Yes, you can usually pay off a leased car early, but it's often not the most financially advantageous move. The process, known as a lease buyout, involves contacting the leasing company to get a payoff quote. This quote will typically include the car's residual value (its predetermined worth at lease-end) plus the remaining monthly payments, and possibly a disposition fee or an early termination penalty outlined in your contract. The main drawback is that you'll be paying for depreciation you haven't used, and you might lose out on any financial incentives that were part of the original lease deal. Before proceeding, it's crucial to compare the buyout cost to the car's current market value to see if you're getting a fair deal.
The decision hinges on a simple comparison: Is the buyout price lower than the car's current fair market value? If so, you have positive equity and buying the car could be a smart financial decision. If the buyout price is higher, you have negative equity and would be overpaying.
Here’s a simplified example of how the numbers might look for a typical lease:
| Lease Component | Amount | Notes |
|---|
| Residual Value | $18,000 | Set at signing, non-negotiable |
| Remaining Payments | $4,800 | 8 payments of $600 each |
| Early Termination Fee | $350 | Varies by leasing company |
| Total Buyout Cost | $23,150 | What you would pay to own the car today |
| Current Market Value | $21,500 | Based on Edmunds, Kelley Blue Book |
| Financial Position | Negative Equity ($1,650) | Buying out may not be financially wise |
Before you commit, check your lease agreement for specific clauses. Some lenders, like Ally Financial, have banned third-party buyouts, meaning only you can purchase the car. Always get the official payoff amount directly from the leasing company, as it can change daily due to interest accrual.
