Written by: Eric Bank
Edited by: Lillian Guevara-Castro
Reviewed by: Ashley Fricker
You have several options when your car lease contract is about to expire. You can simply return the car and walk away. Alternatively, you may lease or buy a different vehicle. This article discusses yet another option: Buying out the lease.
We explain how a buyout works and review several of the best lenders that finance lease buyouts. One of them may be perfect for your needs.
Best Subprime Lease Buyout Loans
Not all automotive lenders provide lease buyout loans. The following do, and we consider them to be among the best options for consumers with poor credit.
- Prequalify in minutes without impacting your credit score
- Refinancing loans save an average of $191 per month
- 125% financing available for cash-out refis
- PenFed Credit Union membership required but can be applied for at the same time as your loan
- See application, terms, and details.
| Interest Rate | In Business Since | Application Length | Reputation Score |
|---|---|---|---|
| 5.19% and up | 1935 | 5 minutes | 8.5/10 |
Virginia-based PenFed Credit Union offers new and used car loans, auto refinancing, and lease buyout loans. Unlike most credit unions, this one has open enrollment without prequalifying conditions. Membership requires only $5 to open an account. PenFed checks the credit and debt-to-income ratio of car loan and auto refinance applicants.
2. RefiJet
- RefiJet helps people lower their monthly auto payment
- Pre-qualifying for a refinance auto loan does not impact your credit score
- Nationwide network of lenders
- Presents you with options from lenders that fit your situation
- See application, terms, and details.
| Interest Rate | In Business Since | Application Length | Reputation Score |
|---|---|---|---|
| Varies | 2016 | 5 minutes | 8.0/10 |
RefiJet is an auto refinance specialist that can help you buy out your lease through an auto loan rather than making a large balloon payment, allowing you to pay over time. It makes buyout auto loans anytime during the lease period – you don’t have to wait until the end of the lease. RefiJet has an A+ rating from the Better Business Bureau, and customers consistently rate its customer service highly.
3. LendingTree
- Auto loans for purchase, refinance, and lease buyouts
- Nationwide lender network
- Get matched with up to 5 lenders that fit your financial profile
- It only takes a few minutes and is free with no obligation
- See application, terms, and details.
| Interest Rate | In Business Since | Application Length | Reputation Score |
|---|---|---|---|
| Varies | 1998 | 4 minutes | 9.5/10 |
LendingTree can find applicants multiple lease buyout offers within minutes through a quick online request process. Its website also advertises competing lease buyout loan offers, including interest rates, loan amounts, and repayment periods. The handy online calculator helps you estimate your monthly payment for any loan rates, terms, and amounts.
- Loans for new, used, and refinancing
- Queries a national network of lenders
- Bad credit OK
- Get up to 4 offers in minutes
- Receive online loan certificate or check within 24 hours
- See application, terms, and details.
| Interest Rate | In Business Since | Application Length | Reputation Score |
|---|---|---|---|
| Varies | 2003 | 2 minutes | 8.5/10 |
When you submit a quick online application, myAutoloan.com will find you up to four lease buyout loan offers in minutes. The application requires information about your monthly housing costs, employment, current lease, and vehicle. Upon approval, you’ll receive an online certificate or check within 24 hours.
Additional Sources of Lease Buyout Loans
These lenders also provide lease buyout loans. You may want to try one of these when your lease contract is about to expire.
5. Tresl
Prequalifying for a Tresl lease buyout loan from a network lender takes only minutes without affecting your credit. You then speak with a Tresl auto financing advisor who will explain the process and handle all the details, including vehicle payoff and retitling. You do not typically need to return to the dealership when buying a leased vehicle, thanks to Tresl’s lease management service.
6. LightStream
If you qualify, LightStream can fund your lease buyout loan as soon as the same day you apply. Auto loan amounts range from $5,000 to $100,000. LightStream determines your interest rate based on your credit, loan term, and the desired loan amount. You can reduce your auto loan rate by half a percentage point by agreeing to automatic repayment.
7. Autopay
Autopay can find you one or more lease buyout loan offers with no payments for 45 days. The company has helped fund more than 700,000 auto loans to date. Autopay’s auto financing network comprises banks, credit unions, and licensed lenders. Loan amounts are available from $2,500 to $100,000, with a maximum loan term of 96 months.
What Is a Lease Buyout Loan?
For those who have enjoyed driving a leased vehicle in recent years, the prospect of returning it to dealerships or leasing companies can be daunting. That’s where options such as lease buyout loans come in. Buyouts enable lessees to purchase their vehicles from creditors or dealerships outright.
In other words, lease buyouts provide drivers with an alternative path to full ownership of their cars. Rather than simply returning their vehicles at renewal time, drivers can leverage this financing tool as a way to finally own what they’ve been leasing for two or three years.
Regarding the transaction specifics, lease buyout loans are similar to auto loans. But instead of taking a loan for the car’s selling price, you finance only the portion equal to its selling price minus its residual value.
At the start of the lease, the dealer assigns the vehicle’s residual value, the price you would have to pay if you bought the car at lease-end. Essentially, the residual value is what the vehicle will be worth after accounting for depreciation throughout the lease period.
Buyout loan interest rates and other vital details vary based on your credit score, credit history, income level, and other factors. You may favor this outcome if you’ve grown accustomed to your vehicle and want to keep it.
What Are the Requirements For Getting a Lease Buyout Loan?
You should know about several requirements when applying for a lease buyout loan. These include having an acceptable credit score, stable income, proof of insurance, and possibly a down payment.
- Having an acceptable credit score: An adequate score improves your approval chances significantly. Most lenders will only accept FICO scores above 650, but the reviewed lenders are more flexible.
- Collecting a stable income: When lenders assess applications, they require borrowers to demonstrate their capacity to repay the loan amount by providing proof of steady employment and earnings history.
- Documenting proof of insurance: You must provide proof of insurance before closing the loan.
- Having equity in the vehicle: This means that the car’s value is at least equal to the residual value of the car at the end of the lease. If the residual value is too high, you would save money by buying a different vehicle.
- Making a down payment: Some lenders may waive the down payment, but many require at least a token amount to secure the car.
- Passing a vehicle inspection: Your insurance provider may require your vehicle to pass inspection to avoid underpricing a policy for a damaged car.
It’s a good idea to shop around for a buyout loan. Comparison shopping helps ensure you receive the best possible loan offer with terms that suit your finances.
How Do I Apply For a Lease Buyout Loan?
You should follow specific steps if you have leased your car in recent years but are now considering buying out the lease. You will want to prepare by researching the vehicle’s value and your credit score, followed by shopping for, negotiating, and closing the loan.
You can start the application process by assessing the estimated value of your car in today’s market. Use online resources such as Kelley Blue Book to evaluate whether buying the car at its residual value makes more financial sense than seeking other options.
It’s also vital to check your credit history and score before applying for any loans or other financing options. This step lets you know whether you qualify for a loan and how much interest you’ll have to fork over.
Next on your to-do list is to shop around for the best deals. Comparing multiple offers will help you land the best deal possible on a lease buyout loan with a competitive interest rate.
Look for lenders specializing in this kind of financing, as they may offer unique packages or deals that suit consumers seeking lease buyouts. If you use a lender network, one application can attract multiple loan offers.
After you choose a direct or network lender, gather all the required documents (i.e., your personal information, financial details, vehicle specifications, and proofs of income, employment, and insurance) when submitting your application for approval. Make sure you fill out the application accurately. Otherwise, you may experience delays and possible rejection.
Read the loan terms carefully before accepting any offer. Ensure you fully understand all the limits and costs — reputable lenders will be transparent about these details.
You may get instant loan approval, but the process may sometimes drag out due to missing or conflicting information. If you receive approval, you can sign the loan agreement and hit the road in your newly purchased vehicle.
What Are the Pros and Cons of Lease Buyouts?
A lease buyout loan can make sense if you are happy with your leased car and its residual value is no higher than its current market value. A possible disadvantage is that a buyout may cost more than purchasing a different vehicle.
As the lease approaches its expiration date, some consumers evaluating their options may be the sentimental types who may feel the car is more than just a means of transportation. They may feel it has become a part of their household.
Be it memories or functionality — having an attachment so strong that you do not want to part ways is understandable. Nonetheless, examining a buyout loan’s pros and cons is wise, as it is only one of several alternatives you can choose.
Pros
- Loyalty: You can keep the vehicle you’re comfortable with, perhaps for the long term.
- Savings: You may save lots of money if the vehicle’s residual value is below market price. In effect, you are buying the car at a discount.
- Fees: You avoid lease-end fees for damage, mileage overage, and excess wear and tear, among other expenses.
Cons
- Monthly payments: The loan term on a new car purchase may run as long as eight or nine years. Lease buyout loans typically have shorter repayment periods, which may translate into higher monthly payments (depending on the residual value).
- Smaller lender pool: Not all auto lenders offer lease buyout loans. This may limit your options when comparison shopping.
- Residual value: The lease’s residual value may be higher than what you’d pay to buy the same used car off a lot. In effect, you would have to pay a premium to buy out the lease.
- Long-term costs: Depending on the car’s condition and your warranty arrangements, buying the vehicle at lease-end may expose you to higher long-term costs than leasing or buying a new vehicle outright.
Consider these tradeoffs before committing yourself to a lease buyout loan — even if keeping your dream car longer seems inviting.
Don’t Let Bad Credit Keep You From Buying Your Leased Vehicle
If you have poor credit, securing a lease buyout loan can be more challenging, but it’s by no means impossible. The reviewed lenders work every day with subprime borrowers looking to continue driving their cars after the lease expires. Leasing offers you options, so understand your alternatives before deciding how to handle the end of a vehicle lease.
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