How to Buy Out Your Car Lease

A car lease buyout allows you to purchase the vehicle you have been driving at a predetermined price, rather than returning it at the end of your lease term. Many individuals consider a lease buyout if they are satisfied with their vehicle’s condition, or if its market value is more favorable than the buyout price. A buyout can also avoid potential end-of-lease charges, such as those for excess mileage or wear and tear.

Understanding Your Lease Agreement

Reviewing your original lease agreement is the initial step in considering a lease buyout. This document contains the terms and conditions for purchasing the vehicle, and locating key figures within it is important.

The residual value is the estimated wholesale value of the vehicle at the end of the lease period. This figure is established when you first sign the lease and is clearly stated in your contract.

The purchase option price, or buyout price, is typically the residual value plus any stated purchase option fee. Your lease agreement will also specify a purchase option fee, which is a charge for exercising your right to buy the car, commonly a few hundred dollars.

Some lease agreements may include an early buyout clause, allowing you to purchase the vehicle before the scheduled lease end date. This can be an option to avoid penalties for exceeding mileage limits or significant wear and tear.

Determining Your Total Buyout Cost

After understanding your lease terms, calculate the estimated total buyout cost. This involves more than just the purchase option price listed in your contract.

You must account for any remaining monthly payments if you are considering an early buyout. Sales tax is also a significant factor, applied to the purchase price of the vehicle, and the rate can vary by location. Some jurisdictions may have already applied sales tax to the full purchase price at the beginning of the lease, while others apply it at the time of buyout.

Additional costs include registration fees and other state-specific fees required to transfer ownership. Processing or administrative fees may also be charged by the dealership or leasing company. Review your lease agreement for these fees, as some might be negotiable or avoidable if you buy out directly from the lessor.

Contact your leasing company directly for the precise payoff amount. They will provide an official quote including accrued interest, outstanding charges, and adjustments based on the buyout date.

Financing Your Purchase

Once you know your total buyout cost, consider how to finance the purchase. There are two primary methods.

One option is to make a cash purchase, paying the entire buyout amount upfront from your savings or other liquid assets. This method avoids interest charges and eliminates monthly loan payments, resulting in the lowest overall cost of ownership. However, it requires a significant amount of available capital.

Alternatively, you can secure a new loan to finance the buyout. Apply for a car loan through various financial institutions, including banks, credit unions, or some dealerships.

Lenders will evaluate your creditworthiness, with your credit score being a major determinant of the interest rate you receive. For instance, in the first quarter of 2025, average new car loan interest rates ranged from approximately 5.18% for those with excellent credit scores (781-850) to around 15.81% for those with lower scores (300-500).

Loan terms, typically expressed in months, can range from 24 to 84 months or even longer. While a longer term can result in lower monthly payments, it generally leads to higher total interest paid over the life of the loan. Shop around and compare loan offers from multiple lenders to find the most favorable interest rates and terms.

Completing the Buyout Process

After determining your total buyout cost and arranging financing, complete the administrative and legal steps to transfer vehicle ownership. Begin by contacting your leasing company to formally express your intent to buy out the lease. They will guide you through their specific process and confirm the final payoff amount and payment instructions.

You will then need to submit the payment, which could involve a cashier’s check, a wire transfer, or a direct payment from your financing institution if you secured a loan. Title transfer legally moves ownership from the leasing company to your name. This requires specific paperwork, such as a vehicle registration/title application and an odometer statement.

You will usually need to visit your local Department of Motor Vehicles (DMV) or equivalent state agency to submit these documents, along with proof of insurance and payment for any remaining title and registration fees. Most states allow 10 to 30 days to complete this transfer after the buyout, and missing this deadline could result in late fees.