Many of you out there might wonder if you lease a car and the lease expires, how you would go about buying your leased car if you don’t have the money to do so.
Well, some might have the money, but still prefer to have the option in getting finance to buy their car. Usually a lease car like any other car depreciate the most in their 1st few years, which makes a lease car more affordable to buy when the lease ends.
If you have a lease car consider the following:
Things you need to think of when you want to buy your leased car
There are normally 2 options you have when your car lease comes to an end. You will be able to buy your car or just return it.
Buying your leased car is a bit different from normal transactions, because you will know in advance what the company wants for your car, which is the residual value they estimated it for.
You drive your car for the lease period and know everything you need to about the car. So, when the time comes to decide whether to buy or return your car, all you need to do is take action.
There are different financing options if you decide to buy your leased car. It will be good to consider the following before you look at your options to finance.
What are the purchase price and the residual value of the car?
With a lease car it’s actually easy to know what you will pay for your car. The price is generally stipulated in your lease contract. Your lease company will estimate what the residual value will be on the end of your lease and that is the amount you need to pay. There may be additional fees which can be discussed with your leasing company.
Residual value is calculated on depreciation of the car over the term of the lease. Typically, they will subtract it from the actual price of the car to work out your payment per month, and what you will owe at the end of the lease.
It might not equal the market value, but if you know what the market value is when the lease expires, and compare it to the price you need to pay, you will know if it’s a good deal or not.
The knowledge you have of the car you lease
You go out and lease a new car and in the time you drive it you get to know the car and its overall condition. If you look after your car, keep it clean, stay by the mileage that is allowed, and service it regularly, you can be sure that its market value will be higher.
This will mean that it will be a bargain to buy when your lease ends. You might also have personal reasons for wanting to keep your car. Except for that it can save you stress, headaches and time to do further car shopping. Because you already know what you will need to pay for your lease car.
Financing options to buy your leased car
Financing from a traditional bank
If you already have a relationship with your bank and your credit is good, you can just approach your local bank. Complete the application for a loan and most of the time it will be approved together with a good interest rate.
The bank will only need the sales contract with the information of the lease company to complete your transaction. You might have to do a few trips back and forth to gather all of the documents that are necessary.
A credit union
They are basically the same as a bank, although, sometimes they may offer you more flexible requirements concerning your loan and terms. If you had some credit issues in the past, it might be good to contact a local credit union.
All paperwork, as well as lien information needs to be filled in by the lease company and your credit union in order to meet all requirements of the state.
Through a car dealership
Some car dealerships provide their own in-house financing with different lenders. In this case you need to know what your credit status is in order to gain a rate which will be appropriate for the loan you require. You can ask your bank to give you a copy of your credit report which will provide the credit score.