Leasing is a popular form of car financing, both for companies and individuals. After the end of the leasing agreement, we face a choice: return the car to the lessor or buy it? This decision is not easy and requires careful analysis. In this article, we’ll weigh all the pros and cons to help you make the best decision.
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Leasing vs. buyout – what should you know?
Before we go into details, it is worth recalling the basic information about leasing and buying a car:
- Leasing is an agreement under which the lessor makes a car available to the lessee for a specified period of time in exchange for regular payments (leasing installments).
- Buyout is the opportunity to purchase a car at the end of the lease agreement for a predetermined price. This price is usually specified in the lease agreement and is called the residual value.
When is it worth buying a car after leasing?
Buying a car after leasing can be profitable in several situations:
- The buyout price is attractive: If the residual value is below the market value of the car, the buyout can be financially beneficial.
- The technical condition of the car is good: If the car has been regularly serviced and is in good technical condition, buying it may be more profitable than buying a new or used vehicle.
- You know the history of the car: When leasing a car, you know its history, mileage and method of use, which minimizes the risk associated with buying a used car.
- Attachment to the car: If you have become attached to the car and want to continue driving it, the buyout is a natural choice.
When can buying a car after leasing be unprofitable?
There are also situations in which buying a car after leasing can be disadvantageous:
- High residual value: If the residual value is close to or higher than the market value of the car, the buyout may not be profitable.
- Poor technical condition of the car: If the car requires expensive repairs, its purchase may generate additional expenses.
- Need to change car: If you need a larger, smaller or different type of car, it may not be justified to buy out the current vehicle.
- New models on the market: The appearance of new, attractive car models may prompt you to give up the buyout and choose a new lease.
How to calculate the profitability of buying a leased car?
To assess the profitability of the buyout, the residual value should be compared with the market value of the car. This can be done by checking the prices of similar cars on advertising portals or in used car dealerships.
It is also worth considering the costs associated with buying a new or used car, such as:
- Initial fee: An initial payment is usually required for a new lease.
- Leasing installments: Monthly leasing installments for a new car may be higher than in the case of buying the current vehicle.
- Insurance: Insuring a new car can be more expensive than insuring an older vehicle.
Formalities related to the purchase of a leased car
The process of buying a leased car is usually simple and fast.
- Submitting an application for redemption: An application for buyout must be submitted to the lessor.
- Payment of the residual value: Once the application is accepted, the residual value must be paid.
- Re-registration of the car: After paying the residual value, the lessor provides the documents necessary to re-register the car to the new owner.
Alternatives to buying a car after leasing
If buying a car after leasing turns out to be unprofitable, it is worth considering other options:
- Returning the car: At the end of the lease agreement, you can return the car to the lessor and choose a new model.
- Lease extension: Some lessors offer the possibility of extending the leasing agreement on preferential terms.
- Car Sale: You can also sell the car on your own or through a used car dealership.
Summary
The decision to buy a car after leasing should be well-thought-out and based on a thorough analysis. It is worth comparing the residual value with the market value of the car, assess its technical condition and take into account your needs and plans. If the buyout turns out to be unprofitable, it is worth considering alternative solutions, such as returning the car, extending the lease or selling.
