Lease Buyout Loans

Here's what you need to know about lease buyout loans.

It is coming towards the end of your car lease arrangement and you want to buy out the remainder of your term. Unfortunately, although you knew this was looming on the horizon, you are now financially unprepared to pay the amount out of pocket and will need an auto loan. This is when a lease buyout loan comes in handy.

Lease Buyout Loan Definition

Lease buyout loans are a way for individuals who have leased their vehicles to borrow the money they need to pay off the remainder of their lease debt. It works when a third party, in this case a commercial lender, pays out the remaining balance on the lease to the leasing company. In return, the borrower makes monthly payments to that commercial lender.

Why Lease Instead of Buy?

Many times, people choose to lease their vehicles because it’s cheaper than actually buying them. Or sometimes people are devout leasers because they are car aficionados and need to get the latest and greatest as soon as it hits the market. Either way, leasing gives provides a degree of flexibility while lease buyout loans can help people with the process.

Leases are usually shorter term loan agreements, running from about three to five years in length. Many small businesses with limited capital may also choose to lease vehicles for their company car. A lease buyout loan is available to them as well, allowing them a way out if they find themselves short on cash by the end of the lease term.

Lease Buyout Loan Rates

In general, the leased car serves as the collateral for the loan, making a lease buyout loan a secured loan. The amount of this secured loan usually covers the remaining lease balance plus any applicable fees or taxes.

Even though the loan is secured, there are requirements that must be met in order to qualify for a lease buyout loan with an affordable rate. Applicants must be able to show a good credit score and report demonstrating their past positive financial responsibility. The best thing you can do to find a low lease buyout loan rate is shop several lenders for the most competitive rate, rather than settling for the first option for qualify for.