Buying a leased car – Ask the M-Network
This article is part of the Ask the M-Network series. June submitted a question and asked:
My car lease is up in Oct 09 – I want to buy the car, but what am I entitled
too..like, warranty, etc. It will only have 36,000 miles. A Chevy Impala…4 door.
First of all, congrats on at least getting close to finishing your lease – not too many people do before getting convinced that they should “trade up” to another one for even longer! As for what you are entitled too; well, that depends on what kind of lease you signed. Leases are either closed-ended or open-ended:
Closed-ended leases mean you can turn the car in at the end of the lease and walk away, owing only mileage and damage charges. You also have the option of buying the car at the pre-determined residual amount you agreed on when you signed the lease.
Open-ended leases are ones where you bring the car back, and they determine the current value of the car and compare it to the above-mentioned residual value decided at the beginning of the lease. If the car is worth less than what they thought it would be, you pay the difference.
You probably have a closed-ended lease, which most people have. So take a look at your original lease and see if there is a residual value amount, which is what you would have to hand over in October should you want to buy the car. If it’s worth it to you, whatever that amount is, go for it. If you got a really bad lease deal to start with, you might have made huge payments for all these years and still owe a lot on the car should you want to buy it. Weigh the cost of this acquisition versus buying another car carefully (are you getting the value of whatever dollar amount you are paying?) as you may be better off leaving the car there and finding something else to buy.
I used to lease cars all the time, but never again. I wrote about why in my post “Money Mistake Monday – The I Fell For Another Car Lease Syndrome“, which might make for an interesting read as you head towards your big decision. Good luck!
David covered how ending the lease works. You can also go ahead and call the leasing company now as well and see what kind of price they’ll give you. Leases often have an early termination fee, but leasing companies will often waive that towards the end of the lease. Don’t be fooled either, the price you pay for the car is negotiable. If you turn the car in and walk away, the leasing company has to pay to have the car transported, detailed and cleaned, and then sold. However, if you buy it they don’t have to incur those costs, thus they are highly motivated to sell it to you. Use that to your advantage, BUT as David said don’t pay too much for it.
As for warrenty, you are fully entitled to the remainder of the warranty and since you signed the lease papers it’s already in your name anyway.
I had a Ford Escort some years back that I leased. The leasing company started calling me about a year before the lease expired making me purpose offers. I finally ended up looking up the car’s value on the internet and calling them and making them a low-ball offer. Guess what? They took it. So don’t be afraid to make them a low offer to buy. You just might end up getting a great deal. Worst that can happen is they say no right?
Thanks for your question. Readers, what do you guys think? Did David and I miss anything? Add a comment!
Please remember that our answers are opinions and should not be considered professional advice and we assume no responsibility of any kind. Please consult a certified financial expert as needed.
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