Should you buy your leased vehicle?

With the end of your car lease fast approaching, it’s time to make a decision. Should you buy out your vehicle’s lease or purchase another new or used vehicle? 

This question has become more relevant than ever before with today's low buyout prices written into lease agreements, where many consumers are starting to discover they can buy their leased vehicle for less than market value.

That being said, determining the buyout price versus market value of your leased vehicle is an important factor to consider in the decision-making process, so pull out your contract and let's get started here!

Step 1: Determine the buyout price of your vehicle

Since the buyout price is usually pre-determined, the purpose of examining your contract is to find the exact amount you'd be paying to purchase the vehicle at the end of your lease.

In many contracts, the "buyout price" is usually referred to as the purchase-option price and this typically gets pegged at residual value (the estimated depreciated value of your car at the end of the lease). Additionally, you'll want to look out for the purchase-option fee (if any) to figure out the total amount:

Purchase-Option Price (or Residual Value) + Purchase-Option Fee = Buyout Price
 

Step 2: Determine the market price of your vehicle

To figure this out, you'll need to determine both the retail value and wholesale value of your vehicle, so pull up your sleeves!

The retail value or actual value is basically the price you'd pay for the car today if you were to buy it straight from another dealer. Luckily there are a bunch of internet sites that make this research easy such as autotrader.ca, edmunds.com or canadianblackbook.com. Since pricing information can vary, visit several different sites to get an average and be sure to narrow it down by region. 

The wholesale value is essentially how much the dealer would pay for your vehicle today if they were to purchase it from a dealer auction. The estimates you'll find on sites like Auto Trader are pretty close to these estimated prices, so having a good idea of what this would be is empowering when it comes down to negotiation. 

Step 3: Compare the buyout price vs market price 

Now that you're armed with both the buyout price and market price, you can determine whether Buyout Price is less than Market Value (favorable) or greater than Market Value (unfavorable). 

If you find yourself in the latter scenario (buyout price is more than market price), it means the dealer or leasing company overestimated how much your car would be worth at the end of your lease, although it is possible that the estimated depreciated value is in fact accurate.

Nevertheless, having knowledge about the market price vs. buyout price will empower you to negotiate the buyout price down with the leasing company, should you choose pursue this option regardless of the fact.

And with that in mind for next time, always make sure you play close attention to the residual value assigned to your car before signing the lease, since you want to make sure you're being given a good purchase option price. Knowledge is power!

The bottom line here is you want to figure out whether you could buy your used vehicle in the condition it's in today for LESS MONEY than the buyout price.

If the answer is no (the buyout price is less money then what it would be worth at the dealer), then financially speaking it would be a good decision to buy out your leased car. You could even consider reselling it after the fact and pocketing the difference, although you'd want to consider whether the difference is enough to endure the hassle of selling it yourself.

If you decide to flip it shortly after the buyout, you'll want to do some more number crunching by comparing the buyout price versus private-party or trade-in value prices. 

Looking for low buyout auto leasing in the Toronto, ON area?

At Somerville Auto we're pleased to offer flexible car lease programs that are tailored to meet each  of our customer's needs and budget. For example, if you know that you'll be driving a lot of kilometers, we have the ability to structure a low buyout so that you don't have to absorb a massive buyout or loss when your automotive lease comes to term.

When it comes to leasing a new or used vehicle in the greater Toronto, ON area, look no further than Somerville Auto.