Is it OK to buy your car leasing?
For many drivers, ending a car rental agreement can mean saying goodbye to a car they like and signing a new rental agreement. But there is another option: an automatic rental purchase. With leasing, you can buy the car you are already driving from the leasing company at a fixed price. Does this sound interesting? Here's what you need to know about leasing purchases.
Take a look at your rental contract
First, check your original rental agreement to see how much it will cost you to buy your car. Your rental agreement must describe the residual value or the price of the purchase option. If you wish to keep the car, you must pay the residual value plus applicable taxes and the Department of Motor Vehicles (DMV) fees. You can also pay a fixed management fee from the leasing company to cover transaction costs. Please note that depending on the brand, model, and details of your rental contract, your car may be worth more or less than the price remaining on the open market. The remaining price: It is based on previous sales prices for this particular brand and model. Reflects the demand for the car. A popular brand or model usually has a higher residual price. It is generally not negotiable.
Three important considerations when purchasing rental contracts
If you're happy with the remaining price of your car, ask yourself if these other aspects of the deal work for you:
Have I exceeded the conditions of the mileage contract? If you have exceeded the mileage limits for your rental agreement, you will be subject to mileage penalties that may apply at the end of your rental agreement. For example, if you are 10,000 miles above the mileage limit of your rental agreement, you may be fined up to $2,500. It is money that could be used to buy your lease.
Is the car in good condition? When you return your car, it will be checked. While most leasing companies allow imperfections from daily use, above-average wear can cost you dearly. These prices can range from hundreds to thousands of dollars.
How much does maintenance cost? You can find brand and model information in independent research. Take these ongoing costs into account when making your purchase decision for your leased vehicle.
Discover your payment options
If you don't have enough money, you will need funding. You can finance the purchase by obtaining a loan from a bank or other financial company as an alternative to dealer financing services. As with any type of loan, it makes sense to look for the best interest rates and terms. Note that the annual percentage (APR) of a rental-purchase loan is generally higher than that of a new car purchase. Also, consider the duration of the desired loan: a shorter-term loan is associated with higher monthly payments. However, this has the advantage that the interest charges are lower over the life of the loan.