If you are currently leasing a car you have some options to consider instead of just giving it back to the dealership. While some brands have made the lease buyout process more difficult than it needs to be, with some planning you could put yourself in a more advantageous position.
A recent news story from a local ABC affiliate entitled “Don’t Waste Your Money, Buying Leased Cars” takes a somewhat sensationalist angle on why buying out your leased car is a recipe for consumers getting ripped off. The story highlights someone who wanted to buy out their Honda lease only to go to the dealer and find out that the price was much higher than they expected.
From the story -
“Taria Wiley loves the 2019 Holda Civic that she leased three years ago, so she decided to purchase it when the lease came up, especially since she was originally offered a great buyout of just $15,567.
“It was stated in clear words, no way around it, that was clear,” Wiley said.
But when she sat down with the dealer, she learned it would not cost $19,834 to buy the vehicle. Wiley said the salesman’s explanation made no sense.
“They said, ‘Since you are financing it, we have to buy the car from Honda, so they are charging us a fee, so we have to charge you a fee,’” Wiley explained. The dealer would not provide a comment.
This is happening more and more these days, according to the car-buying website iseecars.com. Dealers can get a lot more money reselling your lease to someone else, so they don’t really have an incentive for you to buy it at the price they agreed to long ago.”
The story concludes by saying that Ms. Wiley eventually got the dealer to agree to the original buyout price of $15,567 which ended up being a pretty good deal for her and not a “waste of money” considering that a typical 2019 Civic EX would have a retail price ranging from $20,000 - $24,000.
The takeaway from this story is not that buying your leased car is a bad financial move, it’s that you need to do your homework and have an understanding of how the process works. The first thing consumers need to be aware of is that the dealer does not set the buyout price, that is established on your lease contract by the leasing company. Therefore, anyone looking to purchase their own lease needs to call the finance company on their statement and get a “buyout.”
The next thing you should do when you speak to the leasing company is ask if they allow for direct buyouts and third-party buyouts. A direct buyout is when the lessee can pay for the car and buy it directly from the leasing company without getting a dealer involved. A third-party buyout would allow you to essentially “sell” your leased car to another retailer like Carvana, Vroom or CarMax. Several automakers have put a stop to third-party buyouts because they want to protect their dealer network.
If the leasing company allows for a direct buyout, this is an opportunity to secure your own financing via a local bank, credit union or online lender and do the transaction with the leasing company so you can avoid the dealer fees and games. Though be aware that you may be responsible for handling your own registration and sales tax.
Unfortunately, I’ve seen more and more cases where the finance companies will force the consumer to facilitate the buyout through a dealer instead of dealing directly with the lessee. As in the Honda case above, this puts the dealers in a position where they can try to extract as much cash as possible from the person trying to buy out their lease. There are instances where the dealer says they “have to certify the car in order to re-sell it” or that the car requires “reconditioning” and all of these are excuses to charge a several thousand dollar premium over the established buyout price.
If you have to go through a dealer to do your buyout, shop it around. Any dealer of that brand can handle this transaction. I’ve spoken with several consumers who said their local store wanted to charge all kinds of fees, but a different dealer in the same region would only add the local sales tax and a few hundred bucks for registration and paperwork fees.
Since the used car market is so bonkers, buying out your leased car especially as a “hold me over” vehicle could be a wise move as you are essentially buying a used car that you took care of, usually well under market price. However, you will want to start this buyout process several months before the conclusion of your lease and figure out which buyout method will work best.