Buy a car at the end of your lease

You’ve come to the end of your lease and you like you car enough you want to keep it in the driveway. Just like buying a used car, there is some research to be done to nail a good deal.

First, you need to know the cost of buying out your lease. Read the fine print of your contract and look for the “purchase option price”. This price is set by the leasing company and usually comprises the residual value of the car at the end of the lease plus a purchase-option fee ranging from $300 to $500.

When you signed on the dotted line, your monthly payments were calculated as the difference between the vehicle’s sticker price and its estimated value at the end of the lease, plus a monthly financing fee.

This estimated price of the car value at the end of the lease is what is termed in leasing jargon “residual value”. It is the expected depreciation – or loss in value – of the vehicle over the scheduled-lease period. For example, a car with a sticker price of $40,000 and a 50% residual percentage will have an estimated $20,000 value at lease end.