Have you fallen in love with your Toyota Camry or RAV4 and wish you could hold on to it even after your lease ends? Well, it's possible with a lease buyout.
A lease buyout allows you to purchase the vehicle at any time during the lease term or at the end of the contract. If keeping your car sounds appealing, it makes sense to learn more about the process. However, buyouts can be tricky. Doing your research, comparing the options available, and crunching the numbers helps to ensure that taking ownership of your beloved Toyota car is a financially sound decision. In this article, we provide all you need to know about Toyota lease buyouts to help you decide whether it's worth it.
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Toyota Lease Buyout Process
Leasing is an increasingly popular option among drivers of all ages. It helps you get the best of both worlds — driving a great Toyota car without the hassles of ownership. That said, there are occasions when it makes sense to go for a long-term commitment. A lease buyout lets you keep your vehicle even after the end of the lease term by financing or paying cash for it.
A lease buyout is when you purchase your vehicle from the leasing company to be the owner rather than the lessee. This typically includes paying the car's residual value — its estimated price set at the lease's termination — along with taxes, fees, and any remaining lease payments.
Here are the two types of Toyota lease buyouts to consider:
Option 1: Lease-End Buyout
As the term implies, this option involves purchasing your car at the end of the leasing term. Let's say you lease a Camry for two years. At the end of the contract, you decide your Camry is worth a long-term investment. In this case, you can opt for a lease-end buyout. This choice is the most common and straightforward.
Option 2: Early Lease Buyout
This option allows you to purchase the vehicle before the end of the contract. However, not all leasing companies offer this, so check with your dealer beforehand to see if this is feasible. It's usually the more complex and expensive solution since early termination costs can apply.
How Does a Toyota Lease Buyout Work?
Let's take a closer look at what the buyout process involves:
Contact the leasing institution. Ask about available buyout options. They'll walk you through the process and explain the fees and other charges.
Decide how you would like to pay. Ideally, you'll save enough money in advance to pay in full to avoid finance charges and the hassles of a monthly payment. However, the alternative is to opt for a car lease buyout loan.
Apply for preapproval. If you plan to finance the purchase, apply for preapproval with a couple of lenders. You can also check with your dealership if they offer financing support for lease buyouts.
Finalize the terms of the buyout. Ask the dealer or leasing company if they can offer discounts. Once you negotiate a price you're comfortable with, either pay for the vehicle in full or secure financing and complete the buyout process.
Is a Lease Buyout Worth It?
At the end of the lease, lessees may often wonder, "Does it make sense to purchase my vehicle, or should I return it and opt for another lease or buy another vehicle?"
To answer this question, you need to find out the car's residual value. It's the approximate value of your vehicle when the lease is up, and the lease company determines it at the start of your term. If your vehicle's current value is higher than the residual amount, purchasing it is a sound financial decision. However, if the vehicle's value has depreciated significantly, it makes sense to skip the buyout unless the dealer or leasing company agrees to sell it for a lower price.
Let's explain with an example. Assume your Toyota Corolla has an appraised value of $20,000 and the lease buyout is $15,000. In this case, you're getting a good deal by paying $5,000 less than the vehicle's worth. However, if the buyout amount is $22,500, keeping the car doesn't make sense, as you'll be paying $2,500 more than it's worth. In this case, returning the vehicle at the end of the lease contract would be a better option, and purchasing or leasing another car maximizes your dollars.
Here are a few questions to ask yourself when you're considering a Toyota lease buyout:
Is the car worth more than the purchase price?
Did you exceed the mileage limit?
Does the vehicle have excessive wear and tear?
Can you afford the monthly auto loan payments if you purchase the car?
Do you have money saved to pay for the vehicle?
Do you love the car?
If you answered yes to most of these questions, it could make sense to buy out your lease. That said, consider using a car value estimator to calculate the difference between what you'll pay in a buyout and the cost of a similar vehicle of the same make and model in a similar condition to decide whether it's profitable in the long run.
Can You Negotiate a Toyota Lease Buyout?
While you might be able to negotiate the price, discounts are not always possible. This is because leasing companies predetermine the residual value of your car, and this amount doesn't usually change. They have years of experience and know precisely how much a particular model is worth after the lease expires.
With the automotive industry still dealing with the global shortage of semiconductor chips, there's a huge demand for used Toyota cars. With low inventory and high demand, you likely won't get the vehicle at a steeply discounted price. So, even if you can negotiate a lower price, it may not be a significant discount.
Since a lease buyout comes with other costs, consider whether you can negotiate those. Taxes, title transfer costs, and registration fees are usually nonnegotiable, but you could ask about reducing or waiving any purchase option fee or documentation charges.
Toyota Buyout Fees and Rates
You can get a free buyout quote at the end of the lease by logging into your Toyota Financial Services (TFS) account or by contacting TFS at 1-800-874-8822. The alternative is to connect with your dealer to request a payoff quote. Make sure you know all associated costs, including the residual value and any fees, taxes, and remaining lease payments.
You can work with your dealer and TFS to secure financing for your lease buyout. While that might be the most common option, it's not always the best. Depending on your credit score and existing relationship with a lender, you might be able to secure better terms on your loan at a bank or credit union. When you opt for a lease buyout, research the options to find the right choice that works for you.
If you're leasing a Toyota that you're considering owning in the long run, a lease buyout might seem like an easy and financially sensible decision. However, don't rush into buying out the lease until you crunch the numbers and consider all the factors at play.
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