How to Calculate a Lease Buyout

April 28th, 2021 by
Finance Paperwork with Glasses

If your car lease is nearing an end, you have two options: trade in your car for a new lease, or buy out your lease in order to own the vehicle. If you love your car and wouldn’t prefer any other similarly priced model, then you’ll want to know more about how to calculate a lease buyout. In this guide from the Cactus Jack's Auto finance center, we’ll answer common lease buyout questions from Mesa drivers to help you determine your next steps.

Buying Out Your Lease: Is it Worth It?

If you know how to calculate a car lease buyout, it’s easy to see how much a buyout will cost for the average Phoenix driver. First, take a look at your monthly leasing statement. You should see a Buyout Amount or Payoff Amount. This is approximately what you’d pay for a lease buyout, and it includes the residual value of your vehicle at the start of the lease, the amount you still owe on the lease, any any applicable fees. If your statement doesn’t include the buyout amount or you’d prefer to conduct your own research, here’s how:

  1. Find the vehicle’s residual value.
    Your vehicle’s estimated lease-end value was calculated at the start of the lease term, and you can find it in your lease contract.
  2. Determine your vehicle’s actual value.
    Depreciation and normal wear-and-tear since the start of your lease term may have reduced the vehicle’s value. However, your vehicle may not experience significant depreciation if you’ve driven it less than the average 12,000 miles per year. The Kelley Blue Book Value Your Trade tool makes it easy to assess the current market value of your car.
  3. Compare the residual value vs. the actual value.
    You can likely get a good deal on a lease buyout If the vehicle’s actual lease-end value is higher than the residual value listed in your lease contract. Even if it’s not, you may be able to negotiate with your dealer for a lower purchase price.
  4. Account for license and registration fees.
    Learning how to calculate a lease buyout means getting familiar with associated fees and taxes. Becoming the owner of your car means that certain ownership costs are transferred from the leasing company to you. You’ll need to add licensing, title transfer, and registration costs to your lease buyout amount. Learn more about buyout fees on the Arizona DMV site, and check for additional fees from your leasing company.
  5. Account for sales tax.
    Keep in mind that there is a local sales tax for buying out your vehicle. You can find this tax rate on your DMV site or the Arizona government website.

Lease-End Buyouts vs. Early Lease Buyouts

Should you buy out your lease at the end of the term, or wait until the lease term is up? Here are a few points to consider:

  • Lease-End Buyouts: It’s easier to negotiate buyout terms with your lender If you are at or near the end of your lease. They may offer you a better deal to keep the vehicle if they think you may be planning to sell it back to them.
  • Early Lease Buyout: If you choose to end your lease contract early, you’ll have a lot less flexibility when negotiating a buyout price. Many Surprise drivers choose early lease buyout due exceeded mileage limits, unusual wear-and-tear to the vehicle, or other broken lease restrictions, so lenders know they have more leverage.

Rely on Cactus Jack's Auto for More Auto Finance Tips

Now that you know how to calculate a car lease buyout, why not expand your auto finance knowledge even further? Learn more about where to get a car loan, how to finance a used car, and much more from our team of auto finance experts. Then, visit a Cactus Jack's Auto location near you in Glendale!

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