You've driven your leased car for three years at a good monthly price. You know you like it and you know it's in good condition. Does it make more sense to buy out your lease, or should you just lease a newer model and start over?

1.       Do some math.

First, compare the loan payments with your new lease payment. There is a purchase option with what the manufacturer has determined the car is worth at lease end. You pay (or finance) this price, plus a small fee of $300-600. Before you exercise this, check out the market value of your car. Go online and look for cars that are similar to yours in mileage and condition. Now you have a comparison for fair market value.

2.       Consider the financial options.

If your car is worth more than the purchase option price, this means you can buy it for a good value. If you like it and will happily drive it for at least a few more years, it makes sense. Remember, you'll also have to pay sales tax, so make that a factor.

If your car is worth LESS than the purchase option price, it's actually not a bad thing. It means you paid less over the course of the lease than you could have. However, it does mean that it doesn't make financial sense to buy out the lease.

3.       Consider the other options.

If the financial piece makes sense, think about the next few years. If you see yourself replacing it in only a few more years, you're probably better off leasing again. It also makes sense to think about what your family will need in a few years. Maybe you still need a big car now, but you won't in a few years when your kids are out of the house. Or maybe you're still childfree, but you may be starting a family in a few years. If you aren't sure what the long term may look like, another lease may be smart to avoid getting stuck (like friends of mine who bought a compact SUV, got pregnant with baby #2, and found out they were having baby #2 AND #3 and needed a bigger car).

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