Should You Buy the Car You're Leasing?

Instead of rolling into a new lease, you could save money by buying the ride you already love

By Jon Linkov, Benjamin Preston

When their car leases end, many consumers simply choose to turn in the vehicle and lease another one from the same automaker. That’s easy, but it might make more sense to buy the vehicle from the leasing company at a precalculated price—known as a buyout or lease payoff—set at the beginning of most leases.

Why buy your vehicle at the end of its lease? With new-car prices over $48,000 and used-car prices averaging just over $25,000, buying the car could be cheaper than turning it in and leasing or buying something else. There are a few situations where doing this makes especially good sense.

• You like the vehicle enough to keep it, it’s reliable, and you’ve maintained it. It could even still have some of its factory warranty left, which is a bonus.

• You like the vehicle and have driven significantly fewer miles than your contract allows, which means you’ve already paid for those unused miles.

• You like the vehicle, but there’s a rip in the seat fabric or other interior or exterior cosmetic damage that needs to be repaired. Instead of fixing them or paying the dealer to fix them (as per most lease contracts) and then handing the car back in, you could buy the car and take care of the dings, dents, and other cosmetic repairs if and when you want to. 

• You want to buy out the lease and then sell the vehicle for a profit, essentially flipping it to a new owner.

How to Decide

You can expect the leasing company to reach out to discuss your options about three months before your lease ends. But if you initiate the process and contact them before that, you give yourself more time to get your research done and paperwork in order. The lessor’s contact information is on your original contract as well as your digital or paper monthly statements. Follow these steps to begin your decision-making process: 

Check your paperwork. Look through your leasing contract to find the buyout price. According to TrueCar, an online automotive marketplace and CR partner, almost all leases have a buyout clause that allows the consumer to buy the car. The rate of depreciation on each car is precalculated and baked into the contract, so the leasing company can’t change the buyout price based on current market conditions. 

Research your vehicle’s value. Get an estimate of what your vehicle is worth as you approach the end of your lease and compare it with the end-of-term value stated in your lease contract. You can get an estimate of what it’s worth in minutes on websites including Carvana and CarMax, for example, or you can go to an online marketplace such as Autotrader or Kelley Blue Book and check what dealers and private parties are asking for your car with the same model year, similar miles, and the same options.

Do the math. There are a number of costs that you will have to take into consideration:

• If you can’t pay for the car with cash, check with your bank or credit union on the total cost of a used-car loan. The current lessor may also offer you a competitive rate.

• Visit your state’s Department of Motor Vehicles website to determine registration costs, including any sales taxes you will owe.

• Check with your insurance company to see if your payment will change.

• Consider any additional fees such as a title transfer fee, which is paid to transfer the title to you, the new owner.

Contact the lessor. This final check lets you confirm the buyout price with the leasing company. Make sure to ask if there are any additional fees involved or, if you’re buying it before the lease ends, an early termination charge. 

“Make sure to check that you won’t be charged a disposition fee,” says Gabe Shenhar, associate director at Consumer Reports’ Auto Test Center. “This is typically a fee of a few hundred dollars for the dealership to clean, condition, and ready the vehicle for sale, which they won’t have to do if you buy out your lease.”

Keep in mind that turning in your car and buying or leasing a new one involves its own costs. Your insurance costs and taxes will likely be higher, and it may even cost more to register the new car than your off-lease purchased car. 

If you decide that it makes sense to buy out your leased vehicle and either have the cash or have arranged financing, then contact the leasing company and inform it of your plan. You can attempt to negotiate a better price than the one in the contract, but it’s unlikely to haggle with you. This is the time you want to confirm the final price, making sure you won’t be charged any additional fees. 

The leasing company will then walk you through the process, including where to send the check and what paperwork it will send you, along with answering any questions you may have. All that’s left is for you to update your insurance, register the car, and keep driving it.  

Buy It, Then Sell It

If the buyout price is lower than the market value, another option is to buy out your vehicle and sell it yourself for a profit or immediately trade it to another dealer as partial payment for a different car. This was a common practice during the used-car shortages of 2021-2023, although it’s less attractive now. If you’re considering it, there are a number of things to keep in mind.

First, the manufacturer might not allow third-party buyouts of leased vehicles. Basically, the new dealer will pay the buyout price directly instead of you, the lessee, and the car becomes a trade-in. This approach helps you lower the sales tax you pay on the buyout car (paid when registering it). In some states, it can also save you on the sales tax you pay on the new car. The value of the trade-in lowers the overall amount you’re paying, so you pay less sales tax. 

According to TrueCar, most states require buyers to pay sales tax when ownership is transferred from the leasing company. Paying sales tax can quickly eat up the potential profit between what you paid to buy the car and what you can sell it for.

If you choose to sell the car yourself, you’ll have other costs to consider. You might have to make payments on a loan while you wait for a buyer. You may need to negotiate and take a lower price than you expected, which cuts into your profit. If you drive the car while you wait to find a buyer, you’ll have to register it, insure it, fill it with gas, and maintain it, all while putting more miles on it and potentially lowering its value.

Consumer Reports is an independent, nonprofit organization that works side by side with consumers to create a fairer, safer, and healthier world. CR does not endorse products or services, and does not accept advertising. Copyright © 2024, Consumer Reports, Inc.