Should You Buy Your Leased Vehicle?

Here are five times when you should say yes
Leasing a vehicle iscarBuying3_Featured very different from purchasing it. A lease is, in essence, a rental agreement between you and the leasing company. As with a rented apartment, you are responsible for its condition when the term is up. At that point, you must decide if you want to return the car to its owner or negotiate a deal to buy it outright.

If you stray from the limits defined in your lease agreement (returning the car in poor shape, going over mileage, etc.), you will be hit with extra charges and penalties, similar to not getting your security deposit back on a rented house. Otherwise, you can just hand over the keys and go on your way. Or like with a rent-to-own home, you can opt to buy it, should you want to go that route.

Here are five times when buying your leased car would make sense:

1. You went over on miles.
According to trusted online vehicle resource Autotrader.com, you can avoid those steep excess mileage penalties by purchasing your leased vehicle.

“The leasing company estimated what the car would be worth at the end of the lease, stating it as the residual value,” Autotrader.com states. “Estimating residual value includes setting a limit on the number of miles the car can be driven.” Usually that number is 12,000 per year, with a per-mile penalty for every extra mile driven, but again, that penalty is usually dodged if you decide to buy the car.

2. The car is in poor shape.
Similarly, if you haven’t been taking the best care of your leased car, you will be penalized. The little dings and scratches you brushed off as no big deal are a huge deal to your leasing company, and they will penalize you as such. You can avoid those additional charges if you buy the car.

3. You’ve kept your baby in pristine condition.
There is also the other side of the coin. While the leased vehicle has been in your possession you’ve done everything by the book — not a scratch on the exterior, not a stain on the interior — and you’ve had no maintenance issues; why wouldn’t you want to keep it?

“There is not another used car on the market that you can have more confidence in than the one you’ve been driving for the past 24 to 48 months,” Autotrader.com surmises. “If you still love this car as much at the end of the lease as you did on the day you picked it out, keeping it may be the smart move.”

4. The cost would be less than the market value.
The point of estimating a residual value is not just to help set mileage limits, but it’s also even more so to set the lease payment.

“In simple terms, the new-car sale price minus the residual value divided by the number of months in the lease equals the monthly payment,” Autotrader.com explains.

The website says that if the leasing company set the residual value too high, your monthly lease payments were lower than they should’ve been, but if the residual value was too low, you can often buy the car for less than what it’s worth when the lease is up. This is because these companies either resell their returned cars to a dealer or sell them at auction. Usually they can negotiate a price with you that is a more favorable outcome for all parties.

5. You can avoid car shopping all over again.
Two to three years ago, you spent a lot of time and energy picking out your leased vehicle. Avoid weeks of hassle by buying out your lease. It will still take a bit of research and bargaining, but it’s better than starting from scratch.

As you can see, there is a lot to think about in the month or two before your lease ends. Typically, your leasing company will contact you during that time to discern where you are in your decision-making process. With any luck, you’ll now have a better idea of how to respond when that time comes, and be sure to speak with us to get the best possible financing rates.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

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