Comprehensive Guide
Learn more in our Loans & Mortgage Guide.
How it works
A lease-end buyout decision asks one question: is the residual price written into your lease contract better or worse than the open market's opinion of the same car? Residuals were frozen years ago by a leasing company's guess; used-vehicle prices since moved, sometimes violently. When the residual sits below market — the post-2020 pattern — buying out captures instant equity: on a $19,500 residual against $22,000 of market value, roughly $1,500 survives sales tax and purchase-option fees. When residuals sit above market, returning the car hands the depreciation risk back to the lessor, where it belongs. This calculator prices both paths completely. The buyout side adds your sales-tax rate and purchase-option fees to the residual; the return side adds the excess-mileage and wear bill plus the cost of replacing the car at market, because walking away still leaves you needing transportation. The advantage figure and a plain-language recommendation follow. Three refinements sharpen real decisions: residuals are occasionally negotiable near lease end; third-party inspections and independent financing are permitted on most buyouts; and disposition fees belong to the return path, widening the buyout case slightly. Equity capture fades fast, though — run the numbers weeks before maturity, not days.Formula
Buyout all-in = residual×(1 + tax%) + fees | Advantage = (market value + return charges) − buyout all-in
Tips
- Start the comparison 90 days out — equity windows close quickly.
- Request the official payoff quote; residuals plus fees differ from the brochure figure.
- Shop independent financing for the buyout instead of accepting captive rates.
- Remember disposition and turn-in fees hit only the return path.
- If the residual exceeds market, negotiate a lower buyout before conceding to return.
Frequently asked questions
Is it worth buying out my lease at the end?
Worth it exactly when the residual undercuts market. A $19,500 residual against a $22,000 market value yields about $1,530 of advantage after 6.5% tax and $300 of fees. If the numbers flip — residual above market — returning costs less than buying, and the lessor eats the shortfall.
Do I pay sales tax when buying out a lease?
Generally yes — states tax the residual as a purchase, roughly $1,268 on a $19,500 buyout at 6.5%. A few states taxed the original lease payments instead and exempt buyouts, so confirm locally. Tax applies to the residual only, not the car's full market value, which helps captured-equity math.
Can I negotiate the residual buyout price?
Sometimes, especially in the final weeks when lessors want vehicles off their books, or when market values have fallen below residuals and repossession risk looms. Success varies by captive; asking costs nothing and every $500 shaved off the residual flows straight into your advantage calculation.
What happens if I just return the leased car?
You settle excess mileage and wear charges — perhaps $600 here — plus any disposition fee, and walk away owing nothing else. But you still need a car, so the true comparison replaces it at market: $22,000 in this example. Returning wins only when that full replacement path beats the all-in buyout cost.
Can I finance a lease buyout?
Yes — banks, credit unions and the captive all write lease-purchase loans, treating the buyout like a used-car purchase. At $19,500 over 48 months near 7%, expect roughly $467 monthly. Compare that payment against replacement financing on a market-price twin before assuming either path is cheaper.