Car ownership is as individual as you are with choices of leasing or purchasing. When leasing a car, you only pay for a portion of the car’s actual cost while acquiring a new or used car. So, if you are leasing a car, you only pay for that portion of the car that you have used over the years of your lease agreement.
How Does Auto Leasing Work?
Auto leasing has been growing in popularity and has its own set of considerations. In basic terms, a lease means that you have the vehicle for a fixed number of months. Consequently, you only pay for the use of the car during that period, the full depreciation of the car is not forced upon you. One of the benefits of leasing a car is the low out-of-pocket cost. Auto leasing requires little or no down payment and when you return the vehicle at the end of the term you pay end-of-lease costs and walk away.
If the vehicle is being used for business purposes, a lease may offer business tax advantages.
Many people choose to lease a new car, as it allows them to get a higher value car, while not being required to pay the whole price of the car. If you lease a car, you can easily trade that car for something else once the lease terms are up.
As part of the lease agreement, the resale value of your car is predicted and put in writing. If a buyout option was part of your lease agreement, you typically have the option to buy your leased vehicle at the end of your lease. The alternative is to return the car to the dealership. If the decline in the value of the car is much faster than predicted, it will have no effect on the lease agreement. This can be beneficial for you if you decide to purchase the car after the end of the lease.
What is an Auto Lease Buy-Out?
When your car lease is up, you may need to decide whether to return the car or do a lease buyout and purchase the vehicle. A lease buyout loan lets you buy the car you're already driving from the leasing company for a predetermined price. The decision that makes sense for you depends on your budget, the car’s price, and whether you really want the car.
Questions to consider when buying out your lease:
- Is the car worth more than the purchase-option price?
- Did you exceed your mileage limit?
- Does the car have excessive wear and tear?
- Can you afford the monthly payment on an auto loan?
- Do you love the car?
If you answered “Yes” to most of the above questions, it could make sense to buy out your lease. If you answered “No” to a few questions, it may not make sense to buy out the auto lease and you may decide to lease a new car. Don’t forget to compare buying a used car to your lease buyout price to see if you can get a better deal on a similar used vehicle elsewhere.
Payment Options for Auto Lease Buyouts
Choosing a lease buyout option may be expensive. When you get the option to buy a leased car the vehicle is typically just a few years old and its residual value can be pretty high.
While you can pay the lease buyout amount with cash, there are financing options should you need it. Some lenders that offer auto loans for new or used cars also offer loans you can use to buy out a lease.
Metro Credit Union in Omaha, NE
Are you wondering more about buying or leasing a car? Take Metro’s free 35-minute Save and Succeed course to learn more about these options. You’ll feel confident as you sign on the dotted line to receive the keys to your next set of wheels.