Types of Lease Buyouts
- Residential rental. Most residential leases outline what happens if one party wants to end the lease before its term is complete. But in the absence of an early termination clause, either party can propose a lease buyout.
- Commercial rental. Sometimes a landlord wants to redevelop or sell a property before the end of a lease, in which case they might offer a tenant a buyout. The tenant is not legally required to agree. Alternatively, a tenant who wants to close a business before a commercial lease expires might suggest a buyout.
- Car lease. This type of buyout occurs when a lessee wants to buy a car before or after the lease term is complete.
What Fees Do I Pay?
For rental lease buyouts, a break fee may apply. This is the term for an administrative fee charged to terminate a lease early. Most states require landlords to make an effort to find another tenant before charging rent for the months remaining on the lease.
For car lease buyouts, payments could include:
- Vehicle’s residual value. This is the value of the car when the lease expires.
- Purchase option fee. This is a fee the leasing company might charge for administration. Think of this as a buyout fee.
- Documentation and titling fees. These are fees you pay to transfer the ownership of the car. Amounts vary by state.
- Registration fees. Just as with any vehicle purchase, you’ll have to go to the DMV or your state’s equivalent to register the car in your name. Associated fees apply.
- Sales tax. Most states charge sales tax based on the residual value of the leased car. Whether sales tax applies and the amount of sales tax will depend on the laws in your state.
Security Deposits
A break fee is separate from a security deposit. A lease buyout agreement should be clear about what the party terminating the lease owes in relation to the buyout. Still, it should also articulate whether a deposit will be returned or applied to the payment.
FAQ
Is a lease buyout the same as breaking a lease?
Basically, yes. A lease buyout is a safer, cleaner way to break a lease. Terminating a contract prematurely without legal grounds can lead to disputes and lawsuits. Agreeing to the terms of a lease buyout agreement can be a tidier way to end a leasing relationship.
Where can I find the best lease buyout loan rates?
Credit unions, banks, and online lenders offer buyout loans. Since rates vary, it’s wise to obtain a few quotes before you commit to a financing option.
To buy out my car lease, do I have to go to the dealership?
No, not always. Many leasing companies allow you to purchase the remainder of your lease without visiting a dealership.
What’s a fair lease buyout amount?
There’s no standard lease buyout amount. Factors to consider when you negotiate a buyout payment include the length remaining on the lease, current market conditions, and costs each party has to pay as a result of the lease terminating.