If you want to convert a car lease to a purchase, you may be able to buy out the lease early to purchase the car. Car leases typically include a purchase clause that allows you to buy the car for a prearranged price at the end of the lease term. Buying the car before the term of the lease is up isn’t as common, but it is still usually an option. A lease contract may prohibit an early buyout during the first and last months of the lease. If you are still in the first few months, you can just wait until the prohibited period ends to buy the car. If you’re in the last few months of the lease, you’ll need to perform a standard buyout.
There are a couple things to keep in mind before you try to buy out your car before the term of the lease is up. The dealer may allow you to buy the car for the amount specified in the lease contract, but since you’re buying it early, it’s possible that the dealer wants to renegotiate the price. The prearranged amount is an estimate of how much the car will be worth at the end of the lease, but since the value may be different when you want to buy out your lease, the dealer may decide to renegotiate to get a better deal for themselves. The dealer could also want you to make the remaining payments on your lease.
The main reason to buy out a lease early is if you like the car and decide that you want to own it right away. You may also find that you have equity in the car if it has held its value well so far. If that’s the case, you could come out ahead by performing an early buyout.
One situation when you don’t need to perform an early buyout is when you’ve gone over your mileage allowance. Many people mistakenly believe that they need to buy out their leases early if they go over their mileage allowances so that they can avoid the per-mile penalty fees. You can still wait until the end of the lease term to buy it out and avoid those fees. Since you’ll own the car once you purchase it, you won’t be on the hook.
When you’re thinking about buying out a lease, it’s important to consider how you’re going to finance the purchase. If you can pay for the car outright in cash, that’s the least expensive option. Most buyers, however, will need to obtain financing. The dealer that is leasing you the car may also be able to offer you an auto loan, but it’s smart to shop around and see what your options are. You may find that you can get a lower annual percentage rate (APR) on an auto loan through a bank or a credit union. You have time, especially if you’re contemplating an early buyout, so it makes sense to compare different options and find the best deal.
Should you buy out your car lease early? That depends on how much you like the car and if you currently have any equity in it. Another situation when you may want to buy out your car lease is if you want to get out of it, but don’t want to pay stiff penalties. You can instead choose to buy the car and then immediately sell it, making at least a portion of your money back.