Most people nearing the end of a car lease term inevitably ask themselves the same question: “Should I buy the car or lease a new one?” Edmunds.com, a resource for car shopping and automotive information, points out that the answer largely depends on the car’s buyout price – or the residual value – and its current market value. The residual is the pre-determined estimate of the car’s value at the end of the lease term. Generally, if the residual value is less than Edmunds.com’s private-party True Market Value® price, the company considers the buyout a good deal. On the flip side, if the car’s residual value is higher than the TMV®, then it makes more sense to turn in one’s leased car and move on to the next vehicle.
Other factors to consider when deciding whether to purchase – or return – a leased vehicle include the following:
- Many lease agreements include a purchase option fee, which can cost up to a couple of hundred dollars and must be paid on top of the residual price. This should be factored into the expense of buying the car.
- If one is unhappy with the residual value – especially if it’s higher than the market value – there may be some leeway to negotiate it down. Check with the bank or a captive finance company.
- Procrastination is always an option. Once their lease ends, drivers can continue to lease on a month-to-month basis at the same price.
Edmunds.com projects that 500,000 more leased vehicles will return to the market in 2013 than in 2012. With leases accounting for one out of every four new car transactions in 2013, leasing has become a more popular option for car shoppers than ever before.