What goes into the buyout price
Your lease must say whether you can buy the car before the lease ends, and either the price or how it's figured. Early in the lease, the buyout price is usually:
- The residual value from your contract (the car's projected value at lease end),
- plus the part of the car's value you haven't paid for yet, which shrinks with each payment,
- plus any purchase option fee in your contract,
- plus sales tax in states that tax buyouts, and title and registration fees.
Your leasing company's written payoff quote gives the exact figure as of a date. See lease payoff vs. residual value for why the payoff is usually above the residual value.
Two kinds of buyout
| Buyout | What happens | What to watch |
|---|---|---|
| Buy and keep | You pay off the lease, with cash or a loan, and keep driving the car. | Loan rates, sales tax, and whether you'd pay less for a similar car elsewhere. |
| Buy and sell | You buy the car, then sell it to a dealer or private buyer. | Taxes and fees on the buyout, the time it takes to sell, and whether the sale price covers what you paid. |
When a buyout may be worth a look
- The car is worth more than the payoff. You may have equity, which a buyout (or a dealer sale) can turn into money.
- You're well over your miles, or the car has wear. Buying it means no extra-mile or wear charges at return.
- Your leasing company won't accept dealer payoffs. Then buying the car yourself may be the only way to sell it to someone else.
- You like the car and its buyout price compares well with what similar cars sell for.
Costs that are easy to miss
- Sales tax. Many states tax the buyout price; some count tax already paid on your lease payments. Check your state's rules.
- Selling twice. If you buy and then sell, you may pay title, registration, and tax costs that a direct dealer payoff would avoid.
- Payoff timing. Payoff quotes are good only through a date. Payments, interest, and fees can change the amount after that.
The Lease Exit Report estimates the net cost of a buyout next to every other option, including your state's sales tax, and gives your break-even sale price.