What you need to know about a car lease buyout

A car lease buyout lets you hand your lease contract over to someone else, or become the owner of the vehicle before the term ends. Here is how it works, and what to check before you sign.

What is a lease buyout?

As long as the lease has not reached its term, it can be transferred to another person, with the dealer’s agreement.

The different options

• Buying the vehicle before the end of the lease: you pay the residual value of the vehicle plus the remaining balance of the lease (a car loan refinancing can then be used to finance that buyout);
• Having the dealer take the lease back: under certain conditions (and for a fee), the dealer ends the current contract so you can lease another vehicle;
• Transferring the lease to a third party: someone else takes over the remaining portion of your contract.

The dealer can refuse a transfer, but only for a serious reason.

The steps of a lease transfer

1. Inform the dealer of your intention to transfer the lease;
2. Find someone to take it over who is ready to assume the contract;
3. Complete the transfer by paying the fees, which vary by dealer and by brand.

Calculating the cost of a lease buyout

Three elements make up the amount:

1. The residual value of the vehicle (written into the original contract);
2. The remaining balance on the lease;
3. Taxes, where applicable.

Our payment calculator helps you estimate the amount, and see the impact of the interest rate if you choose to finance the buyout rather than pay cash.

Is it a good move for you?

For the person taking over the lease:

• No up-front costs to pay;
• Payments that are generally reasonable;
• You inherit the mileage the previous lessee did not use;
• The option to buy the vehicle at the end of the contract.

For the person handing off the lease:

• Transfer fees are far lower than breaking the contract;
• Buying out your own lease costs less than people think: the largest share of depreciation has already been paid.

The trap to avoid: if the contract carries significant buyout fees, buying the leased vehicle can cost more than financing another one.

What to check before signing

• The remaining allotted mileage: it may be lower than expected;
• The charges for damage beyond normal wear;
• The cost-benefit balance against your real needs and your budget.

Torn between taking over a lease and financing a used vehicle? Our advisors compare both scenarios with you and land you the best rate, with no obligation. Apply online or drop by; we will even walk you through the documents to prepare.