Lease buyout calculator

How a lease buyout works

Your lease contract locks in two numbers when you sign: a residual value (what the bank thinks the car will be worth at lease-end, set at signing) and a purchase option fee (a paperwork fee charged if you exercise the buyout, usually $300-$500). At lease-end you have three choices: return the keys, finance a new car, or pay the residual + fee + tax + registration to keep the one you already have.

Whether the buyout is a smart move depends on a single comparison: residual + buyout fee vs current market value. If your car is worth more in the open market than the residual, you have positive equity. You can buy it out, immediately sell it privately, and pocket the difference. Or keep it.

Sales tax is the part most people miss

The IRS classifies a lease buyout as a purchase, so you owe state sales tax on the residual amount the same way you'd owe tax buying a used car off the lot. In a 7% sales tax state like California, a $22,000 residual triggers $1,540 in sales tax — that completely changes the math. Some states (notably Illinois and Texas) have special lease-buyout tax rules; check our used car sales tax calculator for your state.

You'll also owe registration and title fees in your state — typically $50-$300, depending on where you are. New leases sometimes already had registration paid through the term, but transferring title at buyout is a new transaction. See your state on the all states page.

Financing the buyout

Most lessees don't have $22,000+ in cash sitting around. Lease-buyout loans exist as a specialty product through banks and credit unions — same lenders as our refinance calculator handles. The math is identical to a used-car purchase loan. APRs typically run 0.5-1.5% higher than new-car loans because the lender is taking on an older vehicle.

When buyout makes sense

• Positive equity (market > residual + fee + tax) — buy it, optionally flip for the difference
• You over-mileaged the lease — buyout avoids the $0.15-$0.30/mile excess-mileage fee at turn-in
• The car has condition issues — turn-in would trigger wear-and-tear charges; buyout absorbs them
• You can't find a comparable replacement at the same price — useful in tight-inventory markets

When to walk away

• Negative equity (market < total buyout cost) — turn in the keys, the depreciation is the bank's problem
• Major repairs are imminent (timing belt, transmission, EV battery degradation past warranty)
• You don't actually like the car — don't lock in 5+ more years of payments out of inertia

Frequently asked questions