Buying your leased vehicle could be the best option in the crazy automotive market of 2021.

The shortage of semiconductor chips has resulted in new cars selling over sticker price. In the used car market, prices in June 2021 were 32% higher than the previous year. In certain regions, some used cars are going for more than their newer counterparts. If you think this is crazy, you’re not the only one! There’s never been a market quite like this. If you have a vehicle lease that’s just about to end, you might be in the best position for buying.

The cost of a leased vehicle is pre-determined
Included in the leasing contract is the price at which you can purchase the vehicle when the lease ends. Called the residual value, this is what the leasing company determined the car would be worth at the end of the lease. However, when the residual value was estimated, perhaps two years ago, no one knew what would be in store for 2021.

During ordinary times, the residual value typically isn’t a great deal. However, in this year’s car frenzy, some lease holders find themselves in an enviable position. The buyout price of their leased car is less than what the car would sell for on the open market.

When the lease buyout is less than the same vehicle on the used car market, some folks simply buy the car and enjoy the feeling of satisfaction that comes with getting a good deal. Other folks buy the car, sell it at today’s premium used car prices, and pocket the profit.

Before you decide to buy your leased car
Make sure you understand all the lease terms and do the math before you decide if buying is the right solution for you.

Assess the vehicle:

• Is it in good condition?
• How much will it cost to maintain?
• Have you exceeded the mileage allowance? (If so, consider that a buyout might be more cost effective than paying for the overage.)
• Do you like the car?

Review your lease and identify:

• the residual value of the vehicle
• what sales taxes apply
• any applicable fees or transaction costs

Additionally, consider doing an online search to see the current market value of your car. Sites such as Kelley Blue Book, Edmunds.com and Cars.com are good sources.

Next, estimate what it will cost to buyout the lease. Start with the residual value and add the cost of your remaining payments. For example, if the car’s residual value is $25,000 and you have 6 payments of $450 left on the lease, you’ll add $2,700 and $25,000 for a sum of $27,700. Add sales tax and any other fees to the $27,700, and you have the total for your buyout.

If the market value is greater than the cost to buyout the lease, give the buyout serious consideration in light of tight inventories of new used cars.

Financing a lease buyout
If a buyout is right for you, you can finance the purchase with an auto loan from Consumers. Apply online or call us at 800-991-2221.

Consumers provides banking services for more than 110,000 members. If you have banking questions, call us at 800-991-2221. We make it easy to bank how you want, when you want.

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