Decide whether to buy out your lease at residual or return the vehicle.
Buyout cost
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Equity (market - buyout)
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Residual value
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Your breakdown
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What the residual really represents
When you signed your lease, the leasing company guessed what your car would be worth at the end of the term and printed that guess as a percentage of MSRP. That figure is the residual. Your monthly payment was built to cover the depreciation between the capitalized cost and that residual, plus rent charge. The crucial point for the buyout decision is that the residual was locked in years ago and does not move, no matter what happens to the used-car market. That fixed number is what creates buyout opportunities, because the real market can drift far above or below the lender's original guess.
A 40,000 dollar SUV at lease-end
Take the values the calculator loads by default. You leased a vehicle with a $40,000 MSRP, the contract sets a 55 percent residual, the purchase-option fee is $395, and a quick check on Kelley Blue Book and Edmunds puts the current private-party value at $26,000. The buyout math is short.
The car is worth $3,605 more than it costs you to buy it. That positive gap is lease equity, and it is exactly the situation thousands of lessees found themselves in after used-car prices spiked from 2020 through 2023. You can capture that value two ways: buy the car and keep driving a vehicle you already know, or buy it and resell it to a dealer or private party to pocket the difference.
The costs this tool deliberately leaves out
A buyout decision in the real world has a few line items the headline math skips. Most states charge sales tax on a lease buyout, so a $22,395 purchase in a 7 percent state adds roughly $1,570 in tax. There may be a documentation fee and a new title and registration cost. On the other side of the ledger, returning the car can trigger excess-mileage charges, often 15 to 25 cents a mile, plus wear-and-tear penalties for dings and worn tires. My practical rule is to total the return penalties you would actually owe and add them to the equity figure, because avoiding a $1,200 mileage bill is just as real as gaining $1,200 of equity. The tool flags a buy when equity clears $500, but a thin margin can evaporate once tax is added, so treat anything under about $1,500 as a genuine coin flip.
Can I negotiate the residual buyout price?
Usually not with the original lender. The residual and purchase-option fee are contractual, so the captive finance arm that holds your lease has little reason to discount them. The exception is end-of-term, when some lenders quietly authorize lease-buyout deals to avoid the cost of remarketing the car at auction. It never hurts to ask, but do not count on it. Third-party buyout restrictions have also tightened, so confirm whether an outside dealer is even allowed to purchase your specific lease before you plan around it.
What if the car is worth less than the residual?
Then you are in negative equity, and the answer is almost always to return it. The whole point of a closed-end lease is that the lender, not you, eats the depreciation risk. If your $22,395 buyout sits above a $20,000 market value, walking away hands that $2,395 loss back to the leasing company, which is precisely the protection you paid rent charge for. Buying an underwater lease only makes sense for a specific reason such as a hard-to-find trim or a vehicle in better-than-average condition for the model.