Lease Buyout

The process of purchasing a leased item, such as an automobile, before or upon expiration of the contract term is known as a lease buyout. This mechanism allows the lessee to assume ownership of the asset by paying a predetermined amount called the residual value. The inclusion of this fixed price into the original agreement simplifies budgeting because the cost of acquisition is known upfront.

Making the decision requires comparing the pre-set residual value against the vehicle's current fair market value. If the car’s actual worth on the open market significantly exceeds the contracted buyout figure, purchasing the asset provides substantial savings compared to simply returning it and starting a new lease. Conversely, if the market has declined, buying out the agreement might be financially unwise.