Car Lease Buyout Calculator

Understanding the Lease Buyout Option At the end of a car lease, you typically have three options:

1. Return the car and lease or buy a new one
2. Buy out the leased car at the pre-agreed residual value
3. Walk away entirely

The residual value is set at the beginning of the lease and may not reflect actual market conditions at lease-end.

When a Buyout Makes Sense If the market value of your car exceeds the residual (buyout) price, you have built-in equity. Buying the car is like getting an instant discount vs. buying the same vehicle on the open market.

Equity = Market Value - Residual Value Positive equity = buyout price is below market value → consider buying

Return Fees Most leases charge a disposition fee ($300-$500) when you return the car. Excess mileage fees typically run $0.15-$0.25 per mile over the limit. Excessive wear-and-tear charges can add hundreds more. These fees make the effective cost of returning higher than the disposition fee alone.

Financing the Buyout Monthly Payment = P × r(1+r)^n / ((1+r)^n - 1) Where P is the amount you actually finance, r the monthly rate, and n the loan term in months. P is the residual plus the sales tax, because that is what you hand over at the counter.

Tax Consideration In many states, buying out a leased vehicle triggers sales tax on the full residual value.
Check your state rules, because this can add thousands to the buyout cost and it is the line that most often flips the answer.

Which way the return fees point

This is the part that is easy to get backwards. Return fees are a cost of handing the car back, so buying it avoids them. They make the buyout look better, not worse, and they add to your equity rather than eating into it.

Buying out: you pay the residual plus tax and you own a car worth the market value. You are ahead by the equity.
Returning: you own nothing and you pay the disposition and mileage bill.

So the advantage of buying = equity plus the fees you did not have to pay.

Worked example

An $18,000 residual, $21,000 market value, 7% sales tax, $500 of expected return fees:

• Sales tax on the buyout = $18,000 × 0.07 = $1,260
• True cost to buy = $18,000 + $1,260 = $19,260
• Equity = $21,000 − $19,260 = $1,740
• Return fees avoided = $500
• Net advantage of buying out = $1,740 + $500 = $2,240

Without the sales tax line that equity would look like $3,000, which is why the tax box matters more than it seems. And note what happens near the boundary: at $300 of equity against $500 of fees, buying is still $800 ahead, even though the car is worth less than it costs to buy.