Is now a good time to buy out your car lease?
By Michelle Warren • Bankrate.com

If you're debating buying out versus taking out another lease, keep in mind that in recent years, many automotive companies and their financial counterparts have lost significant money due to over-inflated lease residual values and low monthly leasing incentives; as a result, many are getting out of the leasing game or making it less attractive to consumers. Deals are not as prevalent as they were prior to the economic meltdown, and people coming to the end of their leases might not find what they are looking for in terms of great deals on new leases.

Instead, manufacturers are encouraging consumers to buy by offering zero percent financing and other incentives.

Comparative shopping
However, if you've already got a decent vehicle and don't fancy giving up the equity you've already channelled into your lease, one of the best ways to find out if your buyout price is a good deal is to do some comparative shopping.

As mentioned, a lot has changed since your vehicle's residual value was set three or four years ago. There's been a lot of talk about how residual values for many vehicles have plummeted with the economic instability, thereby making buyout prices too high and not competitive in today's resale market.

There's "no truth to this broadly speaking. It is vehicle-by-vehicle specific," counters auto expert Dennis Desrosiers of Desrosiers Automotive Consultants, whose advice is simple. "To determine whether their buyout is a good deal or not just go to Autotrader.ca and look up what similar vehicles are selling for."

Another great resource is the Canadian Black Book, which has a proven understanding of the auto market and is often used by lenders, dealers, leasing companies, governments and auction houses. Josh Bailey, senior manager, client services, says residual value is a topic often overlooked when people sign a lease.

While residuals for some makes and models did plummet a couple of years ago (the gas guzzlers were hit hard when gas prices soared, however there has been some rebound), many vehicles have fared well. "Most consumers have actually moved into a more favourable position for buying their vehicle at lease-end since residual values have been up and up a lot the last year or two, so their buyout is likely a lower price than the used car market," says Desrosiers.

Can  you negotiate the buyout price?
If your buyout price proves too much, don't despair: There might be room for negotiation.

Margaret Mellott, a spokeswoman for Ford Motor Credit Company, stresses the residual value is set in stone and "is not renegotiable at the end of the contract." Desrosiers also warns that "prices are rarely negotiable."

However, visit auto-related chat rooms, and you'll find examples of people who claim to have negotiated successfully. Keep in mind the leasing company would rather you keep the vehicle. If you don't, they either have to give it to a dealer to sell as a used vehicle or pick up the tab for transporting it to an auction and then settle for a wholesale price, which is likely far below the residual value.

Start by calling the number on your leasing contract and ask to speak to someone with the proper authority. Do your homework and have in mind a fair buyout price. The leasing company may counter offer or simply say no.

If you're happy with your vehicle and ready to break the leasing cycle, now is a good time to own a vehicle. As long as you're prepared to deal with maintenance and other upkeep, ownership has its advantages. Whether you opt to buy out that lease or buy a similar used vehicle to take advantage of inexpensive financing options, it all comes down to your leased vehicle's residual value. Do some quick online comparison shopping, and you'll soon know if a buyout is the most cost-effective route to ownership.

Michelle Warren is a freelance writer living in Toronto.