Car loan form or rental application document. Man signing paper contract to sell premium vehicle. Buyer or distributor in agency. Car insurance or financial documentation. Agreement, policy or financial agreement.
(iSeeCars) — If you’re currently leasing a car and it’s nearing the end of your lease term, you may be wondering what to do next. While new car inventory is picking up, some new cars are selling above MSRP and car leases are also significantly more expensive than they were before the pandemic. And while used car prices continue to fall, they’re also more expensive than they were before the pandemic.
In light of today’s new and used car market, purchasing your car lease may be your smartest choice. How does the process work and should you buy your car rental? We have the important answers.
How a hire purchase works
If you are leasing a vehicle, most finance companies will include a purchase option as part of your lease agreement. Your car lease will state the final purchase price of the lease based on the car’s residual value, which was estimated when you signed your lease. Leasing companies will often contact you at the end of your lease term to let you know your termination options, which will include the option to purchase or return the vehicle to the dealer.
Residual value in the current market
Dealers calculate a vehicle’s residual value based on its projected depreciation, and that value is locked in at the start of a car lease. And if the start of your lease was before the current supply chain issues, your car lease purchase price could be well below current market value. This means that at the end of the lease, you can buy your leased vehicle and sell it for a profit, or you can continue to drive your lightly used car at well below market value.
Understand the value of your rental car
Here’s how you can compare the vehicle’s residual value or purchase amount to its market price. To calculate the vehicle’s market value, you can use pricing tools such as iSeeCars Free VIN, Kelley Blue Book, or Edmunds. Be sure to check your original contract for additional charges, such as a purchase option fee, to determine the total amount you will pay for the vehicle.
And keep a close eye out for “bundled” fees from the dealer or finance company that weren’t specifically stated in your lease.
Leased car purchase price: other factors to consider
There are many factors that contribute to the purchase price of your car. This includes the make, model, residual value and current value of the vehicle. The amount you paid for a down payment will also affect the purchase price.
Additional fees include:
- Purchase Fee / Purchase Option Charge: The leasing company will charge you for choosing to purchase the car instead of surrendering it.
- State sales tax
- Registration fees
Can I finance my hire purchase?
You can finance your hire purchase just as you would a regular used car purchase. The dealership will be willing to offer you financing, but you should also look into outside financing options just as you would with a typical auto loan. This means comparing interest rates from other lenders, including banks and credit unions, to see who will give you the best rate on your car lease purchase loan. Some lenders even offer car loans specifically for hire purchase. Keep in mind that the shorter the loan term, the more you’ll save on interest payments, but the higher your monthly payments will be. This means that you should go for the shortest loan term that you can afford. Also, your credit score will determine your loan rate, so make sure it’s in good standing to get a competitive rate. If you have a bad credit score, you should consider having a cosigner.
Other things to consider
Anyone who has rented a car knows about the extra fees that usually come at the end of the rental. These fees include exceeding mileage limits or any excess wear and tear your vehicle may have, such as scratches or dents. Buying your lease will get you off the hook for these fees, so if there’s an issue with your lease, it’s one more reason to buy your car when your lease ends instead of returning it – him
Some leases offer early lease purchases that allow you to purchase the vehicle before your term expires. Be sure to check your lease to see if you will have to pay additional fees for an early purchase. If there are fees involved, it’s probably a smarter decision to wait until the end of the lease.
bottom line
Lease shopping your vehicle can be a lucrative way to save on a lightly used vehicle in today’s market. You’ll also avoid low inventory and new car profits. Plus, you can enjoy the savings that come with buying a used car in today’s market by taking the guesswork out of how the previous owner drove and maintained the car. You can even sell your vehicle to a private seller for a profit if you no longer want to drive it. So, if you’re nearing the end of your lease, you should at least consider buying your vehicle instead of taking out another lease or buying a new or used car to replace it.
More from iSeeCars:
If you’re ready to start the car buying process, you can search over 4 million new and used cars with the iSeeCars.com car search engine that helps shoppers find the best car deals by providing key information and resources valuable, such as the free iSeeCars. VIN check and ranking of the best cars.
This article, Buying a car rental: is it a good idea? originally appeared on iSeeCars.com.
