Lease Vs Buy

Leasing a car typically results in lower payments. It's also flexible in the sense that at the end of a three-year lease, you can turn the car back in and get a newer one with similar payments without having to go through the process of valuing your trade or selling your vehicle and then buying a new one outright again.

What Happens When The Lease Ends

You have several options at the end of a car lease depending on your lease options.

The vehicle you leased will be checked for:

• • The number of miles you have driven

• • The interior and exterior of the vehicle

• • A determination on the wear and tear inflicted on the vehicle

• • The timing of your return, whether it\'s early or on time with the contract

• • A deduction based on the residual value of the vehicle

Depending on how well you adhere to the terms of your lease agreement, you may owe nothing further, or if you didn't adhere to the agreement, you may owe additional fees.

Residual value describes the future value of a good in terms of absolute value in monetary terms and it is sometimes abbreviated into a percentage of the initial price when the item was new. In effect, you only pay the \"value\" of the car that you use. You then get a return based on the value of the car that remains after use.

Buying Your Lease

What if you fell in love with your car over the course of your lease and you don't want to give it back? Don't worry, you have options! Rather than turn your car back in for a new one, you could go ahead and buy the car from the dealership at the end of your lease.

We call this a buyout. All it means is that you will now buy the car and go through the normal process of getting approved for a loan and buying the vehicle.

Considering a buyout of your trade? Here are some things you may want to consider before you do:

Price to Buy Is Less than Market Value
If the residual value is low, you can buy the car for less than it's worth at lease end. Leasing companies have to resell their returned cars either directly to a dealer or through an auction. Often they will negotiate a buyout price that's more favorable to you to avoid that hassle and expense.

Penalties
By the end of your term you may have accrued significant penalties. Driving over miles, excessive wear, and a collection of dings and dents can result in a hefty penalty. Depending on the remaining value of the vehicle vs your remaining penalty balance, it may be wise to simply buyout.

As you can see there are some serious considerations you may want to make before you decide on a buyout of your lease. If you love your car, do any of these considerations really matter to you? Maybe not!

Determining The Value of Your Car
Even without heavy penalties on your vehicle, it may still be worthwhile to go through with the buyout. Some vehicles hold value better than others. Get your vehicles value from one of any number of popular online valuation tools.