeaways

• A lease buyout means you purchase your leased vehicle instead of returning it when the lease expires. 
• The price of a lease buyout is the residual value (the predetermined price laid out in your lease agreement) plus any fees and taxes.
• It’s possible to do an early lease buyout, which is a lease buyout that takes place before the lease ends. There are often additional costs.
• To buy out your lease, you’ll find the residual value, compare it to your car’s current market value, and make a plan for financing the purchase.

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What does it mean to buy out a leased car?

A lease buyout is when you buy your leased car at (or near) the end of the lease term. Lease buyouts let you keep the vehicle by paying a predetermined price that is laid out in your lease contract.

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This purchase price is also called the residual value, because it’s the leasing company’s estimation of what the car would be worth at the end of the lease. 

If you want to buy out the lease but don’t have enough cash on hand for the full amount, you can finance the purchase with a lease buyout loan. 

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Lease-end buyout vs. Early lease buyout

The process of buying out a leased car may vary slightly depending on whether you’re doing a lease-end buyout or an early buyout. 

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A lease buyout typically happens at the end of your lease, when the term is over — hence the term “lease-end.” But sometimes, you can buy out a car lease early. An early lease buyout is when you purchase the car before the lease period is over. In addition to paying the residual value, there may be other costs or restrictions with an early buyout, depending on your lease agreement.

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Lease-end buyout

Early lease buyout

When it happens

When your lease term is over

Any time before the lease expires

What it costs

Residual value + sales tax

Residual value + remaining lease payments + early termination fees + sales tax

Who it’s best for

When you want to keep the car instead of returning it to the leasing company

When you want to exit the lease early

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The step-by-step auto lease buyout guide

Here’s the process of buying out a leased car, step by step:

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Review your lease agreement and locate your residual value

You’ll need to know the terms of your lease agreement and the residual value, which is the buyout price. Also check your contract for possible fees. Fees for a lease buyout might include purchase option fees, document or administrative fees, and title and registration fees.

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Check your car's current market value

Next, find out how much your car is worth. You can use online tools, such as Kelley Blue Book^®, to calculate the estimated value by providing the VIN or license plate number. You’ll also provide the car’s current mileage, condition, and needed repairs.

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Compare the buyout price to market value to determine if it's a good deal

If the car is worth more than the residual value, you’ve got positive lease equity. Purchasing the car at its stated price would be a great deal. 

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If the car is worth less than the residual value, you may want to think twice about whether you want to move forward with a buyout. You’ll have negative equity, meaning you’ll owe the leasing company more than the car is worth.

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Decide how you'll pay — cash or financing

When you’re ready to move forward, decide how you’ll cover the purchase price. You can pay cash if you have enough stashed away in savings. If not, a lease buyout loan is a common way to finance the purchase of a leased car.

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Apply for a lease buyout loan if needed

If you choose to finance a lease buyout loan, you’ll want to shop around for loan offers and fill out a formal application. Most lenders will require documents such as your driver’s license, proof of insurance, recent pay stubs, and Social Security number. 

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Complete the paperwork and title transfer

After your loan is approved, sign your loan paperwork. The funds will go to your leasing company to pay off the lease and any fees you may owe. Work with them to ensure the title is transferred over to you and update the registration with your state. Now the car is yours.

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Is buying out your lease the right move?

Now that you understand the process, consider whether a lease buyout is the right move for you. It can make sense if:

• The buyout price is less than the car’s market value. You’ll come out ahead by purchasing it for less than it’s worth.
• You’ve gone over the mileage limits set out in your lease. Purchasing the vehicle means you won’t have to pay fees for excess miles.
• The car has a lot of wear and tear. Avoid return fees by purchasing the vehicle instead.
• You love the make, model, and trim level of your car. A buyout will save you the hassle of car shopping all over again.

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There are also times when it may not make sense to do a lease buyout:

• The car is worth less than the buyout price. 
• You don’t plan to keep the car long. 
• The car needs significant repairs. 

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How to finance your lease buyout

Most drivers finance their lease buyout with a loan, rather than paying a lump sum in cash. If you’re considering a lease buyout loan, financing through the leasing company isn’t your only option. You may find better rates by shopping around for multiple loan offers, since auto loan rates vary so greatly from one lender to another. 

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RefiJet offers lease buyout resources and tools that help you find competitive rates on your next lease buyout, auto loan, or auto loan refinancing. While you can’t refinance a leased car, you could later refinance a lease buyout to take advantage of better loan offers.

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FAQs

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Below are some frequently asked questions about the auto lease buyout process. 

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What does it mean to buy out a leased car?

Buying out a leased car means you purchase it for yourself, by paying the leasing company the residual value of the vehicle. A lease buyout lets you keep the car instead of returning it at the end of the lease.

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What is residual value and how does it affect my lease buyout price?

The residual value is the estimated value of the vehicle at the end of the lease, and it’s laid out in your leasing contract up front. The lease buyout price is typically the residual value, plus any applicable fees and taxes. 

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What is the difference between a lease-end buyout and an early lease buyout?

A lease-end buyout is when you purchase the car at the end of the lease. An early lease buyout is when you buy the car before the lease is over.

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How long does the auto lease buyout process take?

The time it takes to complete the auto lease buyout process depends on a few factors, including whether you will be applying for financing for a lease buyout loan. If so, it can take a few days to a few weeks for the lender to review your application, verify your information, and approve the loan.

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What documents do I need to complete a lease buyout?

To complete the buyout of your lease, you’ll typically need to gather your lease agreement, a payoff quote from the leasing company, insurance ID card, driver’s license, and vehicle registration. If financing a buyout loan, you’ll also need documentation proving your income for the loan.

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How does RefiJet help me finance my auto lease buyout?

RefiJet can help you review customized financing options from multiple lenders at once to find the best loan for buying out your lease. We also offer expert tools and resources to help you on your financial journey.

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