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Buy a car at the end of your lease |
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Written by Chad Cook
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Wednesday, 07 June 2006 |
You've approached the end of your lease and you like your car enough you desire
to hang on to it in the driveway. Just like buying a second-hand car, there areseveral
things to be done to nail a good deal.
First, you need to know the price of buying out your lease. Look over the fine
print of your contract and look for the purchase option price. This price is set by
First, you need to know the price of buying out your lease. Look over 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 remaining value of the car at the end of the lease with 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 vehicles sticker price and its estimated value at the end of the lease, plus a monthly financing fee. This ballpark 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 sacrifice in value of the vehicle over the scheduled-lease period. For instance, a car with a sticker price of $40,000 and a 50% residual percentage will have an estimated $20,000 value at lease end.
Now that you know the price of buying out your lease, you need to determine
the existing value, also termed market value, of your vehicle. So, how
much does your car retail for in the market' To pin down a satisfactory, solid
estimate you are required to do various pricing research. Look at the expense of the
vehicle, with comparable mileage and condition, with other dealers. Use
online pricing websites, such as Cars.com, Edmunds.com and Kelly Blue Book
for detailed pricing knowledge. Gathering pricing information from a variety of
sources should give you a fair estimate of your vehicles retail value.
All you have to do now is compare the two amounts. If the residual value is
lower than the existing retail value, than you're into a prizewinner. Unfortunately, there is a acceptable chance a car coming off a lease is a little on the high side.
Don't despair though. Leasing companies understand as much of that residual values on their vehicles are greater than their market value and as such are
always on the look out for offers. You can come down on the price of your
leased vehicle with some knowledgeable negotiating tactics. Put first a cost
that is further down your actual target and negotiate hard till you wind up near
that figure. |