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- What to Look for When You're Considering a Car Lease
- Who Really Makes Money When You Lease a New Car or Truck?
- Does It Make Sense to Trade a Car in Every Year for a New Car?
- Can Excess Miles on a Lease Be Written Off as a Tax Write-Off?
Auto leases are typically set for between two and four years based on the type of car and the amount you put down. At the end of a lease, you can return the vehicle in accordance with the lease agreement or purchase the car. While it is tempting to have a brand new car every few years through leasing, you may find significant savings with a buyout.
The amount you save by buying out your lease varies based on the type of car you have. For example, if you are leasing a car that is in great demand, it may come with a high sale price even if it's a few years old. If you return your lease then try to buy the same car on the open market, you may end up spending much more than you would have if you'd just bought out the leased vehicle you were already driving. If you are leasing an unpopular model, the cost of a buyout will likely be higher than the same car purchased used elsewhere.
Any lease buyout comes with a purchase-option fee attached. This fee ranges from $300 to $600 based on the price of the car. It must be paid at the time of the buyout and adds to the overall cost of the process. When you factor in the purchase-option fee, the decision to buy out your own lease may not save as much money as you thought it would. For example, a car valued at $10,000 with a $9,500 buyout price may seem like a deal. Add a $600 buyout fee, however, and the transaction becomes a loss.
The price you are quoted for a lease buyout by the car dealer may not be the best deal you can get, but you may be able to negotiate a better deal. Dealers want to sell cars, and it is far easier for them to sell your leased car to you than it is to find a new buyer and start from scratch. Use this lnowledge to gain leverage in the negotiation process. Let the dealer make an offer first, then make a counteroffer that is lower by at least 10 percent to 15 percent. Unless the car is in serious demand, you will be able to save even more by engaging in a little back and forth.
There are cases in which it makes sense to buy out your lease even if you are not interested in keeping the car yourself. Some cars earn equity during the course of a lease. Equity builds when the car you lease becomes worth more than the buyout price set by the dealer. In this case, you may choose to sell the car to another person, buy out your lease in full and keep the difference between the two. If the profits are large enough, they can offset the entire cost of your lease and you can save thousands. According to Phillip Reed of Edmunds.com, the savings can be as high as $3,500. To know whether you have equity on your leased car, check the resale value in its current condition and compare that with the buyout price.
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