Leasing a car is a great way to get into a brand-new model every few years. If you fall in love with your lease, you might decide to buy the car at the end of the lease period.
But if you’re preparing to purchase your vehicle at the end of your lease, know that there’s probably little room for negotiation. It’s often much harder to negotiate a car lease buyout than it is to negotiate the cost of a new or used vehicle.
However, that doesn’t mean it’s impossible to get a better deal on a lease buyout. In this article, we’ll share some strategies to help you potentially negotiate a car lease buyout with your lender.
Can You Negotiate the Price of a Lease Buyout?
You can negotiate the price of a lease buyout, but it’s not easy. At the beginning of your lease agreement, the lender has already calculated the residual value of the car (the value after the lease ends), and that amount usually never changes.
Car salespeople are lease experts and they know exactly how much a specific make and model is worth after it comes off the lease. If they negotiate the price down too much, they don’t make any money.
In addition, the automotive industry is still recovering from the global shortage of semiconductor chips that led to low new car inventory levels, high demand for used vehicles, and grossly inflated sticker prices.
Therefore, it’s really not in the dealership’s best interest to accept a lower buyout fee. If you are able to get a lower price, don’t expect to shave much money off the residual value.
When Can You Buy Out a Lease?
There are two times when you can buy out a car lease: At the end of the lease and while the lease is still active. Each option has its pros and cons. Here’s what you need to know about buying out your lease early vs. at the end of the lease period.
End-Of-Lease Buyout
A typical car lease with a buyout option happens at the end of the lease term. If you want to buy the car, you pay the residual value, which is determined at the start of your lease.
You can either purchase the car for the residual value in full or finance that amount with a loan. If the automotive market has changed significantly since your lease started, the dealer might be more willing to negotiate the end-of-lease purchase price.
Early Lease Buyout
If you decide that you absolutely love your leased car and you want to buy it before your termination date, consider an early buyout. This option has a few benefits. You’ll no longer have to make lease payments and you won’t be held to the mileage limits.
However, buying out a lease early can be expensive. You typically have the pay the remaining balance of your lease payments, plus penalty fees for breaking the lease early.
How to Negotiate a Leased Car Buyout
As your lease termination date approaches, you’ll need to decide what you want to do with the vehicle. If you want to buy out your contract instead of leasing or purchasing another car, you’ll want to start the negotiation process before the term ends. Here are a few tips for negotiating your lease car buyout.
Do Your Research
If you want to negotiate a car lease buyout, you need to do some research. First, you should review your contract to see if it’s even possible to make a deal with your lender or dealership, as not all financial institutions write a car lease that includes a negotiation option.
If your contract does allow for negotiation, look up your vehicle’s current market value. Then, compare that figure with your lease buyout price. If the car’s market value is less than the residual value, it’s probably worth negotiating a better purchase price with the dealership.
Compare Competitor Offers
When you lease a car, you don’t have to return it to the dealership where you got it. If you want to negotiate a car lease buyout, it’s a good idea to get multiple offers from different dealerships in the area.
If you know how much the competition is willing to pay, it could give you leverage when negotiating with your leasing company.
Contact Your Leasing Bank
You can always start negotiating a car lease buyout with your dealership. However, if you secured financing through a different company, that lender may not be the sole determiner of the lease buyout price.
If that’s the case, contact your lending company directly to see if they are willing to work with you.
Get Pre-approved for an Auto Loan
Having a pre-approval letter from an auto lender is another way to potentially entice the lease provider to give you a better deal.
Knowing that you have cash available to complete the lease buyout quickly and seamlessly is an advantage for your leasing company.
Make an Offer
Once you’ve done your research and gotten a pre-approval letter for your auto loan, it’s time to approach the subject of negotiation with your leasing agent. If you have a strong argument for why the finance manager should lower the buyout price, you may get closer to the price you’re hoping to pay.
Don’t forget to contact the lender well in advance of your vehicle’s lease turn-in date. When the dealership can count on making a sale, they might be more willing to work with you on price.
Finance & Insurance Editor
Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia, Reviews.com, Forbes, and Bankrate.
Source: www.caranddriver.com