Your Lease Is Up - Is It Worthwhile To Buy The Car?
When a car lease expires you’ll be responsible for visiting the dealer to drop off the car. Afterward, you’ll sign a few documents and then walk away from it forever. However, what if you want to purchase it outright following the lease expiration? Should you buy the car or is it better to search for something else in the market?
If you currently find yourself in this situation and are unsure what to do next, read on for some valuable tips that can help deliver the best results.
What Is The Residual Amount And Retail Price?
Before taking any further steps, the first thing that you need to assess is the original lease contract. For starters, it can help you identify the residual price or the buyout price of the vehicle.
If you’ve made online payments throughout the lease, you can find out more about the residual price by logging into the account on the dealer’s website or contacting the dealer directly about the residual price. Once you have the figure in hand, the next step is to appraise the vehicle. There are several useful ways to determine a car’s value based on several criteria through online vehicle valuation tools like Kelley Blue Book or Edmunds.
After inputting all of the relevant vehicle details, the results will display all sorts of valuable information including the market value along with the average retail and trade-in amount for your car. If you find that the buyout amount is below the average retail price given the mileage and vehicle condition, it may make sense to proceed with a purchase.
What Condition Is The Car In?
When you’re leasing a vehicle, you ordinarily won’t have to worry about the warranty given it’ll likely outlast the lease period. However, if the lease expires and you decide to buy, you may no longer be entitled to the same dealership perks and manufacturer’s warranty. In that case, it’s best to carefully evaluate the condition of the car.
Make sure to hire a professional mechanic to conduct a thorough check-up. If they tell you that the car isn’t in great shape or might require considerable repairs in the future, it’ll probably be better to walk away from any purchase deal.
Have You Gone Over The Mileage Limits?
Have you traveled more miles on your car than you were supposed to? Was the exterior or the interior of the vehicle accidentally damaged? If your answer is yes in both cases, it may actually make more sense for you to take a lease buyout.
The reason behind this is that the dealership may penalize you for the damage done if it’s beyond the scope of normal vehicle wear and tear. Nevertheless, if you do buy the car in the end, then you’d only have to pay the dealer’s price and nothing more.
However, before you make a buyout decision, ask your dealer about the penalty amount.
What Would Your New Monthly Payment Be, And Does It Fit Your Budget?
If you end up acquiring the vehicle but don’t make a sizable down payment, then you might have to pay more than your monthly lease cost. Therefore, you should always make these types of financial calculations way before making any decisions.
An online auto loan calculator is perfect for this purpose. Make sure to include all the relevant details to ensure you build as accurate a picture as possible. Please note that APR, which factors in all the costs of purchase including the interest rate, is the most important figure to input in any calculation.
After building an estimate of the total monthly cost if you decide to finance the purchase, make sure to tally the figure with your other monthly expenses. Does it fit your budget? If it does, then proceed with the purchase if it satisfies all the other relevant criteria. Still, if it’s going to stretch your monthly budget and possibly create problems if any loss of income arises, it may prove better to find a more affordable vehicle.
For individuals who aren’t interested in buying a car, leasing can be an attractive alternative. However, if you’ve fallen in love with the car and want to be an owner after the lease expires, a buyout might be ideal.
Before you make any final decision, ensure you’ve made all the calculations necessary to determine if a buyout purchase is worthwhile. Don’t forget to consider the residual value, warranty coverage, the car’s conditions, and other relevant factors that may sway the decision-making process.