Top Lease Buyout Loans of March 2024

Leasing a car is considered a feasible way to own a car affordably. However, at the end of the lease term, you need not always return the car. If you think you get a better deal by buying the car you've leased than buying one, or if you have to pay a higher amount for extra mileage or wear and tear.

So, a lease buyout is the best option out there. Therefore, a lease buyout loan is an auto loan designed to finance the purchase of a leased vehicle. How is it different from a regular auto loan? Do all lenders provide this? What are the factors that affect a lease buyout loan?

What Is a Lease Buyout Loan?

A lease buyout loan is the money that the lender provides to the buyer to pay the buyout price to the leasing company, and you repay the loan with interest over a set term. In other words, at the end of your car lease term, you can either return the car, start a new lease, or buy the car.

So, if you think buying the car is the best option for you but cannot afford the amount upfront, a loan helps you finance the purchase through a lease buyout loan. Consequently, you repay the loan with interest over the term. Like a credit union loan, the car serves as collateral for the loan. The lender can repossess the car if you fail to make payments.

How Does a Lease Buyout Loan Work?

Unlike a used car deal, in this situation, you will already be driving the car and will be asked how to proceed with your leased car towards the end of the lease period. If you are planning to buy the car, then you can make use of the loan to buy the car if your leasing company offers it.

While opting for lease buyout loans, you should consider factors like your credit score, loan amount, and desired repayment term when deciding about the lease buyout loan. Similarly, make sure you review the lease agreement to learn about the car's residual value.

In other words, your lease agreement will mention the value of your car at the end of the lease term, known as the residual value. Understanding this will help you finalize the amount you will be paying if you buy the car and let you plan your finances accordingly.

How to Apply for a Lease Buyout Loan

Check your credit score

Like taking out any other loan, the interest rates and the approval of a lease buyout loan will also rely on your credit score. The higher the credit score, the better the rates and easier approval.

Read your lease agreement

Knowing the residual value of the car you have been driving will help you understand the value and receive a fair deal. In addition, it will also help you negotiate prices and see whether your agreement allows a buyout and, if it does, whether it is towards the end of the lease term or a few months into the lease.

Review the lease buyout loan options

You can contact your personal bank or credit union to determine if they provide lease buyout loans. On the other hand, lease buyout loans are not offered by every financial institution. If they do not, you should look into alternative financial institutions, such as credit unions or internet lenders, and figure out which of your options is most suitable for you by comparing them.Therefore, shopping around will help you compare the rates and help you save better as you choose according to what fits your budget.

Apply for the loan and sign the offer

After you have figured out your lender, you should gather your documents and apply for the loan. Once the lender approves, you can review the terms and sign the agreement.

Lease Buyout Loan Rates

Lease buyout loan rates vary with each provider. Lenders and aggregators like Gravity Lending, RefiJet, myAutoloan, and RateGenius have their estimated APRs starting at 5.29%, 5.99%, and ranging to 29.9%. And for most lenders credit scores should be between 550 and 660. While there is no maximum limit on the loan amount for some, lenders like LightStream and RateGenius offer loan amounts from $5000.

Top Lease Buyout Loans

Here are the top lease buyout lenders and the lease buyout loan rates.

A) Through loan aggregators

Loan aggregators link people looking for auto loans with multiple lenders, typically providing several loan options. These are the best buyout loans provided by aggregators.

B) With direct lenders

Direct lenders are banks, credit unions, or other companies that directly work with borrowers to provide and manage loans.

Is a Lease Buyout Loan Worth It?

Whether or not a lease buyout loan is worth it depends on several factors and requires careful consideration. For instance, the value of your car, the loan interest rates, and other additional charges and taxes should be considered.

You should consider a few factors before zeroing in on a lease buyout loan.

• You may not be able to lease the vehicle immediately. Not every company allows immediate buyouts. Some of them only allow the buyout at the lease term's end.
• The residual value of the car should be understood before finalizing buying it. However, it comes with pros and cons; cars generally lose value over time so you might be paying more than the car's actual worth. But, if the car's market value exceeds the buyout price, you might profit from selling it later.
• You can save some money if you exceed the mileage allowance in your lease if you buy out. Similarly, if your car has minor damage exceeding allowed limits, buying it out can prevent these fees.

When to Get a Lease Buyout Loan

• Lower or equal residual value than the car's market value.
• To continue driving the same vehicle.
• Exceeding mileage limits will result in extra penalties if you return the car.
• You've driven significantly below the allocated mileage, preserving more of the car's value.
• To avoid extra charges for excess wear and tear.

When Not to Get a Lease Buyout Loan

• If a similar model is available on the used market at a lower cost.
• The residual value exceeds the actual value of the car.
• You prefer not to take on repair costs for a vehicle once its factory warranty expires.

Factors to Consider When Deciding Whether to Buy Out Your Vehicle Lease

• Comparing your car's purchase option price to the open market is crucial to ensuring a fair deal. Utilize market guides offline and online to ensure the price. Also, consider factors such as residual value, influenced by the car's condition, mileage, and wear.
• Leasing companies allow for average mileage and expected wear and tear, but exceeding these limits may result in additional fees. If faced with high lease-end fees, redirecting that money toward a lease buyout can be a more economical option.
• See if the car is fit for your needs. If you've exceeded mileage limits or subjected the car to excessive wear, a lease buyout may be preferable to avoid penalties. Also, consider if your current leased vehicle aligns with your lifestyle.
• If you're looking for a change, exploring options like downsizing or buying an exotic vehicle could be worth considering.

Bottom Line

You are closer to owning the car you had leased if you opt for a car buyout lease. However, you must weigh the pros and cons of whether the decision is financially feasible. As the lease buyout loan rates can vary with lenders, it is important that you research the rates and also review your lease agreements.