How to buy out lease

[ChisJo]

I leased a car last June. I have since decided that I actually want to purchase it and convert the lease to a loan. My current lease is a 5 year lease and I want to convert it to a 5 year loan instead. I know my payments would be slightly higher, and financially, I have no problems with that.

Does anyone know the process of doing the buy back early? Is it a pain in the ****? Typically, is there a large penalty for doing this? I've gone through my leasing papers and can't really find anything on this. Any advice?

 

[Mickey1Fan]

Speak to the leasing company. They will have the answers to all your questions.

 

[bankr63]

There would be a few fees involved. Most leasing companies won't charge a penalty per se, but they do have fees for ending the lease (about $500 if recall). You will also have new fees around the new loan and the bank will want to register a new lien against the ownership (purchased or leased, you don't really own the car until it is payed off).

Not sure what the advantage to the conversion would be. If it is because you want to have it fully paid off in 5 years, just start a savings account and send the extra dollars there so you have enough to exercise the buy-out at the end without arranging new financing. It will still be yours free and clear at the end of the period, and no real extra cost to you. Also compare bank loan rates against your lease rate. Bank loans are usually at a higher percentage than the subsidized dealer lease rates.

One of the best advantages to having a lease is that you have an out in another 4 years if you need it. Should the car turn out to be a lemon in the coming 4 years, or be involved in an accident, you have the option to walk away from it, and the car company gets to deal with the decreased value. If you have been saving as above, you also now have a tidy down payment for your next car.

I've leased a new vehicle every 3-4 years for the last 20+ years, a couple I have bought out at the end of the lease (usually for a 2nd vehicle for the family), but most have gone back because I'm always ready for something new. I have never actually ended a lease early however I have considered it; the costs I expressed above are from reading up on it at leasebusters.com

 

[ChisJo]

There would be a few fees involved. Most leasing companies won't charge a penalty per se, but they do have fees for ending the lease (about $500 if recall). You will also have new fees around the new loan and the bank will want to register a new lien against the ownership (purchased or leased, you don't really own the car until it is payed off).

Not sure what the advantage to the conversion would be. If it is because you want to have it fully paid off in 5 years, just start a savings account and send the extra dollars there so you have enough to exercise the buy-out at the end without arranging new financing. It will still be yours free and clear at the end of the period, and no real extra cost to you. Also compare bank loan rates against your lease rate. Bank loans are usually at a higher percentage than the subsidized dealer lease rates.

One of the best advantages to having a lease is that you have an out in another 4 years if you need it. Should the car turn out to be a lemon in the coming 4 years, or be involved in an accident, you have the option to walk away from it, and the car company gets to deal with the decreased value. If you have been saving as above, you also now have a tidy down payment for your next car.

I've leased a new vehicle every 3-4 years for the last 20+ years, a couple I have bought out at the end of the lease (usually for a 2nd vehicle for the family), but most have gone back because I'm always ready for something new. I have never actually ended a lease early however I have considered it; the costs I expressed above are from reading up on it at leasebusters.com

This was the information that I was looking for. Thanks for the advice!