CONSIDERING A LEASE BUYOUT?

When you lease a car, truck or SUV, you’re paying the car company for the predicted depreciation of that vehicle. Your monthly lease payment includes this depreciation and a fee that goes to the leasing company to cover administrative costs. At the end of your lease, you’ll have paid the car down to its “residual value”, which is the car company’s prediction of what your vehicle will be worth at the end of your lease term.

There are several websites like Edmunds or Kelley Blue Book that can help you find your vehicle’s market value. By inputting your car’s make, model, and year and providing additional information about mileage and condition, you can see the market value of your vehicle. (Be sure to look for the market value rather than a trade-in estimate.)

Keep in mind that there are factors the car company couldn’t predict that may actually cause the market value of your vehicle to be higher—especially right now. With the production of new cars slowing due to the pandemic and other unforeseen factors, demand for used cars has increased significantly. You may also find that you haven’t put as many miles on your vehicle. Factors like this can drive market value up.

If your vehicle’s market value is close to or higher than the residual value stated in your lease, buying out your lease may be a great deal. But if the market value is lower than the residual value, it may be best to walk away—unless you really love your car.