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Deciding Whether to Buy or Trade-in Your Leased Car? Consider These 4 Factors Before Making Your Decision.
At the end of a lease, we are given the option to buyout the car or give it back. To some, the buyout may be an attractive opportunity, while for others, it may be a tool for damage control.
The buyout price is determined by the leasing company at the beginning of your contract. If you are anticipating extra fees and penalties, for example, for damage to the vehicle or extra miles, buying the car at the end of your lease can help cut your losses. Or, on the other hand, if you have barely driven the car and it has low miles, you can turn the hidden value in your vehicle into real savings.
Here are some factors to consider before deciding to buy or trade-in your leased car:
– You are either way over or way under the allowed mileage. Most lease contracts are for three years and 36,000 miles. If you go over the allowed miles, you will owe money for each mile past the allowed mileage; if you are under, you could leave money on the table.
Instead of handing the dealer what can be thousands of dollars in mileage penalties and have nothing to show for it, consider buying the car. Also, buying the car will save you the disposition fee, which is typically around $450.
– You have a friend who wants to buy the car. If you buy the car from the dealership and then sell it privately, you will have to pay sales tax. Instead, see if the finance manager at a local dealership will do a “lease pass-through”. A “lease pass-through” matches leaseholders (you) with car shoppers (your friend) looking to take over a lease. This way you will not have to pay sales tax and both parties end up satisfied.
– The leasing company is willing to negotiate a lower buyout price. In some cases to avoid auction and shipping fees, the leasing company will call and offer you a lower buyout price than what is listed in your contract. If they do this, you should aim to pay as close to wholesale as possible.
– You like the car and do not want to shop for another car. If you are satisfied with your car and do not want the hassle of shopping for another, compare the buyout price to the retail price on a reliable car buying website. If it seems like a fair deal, skip the dealership and send the check directly to the lease company.
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