Car leasing has staged a comeback over the last couple years.
If you leased a new car recently, or plan to, you’ll eventually reach the end of the agreement and face a decision: end the lease or purchase the vehicle. If you are in love with the car and want to keep it parked in your driveway instead of exchanging it for a newer model, be prepared to do some research. Remember, while it will feel like “your” car, it’s really still a used car, and you need to make sure you’ll get a good deal if you choose to buy it.
When you sign a lease, there is a “purchase option price” written into it somewhere. This price is set by the leasing company and represents the estimated residual value of the car at the end of the lease. That price plays a huge part in setting the monthly payments on a leased vehicle, which are calculated as the difference between the vehicle’s sticker price and its estimated value at the end of the lease. Is buying the car at lease-end a good deal?
When the lease is signed, the residual value and a potential purchase price is set, so if you choose to buy out your lease, you’ll need to compare that residual value to the actual market value of the vehicle.
To help determine how much the car is worth in your market, try the CarGurus used car listings. You’ll be able to easily compare the same make and model for sale in your area with similar mileage and condition.
If the residual value is in the ballpark of the actual retail value, you can feel good about the purchase.
In reality, though, there is a good chance the residual value will be high. This is where you have a choice: Return the car and get out of the lease or, if you are in love with the car, negotiate like mad to get the purchase price down. Remember, in the world of buying cars, even leased ones, everything is negotiable.
Have you ever leased a car and then bought it? Do you think you got a good deal?