How to Calculate a Lease Buyout

Leasing a car is a useful way to buy a new car and have a relatively low payment. When leasing, the lessor pays only for the car's depreciation and some interest. When a lease is up, the lessor can turn in the car or buy it out. Many owners find buying out a lease to be a necessity. Some lessors have damaged the car and others have driven too many miles; in either case, the lessor doesn't want to pay to turn in the car, so he buys it out.

Locate your lease contract. Look it over to determine the residual value. The residual value is the difference between the purchase price of the car ("capitalized cost," in lease lingo) and the amount of depreciation you have paid for. Your car may be worth more or less than this number, but this is the value in the contract, and it's the value your buyout is based on.

Add licensing and registration fees. Up until your buyout, the leasing company has owned the vehicle. You will need to transfer the title into your name, so make sure you account for title transfer costs in your calculation. Costs will vary from state to state and will depend on the leasing company. Check with your local BMV for state fees and consult your leasing company for their fees.

Add sales tax to the residual value, as well as any fees. The residual value is the payoff amount for the lease--it's not your buyout amount. When you buy out a lease, you will need to pay sales tax. Add your local tax rate to that amount to arrive at the buyout value.


  • If you're not sure of your local tax rate, search your state's website for local tax tables.