auto

Should I end car lease early to buy auto?

Tara Baukus MelloDear Driving for Dollars,
I've been leasing a car and have been very happy with it, so I plan to buy it when my lease ends in a few months. A representative from the company just called me to ask what I was going to do, and he said it would be to my benefit to end the car lease early and begin paying toward my purchase.

That makes me nervous, though. How do I know if that's the best decision?
-- Tonia

Woman driving her car at sunset © iStock

Dear Tonia,
It's common for dealers or manufacturers' reps to reach out to lessees a few months before their leases are due if they are trying to avoid a large number of leased cars returning to market or if they are trying to move slow-selling newer models. So, it doesn't raise my eyebrows that you got this call.

It certainly makes sense to investigate the offer further so you fully understand the implications. First, check your car-lease account online or call the company to see what your current buyout amount is. Your original lease agreement will have a buyout price listed for when the lease is up, but the fact is that you can buy out a car lease anytime.

Next, check to see what the car is worth using an online pricing site such as Edmunds.com or Kelley Blue Book. You may find that your buyout price is less or more than its current value.

If your lease buyout price is less, then it shows you have equity in the car and purchasing it sooner would put you ahead of the game.

Be careful to check your car-lease agreement and the buyout offer for any fees associated with terminating the lease early. You also will want to make sure you are prepared to pay any extra fees, such as if you are over the mileage limit or for damage beyond typical wear and tear. You will need to pay these fees regardless, but you want to be prepared for them.

Finally, if you think you are ready to move forward with the buyout, investigate current car loan interest rates to determine what rate you qualify for before you agree to buy.

This will give you the opportunity to tune up your credit in the coming months if you need to before making your purchase.

Worried there may be mistakes on your credit report? Check it for free at myBankrate.

Ask the adviser

If you have a car question, email it to us at Driving for Dollars. Read more Driving for Dollars columns and Bankrate auto stories. Follow her on Facebook here or on Twitter @SheDrives.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

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Tara Baukus Mello

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