In most cases, you can’t negotiate the buyout price at the end of your car lease.
At the beginning of your car lease, the leasing company estimates the car’s residual value, or what the car will be worth at the lease’s end. Based on that valuation, your buyout cost is specified in the lease agreement and usually won’t change.
Experts say any negotiating room depends on whether your lease is written through the carmaker’s finance arm — called a “captive lender” — or through a third-party bank or credit union. A recent study by Market IHS finds that captive lenders facilitate 90% of all U.S. car leases.
“To our knowledge, and we’ve seen a lot of lease contracts, basically no one has ever successfully negotiated a buyout price from a captive lender,” says Michael Sin, co-founder of Leasehackr.com, an online community dedicated to car leasing. “Maybe that has happened with a third-party bank.”
If the lessee doesn’t want to buy the car and returns it, captive lenders can sell it at auction or as a certified pre-owned vehicle through a dealership. “It’s really not in the captive lender’s best interest to negotiate a lower buyout price,” Sin adds.
Negotiating a lease buyout in 2021
Scot Hall, executive vice president for Swapalease.com, a marketplace for car lease transfers, says, “I would say a person would have more success negotiating a lease buyout with a bank than a captive lender. The issue is that there are fewer banks doing leases now. So, the possibility of negotiating the buyout price is not likely.” He adds that it’s even less likely in the current car market.
A shortage of semiconductor chips has caused a low inventory of new cars, higher demand for used vehicles and inflated car prices. Many consumers coming to the end of their car leases are finding the market value of their cars is much higher than the buyout price. Lenders have little reason to agree to a lower buyout price if they can take the car back and sell it for much more.
Instead of returning leased cars or negotiating the buyout, many consumers buy their cars for the original buyout price and then sell the vehicles for a profit.
When can you negotiate a lease buyout?
Can you successfully negotiate a lower buyout price if your auto lease is among the 10% consigned to a bank, credit union or another non-captive lender? Again, it depends on the lender and its policies. For example, some lenders have a “no negotiation” rule for the lease buyout price within the lease agreement.
If a lender does offer a lower buyout price, it will most likely be driven more by its policies and less on your negotiating skills. Says Sin, “We have seen instances where it’s offered by the lender, but it’s generally based on some type of internal formula. So the lender might say, ‘We can offer you a lower buyout price.’ But it’s really rare and sort of a take-it-or-leave-it situation.”
This post was originally published on Nerd Wallet
