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When an auto lease ends, you have 3 options. Option A is to end your leasing arrangement and purchase a new car or find an alternative mode of transport. Option B is to sign a new lease agreement for another vehicle. Option C is to purchase the car you’ve been leasing—which is known as a “lease buyout.” Your leasing agreement should stipulate the residual value, or estimated buyout price, of your vehicle. If you opt for a lease buyout, you’ll need to pay the residual value plus state taxes and DMV fees.
Depending on the vehicle, a lease buyout can cost thousands if not tens of thousands of dollars. A buyout is a good move if the vehicle is still in good condition and if the buyout price is lower than the vehicle’s market value.
A lease buyout loan, as the name suggests, is a loan that funds your lease buyout. Lease buyout loans can be obtained at the end of the lease or toward the end of the lease.
LendingTree is a marketplace where you can set your parameters and then receive a list of relevant loan providers. One of the perks of LendingTree is that you fill out one application and can then review multiple loan options.
Vast network of loan providers means competitive rates
Not directly a lender so rates and terms vary
Works with all types of credit
Lack of information about specific loan types and terms
MyAutoLoan is a lending marketplace that lets customers find the right loan solution for their auto purchasing or refinancing needs. The company has developed proprietary technology that can help them easily and effectively match lenders to borrowers based on their needs.
Simple and efficient pre-qualification process
No offerings for borrowers with credit score of less than 600
Receive funds in 24 hours
High minimum loan amount
Like standard car loans, most lease buyout loans are secured loans whereby the car is put up as collateral. If you have a strong credit score, some borrowers may be willing to offer you an unsecured lease buyout loan. If you can’t get approved for a lease buyout loan, an alternative option is an unsecured personal loan. Personal loans can be used for any purpose, although APRs are generally higher than for auto and buyout loans.
Before applying for a loan, you should first think carefully about whether a buyout is your best option. Read the terms of your leasing agreement carefully. Speak to your leasing company if any of the details are unclear. And compare your buyout price to the current market value of your car. (There are plenty of free online tools that can help give you a realistic estimate of your car’s value).
If you opt for a buyout, the next step is to compare lenders. Each lender offers different APRs, different terms, different loan amounts, and different levels of customer service. Therefore, it’s important to look at 3 to 5 lenders or use a loan comparison tool like LendingTree, CarsDirect, or MyAutoLoan to find the best lender for your needs.
Applying for a lease buyout loan is similar to applying for a car loan or any other loan. Your lender may ask for proof of the following:
Generally speaking, the rates and terms for lease buyout loans are similar to what you can find for auto loans. This is because lease buyout loans are almost the same thing as auto loans. With an auto loan, you’d make a down payment on a new vehicle and borrow the rest from the lender. With a lease buyout, the amount you pay to the leasing company during your leasing agreement is basically the same as a down payment.
Looking at the top auto lenders, you can expect to find the following:
We’ve already mentioned the importance of knowing your car’s value, and it’s worth emphasizing this point. It’s easy to get attached to your leased car, but don’t let emotion get in the way of the right decision.
Before going for a lease buyout, you should know your car’s buyout price and its current market value. The buyout price is the amount you would pay the leasing company to purchase the car, plus taxes and Department of Motor Vehicles fees. The market value is the amount a dealer would be willing to pay you for the vehicle. If the market value is below the buyout price, you’d probably be better off buying another second-hand car. But if the market value is equal to or greater than the buyout price, then a lease buyout is a good deal.
Your leasing agreement will have already stipulated the residual value of your vehicle. This is the estimated value of what your car will be worth when your leasing agreement ends. If, at the end of your leasing agreement, you believe the residual value isn’t realistic, you may be able to negotiate your buyout price. Not every lender will agree to negotiate, but it doesn’t cost anything to ask.
There are plenty of free online valuation tools to get an estimate on your car in seconds. In most cases, all you need is the car’s number plate and mileage.
When comparing a lease buyout versus your other options, always remember to include fees and taxes in your calculations.
Each lender is different when it comes to loan amounts. Some lenders offer a max loan amount of $30,000, while others go as high as $100,000. Of course, the first thing to worry about when comparing lenders is the amount you need. Depending on your car, your lease buyout could cost you a few thousand dollars to tens of thousands of dollars. But unless you’ve been leasing a luxury car, it’s unlikely you’ll need more than 50 grand to make a buyout. All the top auto lenders should be able to offer you the right loan amount. Their offer might also depend on your financial credentials such as credit score, income, and debt-to-income ratio. Therefore, as you near the end of your lease, make sure to maintain a healthy credit score and have all your documentation in order.