When I sold cars, we had very in-depth sales training. One facet of the car sales business we were well educated about was leasing a car as opposed to buying a car outright. This article is to help pass on what I learned from my car sales training about whether you should buy your leased car at the end of the lease agreement. Hopefully, this article will help to allow you to make an informed decision.
When you lease a car, the biggest decision that you are going to have to make is at the end of the lease. You’ll have to decide whether you want to keep that car or get rid of it. This article will help to explain what you need to know if you desire to keep the car at the end of your leasing contract.
Besides liking the car, one of the biggest factors of whether you keep the car or not is going to be how much it will cost to buy the car. When you originally signed to lease your car, you should have received a copy of your contract. Somewhere in the contract, probably within the fine print, you’ll find something called a purchase option price.
The purchase option price is typically made up of the residual value of the car plus a $300-$500 purchase option fee. The monthly payments you were paying comprised of the difference between the sticker price of your car, estimated value at the end of the lease, as well as a monthly financing fee. The term used to describe what your car is worth after your leasing period is over is usually referred to as residual value.
The residual value is just another way of expressing expected depreciation of the vehicle over the amount of time. You agree to lease it for an example would be if you lease a car that had a sticker price of $60,000 and had a residual percentage of 60%. The estimated value at the end of the lease would be $24,000
The next step in determining what you have to pay to buy the vehicle you lease is to figure out what is known as the market value of your car. In other words, what would your car be were to the average consumer. At this point in time, the best way to determine market value for your vehicle is to input all of the options on websites such as Cars.com, Edmunds.com, and KBB.com; by getting estimates from different sources, you’ll get a more accurate market value for the vehicle
Once you have all of this information all that’s left to do is compare the two figures. If the market value of your car is higher than the residual value that you figured out in the first step then you’re ahead. Your car is worth more than what you’re paying the leasing company to buy it for. However, usually this is not the case when you lease a car for market value is usually less than the residual value on a leased car.
Don’t let this discourage you; most leasing companies would be more than willing to work with you if you really wanted to purchase your vehicle after the leasing contract is over. Not to mention within the automobile industry, most anything is negotiable; including the purchase price of a leased car.
Before you go in to talk to your leasing agent think about a number that is well below the actual number that you want to pay. Now all you have to do is put up a tough negotiation. Obviously, they will not agree to your extremely low number. They will try to negotiate higher than your low number. Just keep negotiating until you get close to your true target number.