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Finding a new car can be a stressful and lengthy process. This can be especially true if you’ve been leasing your car and you’ve gotten attached—it’s hard to imagine saying goodbye! If this sounds familiar, then an auto lease buyout may be the perfect option for you.

What is Auto Leasing?

Auto leasing is a form of financing for a vehicle, where you sign an agreement with a car dealership to borrow a car for a set amount of time and set mileage. You are “renting” the car from the dealership, and you’ll make monthly lease payments. The car is not officially yours, but you can drive it within the timeframe and mileage agreed upon with the car dealership.

An auto lease is different from an auto loan. With an auto loan, you borrow money from a lender to purchase your car. You’ll make monthly payments, but once your car is paid off, it’s officially yours. When you lease a car, you’ll still make monthly payments, but you will only own the car if you choose to buyout your lease at the end of its term.

Auto leases typically have terms between two and four years. Your credit score will be reviewed when deciding whether to approve you or not for a lease. Many people choose to go the route of leasing for their car, and it’s incredibly common for many to lease a new car once their previous lease ends.

What is an Auto Lease Buyout?

When leasing a car, you may be presented with the option to buyout your lease. If you choose this option, you’ll get to own your car outright! To complete an auto lease buyout, you will make a payment that covers the remainder of your lease. From here, you’ll receive the title and bill of sale and finalize the process by registering the car in your name with the Department of Motor Vehicles. Congratulations—you’re officially a car owner!

But what if you don’t have the funds to fully purchase the car from its lease? This is where an auto loan comes in. You can apply for an auto loan with a lender, and if approved, use those funds to finalize your lease buyout. You can still make a down payment towards your car, and any remaining funds you need can be covered through the auto loan if you’re approved.

Be sure to review your paperwork as you weigh your options and consider exploring a lease buyout. When you signed your lease, this buyout option, and any regulations or requirements that go along with it, will be spelled out.

Benefits of an Auto Lease Buyout

There are lots of options when it comes to purchasing and leasing cars, so it’s entirely normal to feel overwhelmed. Here are some signs that may point to an auto lease buyout being the right option for you:

• If your car's residual value is less than the market value: Car prices have continued to soar over the last few years. It’s likely that your car’s current value is lower than its initial contractual purchase price. To estimate your car’s current market value, consult tools like the Kelley Blue Book® or Edmunds.
• If you've exceeded your contracted mileage limit: When you enter an auto lease, you’ll be agreeing to a set amount of miles. You may need to pay a per-mile fee when your car’s lease ends if you’ve gone over that set amount. You can avoid this fee by buying out your lease.
• If your car has wear and tear: Whether it’s a scrape, scratch, or bump, you may need to pay for these damages depending on the terms of your lease agreement. If your car is running fine and these flaws don’t bother you, buying out your lease may be for you.
• If you've modified your car: Certain lease agreements may require you to reverse any modifications you’ve made to your vehicle. If you like your car the way it currently is and want to avoid additional expenses, moving ahead with a lease buyout could be the way to go.
• If you really like your car: There's a fair chance you're already in the car of your dreams! With the buyout option, it will officially become yours.
• If you have a friend or family member who really likes your car: Even if you have your eyes set on another car, buying out your lease could be a way to still accomplish that goal. You could sell the car to them, at a price you’re comfortable with, and then find your next ride. It’s a win-win for both of you.

Cons of an Auto Lease Buyout

When it comes to a lease buyout, the benefits certainly outweigh the drawbacks. However, everyone’s situation is unique. Consider some of the potential drawbacks of an auto lease buyout below before jumping right into the process:

• Your car will continue to depreciate as the years go on, making it worth less its initial cost when you started driving it. Be sure that you’re confident this will be your car for some time, as you won’t get the same return if you go to sell it later.
• When you buy out your lease, you’re locking into this car for the long term. If you haven’t imagined yourself driving in it for at least five years in the future, you may want to consider finding another vehicle.
• While an auto loan can be the piece you need to finalize a lease buyout, it's important to remember you'll still have a monthly payment to make for your car.

In addition to Auto Lease Buyouts, we’re proud to offer our members Auto Loans. Apply today and enjoy a low rate and flexible terms, allowing you to feel confident and secure in your next ride.

Auto Products with American Heritage

Here at American Heritage, we make it our goal to help you find your dream car! Whether through an Auto Loan or an Auto Lease Buyout, we have the tools you need to find your next ride and hit the open road. Click here to learn more about our auto product offerings.