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Should you lease and then buy a car?

Couple signs auto lease
Couple signs auto lease
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Many drivers choose to lease a car rather than purchase it outright in order to lessen the monthly cost or afford a more luxurious option. However, after leasing a vehicle, many drivers then choose to buy it. This option is best for drivers who have fallen in love with their leased vehicle and no longer want to pay a monthly fee. But before taking this route, it’s important to weigh the total cost.

When should you lease before buying?

Leasing a car without planning to buy it is very different from leasing a vehicle with the intent to purchase it after the fact. However, the latter could be viable if you are the type of driver who always wants the latest models or if you don’t have the money or credit score to purchase a new car. 

To decide which option is best, add the total cost of leasing a car, including any upfront fees, to the car’s projected residual value at the end of the lease. Then compare that number to the car’s sale price, plus all fees and interest over the life of the car loan, and see which number is lower. 

In some cases, leasing and then buying ends up being more costly than buying outright, especially if you exceed the dealer’s mileage limits or the residual value at the end of the lease is much higher than anticipated. However, in other cases you may get a good interest rate deal on your lease and see a lower residual value than expected, so it could be a good trade-off to not be locked into owning a car that doesn’t suit your needs. 

Key considerations before leasing to buy

If you’re thinking about leasing to buy, consider these questions.

Did you weigh financing options?  

It is always smart to get at least three different lender quotes for a car purchase or a lease before signing off. The more offers that you have in front of you, the better chance you have of receiving a good deal. It can also help you determine whether leasing or buying will be more affordable over time. 

Is the car in good condition?  

Consider getting the vehicle checked before deciding to go through with a buyout. Depending on how long you’ve had the lease, you may even fall under the factory warranty and get necessary repairs at a low cost. You shouldn’t purchase the vehicle if the condition has greatly depreciated under your care. 

How long do you want to drive the car?  

Decide how long you intend to hold onto the vehicle. If you hope to buy or lease the newest model in less than two years, it doesn’t make sense to lease and then purchase the vehicle. There’s no way to know if your car’s residual value will increase or decrease over the lease term. But if it decreases and you decide to keep the car for a short period, you’ll likely owe more than the car is worth and have to come out of pocket to swap it out.  

How many miles do you typically drive a year?  

If you expect to go over your allotted mileage for your lease — typically 10,000, 12,000 or 15,000 miles — then purchasing your vehicle after the lease might save you from the extra fees and penalties for going over your mileage. But be sure that those fees do outweigh the price you’ll pay to purchase the vehicle. 

Will you truly save money? 

Compare a new monthly vehicle payment to a lease payment. Also, factor in upfront leasing costs, including the security deposit, acquisition fee and documentation fees. If you’d pay more with a lease, taking into account fees, it might be smarter to just buy the vehicle outright rather than leasing it first. 

Price negotiation tips

If you’ve decided to buy your vehicle at the end of the lease, you can try to negotiate the deal. Negotiation doesn’t always work, but preparedness is the key to feeling confident when trying to get the lowest price possible. Returning the leased vehicle instead of buying it does mean that the lenders must find another driver interested in the vehicle — so lean into the fact that the lender wants to avoid the extra time and money that it takes to handle the resale of the vehicle. 

Use Kelley Blue Book to find out what your car is worth and compare it to the lender’s offer. If the value you find for a trade-in is higher than that buyout cost, then you can assume you are getting a good deal. 

Keep in mind that if you don’t buy the car, you could end up with surcharges at the end of the lease if the car has too much mileage or excessive damage, so you could end up with a bill that you didn’t foresee when you initially made your choice. 

The bottom line

Before deciding to lease and then buy your next car, weigh the costs and only go ahead if you are getting a great deal on both the lease and the payoff amount. If it would be cheaper to buy your car upfront, or if you think you’ll want the car for a long time, it might make sense to skip the lease and buy your car directly. 

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Written by
Rebecca Betterton
Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car.
Edited by
Student loans editor
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