Lease Buyout Loans: How to Finance Buying Your Leased Car

In short

The price to buy your leased car at the end of the term is written in the lease: the residual value plus any purchase option fee. Federal leasing rules require the lessor to disclose whether you can buy and at what price. To that, add sales tax (how it applies to a buyout depends on your state), title and registration fees. A buyout loan from a bank, credit union or the leasing company's finance arm pays the leasing company, and the title moves to you with the new lender's lien. Buying makes sense mainly when the car is worth more than the buyout price, or when you are well over your mileage allowance.

Price is set by: Your lease contract
Usually added: Fees and sales tax
Tax on a buyout: Varies by state
Compare it with: Market value of the car

Where the buyout price comes from

When you signed the lease, the leasing company estimated what the car would be worth at the end of the term. That figure is the residual value, and your monthly payments covered roughly the difference between the car's price and the residual, plus a rent charge. At lease end, the residual is the starting point of the buyout price.

The Consumer Leasing Act and its rule, Regulation M, require the lease disclosures to say whether you have an option to buy the car and, if so, the purchase price at the end of the term. For a purchase before the term ends, the lease must give the price or how it is calculated, and when you may use the option. Find that page of your contract before you call anyone.

The same rule covers ending the lease early. The disclosures must state when you may terminate before the end of the term and how any early termination charge is figured, and that charge must be reasonable. If you are thinking of buying the car before the lease ends, compare the early purchase price with what the lease says you would pay at the end, and with the early termination charge if you simply returned it. If you neither buy the car nor extend the lease, you return it to the lessor at the end of the term.

Residual value: fixed in the contract and not reduced by a drop in used-car prices.
Purchase option fee: a set charge in many leases for exercising the option to buy.
Sales tax: how a buyout is taxed depends on your state, including how tax paid during the lease is treated. Ask your state's motor vehicle or revenue agency.
Title, registration and any dealer fees: a dealer that handles the paperwork may add a documentation fee.

Is buying your leased car a good deal?

Compare the total buyout cost with what a similar car of the same year, mileage and trim sells for today. If the market price is higher, you have equity: buying lets you keep a car you know for less than a comparable one would cost. If the market price is lower, you would be paying more than the car is worth, and returning it is usually cheaper.

Reasons to buy

You are well over the mileage limit or face wear charges, the car has been reliable, or its market value is above the buyout price.

Reasons to return it

The buyout price is above market value, the warranty is ending and repairs are coming, or you want a different car.

Reasons to wait

An early buyout may include remaining payments and fees. Compare the early price with the end-of-term price before acting.

Buying the car ends the lease's charges for excess mileage and wear, because you are no longer returning it. On a high-mileage lease those charges can be large, so ask the leasing company for an estimate of the turn-in charges and weigh it against the buyout.

How a lease buyout loan works

Ask the leasing company for a buyout quote in writing, showing the residual, fees and the date the quote expires.
Ask how taxes and title are handled in your state, and whether the leasing company sells directly to you or only through a dealer.
Get loan offers from a bank or credit union and, if offered, the leasing company's own finance arm. Compare APR, term and total of payments.
Let the lender pay the leasing company. The leasing company releases the title, and the new lender is recorded as lienholder.
Update your insurance so it shows you as owner and the new lender as lienholder.

The car is no longer new, so compare buyout offers with used-car pricing. As a yardstick, Experian's second-quarter 2026 data put the average used-car APR at 8.81% for scores from 661 to 780 and 6.29% above 780. Leasing companies set their own rules on who may buy the car, so if a dealer offers to handle the buyout, confirm with the leasing company first.

Example: financing a $19,000 buyout

Example lease buyout, with an assumed 6% sales tax (round figures for illustration)
Item	Amount
Residual value in the lease	$17,400
Purchase option fee	$300
Sales tax at an assumed 6% of $17,700	$1,062
Title and registration	$238
Amount to finance	$19,000

At 8.81% APR, $19,000 costs $471.10 a month over 48 months, with $3,612.80 in total interest. Over 60 months the payment falls to $392.66, but interest rises to $4,559.60. Paying the tax and fees in cash instead of financing them cuts both figures. Try your own numbers in the car payment calculator and compare terms with the loan term comparison.

What to check before you sign

The buyout price matches the purchase option in your lease, and no extra fees appear that the lease does not mention.
The loan amount equals the buyout price, tax and fees, with no add-ons you did not request. GAP and service contracts are optional; see add-ons, GAP and service contracts.
The term is short enough that the loan ends while the car is still worth more than you owe.
The car's factory warranty end date, so you can budget for repairs on an older car.

Questions people ask

Can I negotiate the lease buyout price?

The end-of-term price is written into the lease, so there may be little room to move it, though asking costs nothing. Dealer fees and add-ons on the buyout paperwork are a different matter; you can question or decline them.

Do I pay sales tax on a lease buyout?

Often, but the rules differ by state, including how tax already paid on lease payments is treated. Your state's motor vehicle or revenue agency can tell you what applies to a buyout.

Is a lease buyout loan the same as a used car loan?

It works the same way: the lender pays for the car and holds a lien on the title. Lenders may label it differently, but compare it with used-car offers by APR and total cost.

Can I buy out my lease early?

Many leases allow it, and the lease must say how the early purchase price is figured. An early buyout often costs more than waiting, so compare both.

Sources

Facts on this page were checked against these sources on October 26, 2026. Sales tax on a lease buyout depends on your state; the example uses an assumed rate.

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