Do You Need To Pay Lease Buyout Dealer Fees? Here's What To Know

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What Are Lease Buyout Dealer Fees?webphotographeer - Getty Images

Opting for a lease buyout may be a good idea if you enjoy driving your leased vehicle and want to keep it for good. However, you need to know how much you have to pay to own the car so you can properly plan your finances.

To complete a lease buyout, you need to pay the residual value of your vehicle, as listed in your lease agreement. You can also expect the dealership to charge additional fees for processing the buyout.

In this article, we provide detailed information on lease buyout dealer fees so you can better understand the overall cost of your leased vehicle purchase.

Planning to finance your lease buyout? Compare auto lenders below to find your ideal loan.

What Are Lease Buyout Dealer Fees?

When you buy out a car lease, you typically pay lease buyout dealer fees. Under normal circumstances, these fees account for only a small portion of the total buyout price, but knowing how much they add up to is still important. Depending on the dealership, buyout fees may vary and come in different forms. The following are the common types of fees that dealers charge for a lease buyout:

  • Purchase option fee: In most lease agreements, you pay a purchase option fee to exercise the option to buy out your lease. This is usually a few hundred dollars, and you can roll it into your future loan payments if you plan to finance your lease buyout.

  • Processing fee: When you purchase a leased vehicle, your dealership has to do some legwork and paperwork to complete the buyout transaction. So you can expect to pay for this time and effort. Some dealers also charge a processing fee.

  • Early termination fee: You'll likely pay an early termination fee if you intend to buy out your lease before it ends. The amount you pay depends on how early you terminate your lease. You'll often get a better deal if you wait until the end of the term to purchase the car. Check your lease agreement to find out how your dealer handles early buyouts.

One of the benefits of purchasing a leased vehicle at the end of the lease term is that you won't have to pay a disposition fee. Your leasing company charges this fee to cover the expenses of reselling the vehicle. So they remove this fee if you take the car off their hands through a lease buyout.

In addition, you won't be responsible for any excess mileage or wear and tear penalties. These charges can be substantial if you've racked up significantly more miles than the lease allows or you've damaged the vehicle. In fact, many lessees buy their leased cars to avoid paying costly penalties.

Examples of Lease Buyout Fees You Should Be Wary Of

Some car dealers may charge different fees for a lease buyout than others, making it difficult to determine what you should and shouldn't pay. They may also have different terms for the same type of fees, causing further confusion. For example, lease agreements sometimes refer to processing fees as administration or document fees.

Beware that some dealers may charge you unexpected or deceptive fees to make extra profits, especially if your leased car is worth more than its residual value. There are also instances where dealers have quoted a buyout price significantly higher than the one stated in the original lease contract. The following are a few examples of potentially illegitimate lease buyout dealer fees you should watch out for:

  • Vehicle service fee.

  • Certification fee.

  • Pre-delivery service charge.

  • Excessive state inspection fee.

Generally, you should only pay the lease buyout dealer fees that your lease agreement lists. Also, don't let your dealer charge you more than the specified amounts.

Can You Negotiate Lease Buyout Dealer Fees?

Many car dealerships have a no-negotiation rule for lease buyouts, leaving little room for haggling. This is because all the terms and conditions are agreed upon and specified in the lease agreement. In a usual situation, a dealer doesn't have the incentive to allow you to negotiate your lease buyout. Dealers may prefer to take the vehicle back to replenish their pre-owned inventory.

However, if car market conditions aren't favorable, dealerships may be more eager to sell you the leased vehicle so they don't have to look for another buyer. In this case, your dealership should be willing to accept a lower price.

The residual value of your leased vehicle is typically fixed and non-negotiable. Nonetheless, you can reduce the total cost of your car purchase by negotiating the lease buyout dealer fees. Depending on the situation, some dealers may be willing to waive the purchase option fee to sell you the vehicle. It's worth asking, as you could save hundreds of dollars if successful.

Another lease buyout fee you can negotiate is the processing or document fee. Since the dealer charges this fee, you may be able to negotiate with them to remove or lower it. While it isn't a requirement when completing a lease buyout, some states cap the processing fee, so make sure you aren't paying an excessively high amount if you can't get the fee waived.

If you opt for an early buyout, you have a slim chance of avoiding the early termination fee or any applicable penalties. Your dealership will want you to wait until the end of your lease to purchase the vehicle so it doesn't incur extra costs. Therefore, they'll almost certainly reject any attempt to negotiate the early termination fee.

What Other Fees Do You Need to Pay When Buying Out Your Lease?

Buying out your lease is like purchasing a vehicle. As such, it subjects you to the various fees car buyers need to pay. These fees may vary from one state to another, so you should research the exact fees and amounts you need to pay in your state.

When you buy the vehicle you're leasing, certain ownership costs transfer from your dealership to you, including title transfer, registration, and licensing fees. Usually, your dealer will handle the titling and registration on your behalf, but you're responsible for paying the fees.

Sales tax is another expense you need to consider. Depending on your lease terms and state, you may have already paid all or part of the required sales tax on your leased vehicle. Most states want dealers to roll the sales tax into the monthly lease payments, while others may require lessees to pay all the sales tax on a lease upfront. Regardless of the situation, you're unlikely to be taxed on the full original price of the vehicle you're buying out.

In addition, you must prepare to meet other state requirements when purchasing your leased vehicle. This includes vehicle safety inspection and emissions testing. Fortunately, the fees for these inspections aren't expensive.

How to Save Money on Your Leased Car Purchase

Apart from negotiating dealer fees, you can also ask your dealership for purchase incentives or financing discounts. You may be surprised how much these incentives can help you save on your leased car purchase.

Also, remember that you can buy out your lease at any of the manufacturer's dealerships, not just the one from which you're leasing your vehicle. So it's a good idea to shop around. Research buyout fees at several dealers and choose the one that offers the best overall price.

Another way to reduce the cost of your leased car purchase is to amend your auto insurance policy. Tell your insurance company you're opting for a lease buyout when your lease ends. If you previously purchased a high level of coverage to meet your lease obligations, you can now adjust your policy to save money. Alternatively, explore your options with other car insurance providers to see if you can get a better deal.

Finally, research the current market value of your car. Even if you save on the fees, if the residual value plus fees is more than the market value, it might be best to walk away at the end of the lease.

A lease buyout is a substantial investment, so it's essential to understand its associated costs. Having a clear understanding of your lease buyout dealer fees helps you prepare yourself for the car purchase and enables you to identify any suspicious or illegal fees. Also, remember that asking the dealer if they can waive or lower any of the buyout fees can benefit you.

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