Lease Buyout Loan: How to Get a Loan to Buyout Your Auto Lease

Given the steep cost of buying a car, leasing a car is a necessity for many. One of the upsides of leasing, though is that you always have the option of buying out the lease on your car down the road.

Buying out your lease can be a prudent move, depending on your circumstances and how much you like your car.

Procuring the funds for a lease buyout can be difficult, though, especially for noncitizens and visa holders who are often considered high-risk borrowers and are denied loans. However, there are loan options available for immigrants. This article discusses the ins and outs of car lease buyouts, and how you can qualify for a buyout loan.

What is a Car Lease Buyout?

A car lease buyout is the process of purchasing a car that you are currently leasing. This is often done once the lease expires, but you can also do an early-buyout, which involves purchasing the car during your lease.

Difference Between a Lease-end and an Early Buyout

People typically opt for a lease-end buyout rather than an early buyout because there are multiple disadvantages to an early buyout. An early-buyout will likely incur a fee for terminating the lease, and car payments may even go up from your initial lease. Also, you will face new taxes upon buying out your car, because you have to change the sales tax, license, and registration.

6 Reasons Why You SHOULD Buyout Your Car Lease

If It’s the Right Car for You

If you are very satisfied with your lease vehicle and do not anticipate leasing or buying a different car, buying out the car is a sensible choice. Furthermore, immigrants can have trouble getting leases approved, so securing your current car will let you avoid the hassle of constantly having to find a new lease.

If the Price is Right

While purchasing a car often means an increase in car payments, this isn’t always the case. Discuss the terms of a potential buyout with the dealer, and see how the price compares to the cost of your lease. Even if the price does go up, buying out may be worthwhile if you are satisfied enough with the car. Finding financing for the buyout will likely be simpler for immigrants if they work with a dealer who has already approved them, as well.

If You Took Good Care of It

If the car is in poor condition, then the costs of a buyout are somewhat difficult to justify, especially if you can get a car in better condition by leasing. However, if you have taken good care of your car, and you are comfortable with and attached to the car, buying out makes sense.

To Avoid Return Fees

Returning a leased car can incur substantial fees, especially if you have gone over your mileage limit, or if the car is damaged. In such a situation, the added costs of buying out the car will be offset by the fees you would otherwise be charged.

If It’s a Good Match for Your Lifestyle

People often switch cars because they have different needs: parents look for more seating and safety, bachelors might want luxury and the cost-conscience look for reliability. If the vehicle you have leased still suits your lifestyle, then buying it may be preferable to continually lease.

If It’s Valued Higher than Its Projected Value

Upon leasing a car, you and the dealer estimate the value of the vehicle at that time, along with the value once the lease has ended. If you find out that this estimate undervalued the car, buying out the car at the underestimated value is financially prudent. Immigrants looking to build credit and a financial profile can benefit in particular from accruing valuable assets like a car.

5 Reasons Why You SHOULDN’T Buyout Your Car Lease

If Your Lifestyle or Needs Have Changed

There are numerous reasons that your leased car can be no longer ideal for your circumstances. You may have moved and now live in a different climate, had kids, gotten a new job that requires a longer commute, or had any other number of life changes. In these situations, leasing or buying a new car is likely preferable.

If You Can’t Afford the Payments

As stated above, car payments will likely increase upon buying out your car. Immigrants, in particular, will have a harder time finding financing for a buyout than regular citizens. You should anticipate this, and find out what the payments would be on your buyout. If you cannot afford the increased car payments, you should avoid buying out your car.

If The Value is Lower Than Its Projection

While it is possible that the valuation of the car at the beginning of your lease is too low, this estimation may also be too high. Research comparable sales prices for a used version of your car, and if the estimate you made with your dealer is too high, then buying out the car is not a financially sensible move.

If the APR is Too High

The initial APR of your vehicle was based on the mileage and condition of the car at the time of the lease. The new APR that you negotiate may be less favorable, especially if the car’s condition has declined. This, combined with the added costs of licensing and registration, can make a buyout financially unfeasible. Also, immigrants are often without a credit history or cosigner, which means they get even higher APR than citizens would face.

If It Has Been Damaged

If the car has incurred substantial damage, then, as a leaseholder, you would not take the loss for the decreased value of the vehicle. If you buy out the car, you would be on the hook for this loss of value.

The Buyout Process Timeline

First, consider whether an early-buyout is worth the added cost of terminating the lease, or whether you can wait until the lease expires. From there, you should establish the value of the vehicle by researching on directories like Kelley Blue Book or Cars.com, and compare it to the value that was estimated at the beginning of the lease. That way, you can have the upper hand in negotiating a price with the dealer.

Finding financing is the next step, which can be done with a personal loan or an auto loan.

How to Get a Lease Buyout Loan

Immigrants and visa holders can have a very difficult time obtaining loans. Lenders penalize immigrants for lacking a credit history and a cosigner, along with the inherently temporary nature of visa status. However, there are lenders that offer loan services specifically to immigrant communities by building eligibility requirements that are inclusive of immigrants.

Getting a loan for a lease buyout is simple and straightforward. You start by completing an online application with details of your finances, employment, and education, along with details on the buyout and the amount that you need. Make sure that the amount that you ask for will be enough to cover the cost of the buyout. If your application meets the minimum qualifying requirements, then you will be offered a range of term lengths to choose from, along with an interest rate. If you agree to the terms, then you just sign a promissory note and you will receive the funds in your bank account within a day or two.

How to Use Your Loan to Buyout Your Lease

With the funds in hand, using your loan to buy out your lease is simple. You can reach out to the dealer and tender an offer, or wait until the lease is nearly ended and see if they offer you buyout terms. Try and talk the dealer into offering concessions, such as discounts, waivers, or purchasing incentives.

Conclusion

While buyouts can be pricey, they can also let you secure your ideal car, rather than having to surrender it and find a new lease. If you expect that your transportation needs will not change in the future and you love your current car, consider taking out a personal loan to cover the cost of a buyout.

Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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