What Is a Lease Purchase Option?

A lease purchase option is the right to buy your leased vehicle, usually at the end of the lease term, for a predetermined price stated in your contract. This price is typically based on the vehicle’s residual value set at the beginning of the lease.

It allows you to transition from leasing to ownership instead of returning the car.

How a Lease Purchase Option Works

When you sign a lease agreement, the contract includes:

• The residual value (projected value at lease end)

• The purchase option price (buyout price)

• Any applicable purchase option fee

At the end of the lease, you can:

1. Return the vehicle

2. Buy it for the agreed purchase option price

3. Lease or finance another vehicle

The purchase option price does not change based on market conditions.

Is the Purchase Option the Same as the Buyout Price?

Yes, in most consumer leases:

• Purchase Option Price = Residual Value + any purchase option fee

For example:

• Residual value: $15,000

• Purchase option fee: $350

Total buyout amount: $15,350 (plus taxes and registration fees)

When Does It Make Sense to Use the Purchase Option?

Buying your leased vehicle may be beneficial if:

• The vehicle’s current market value is higher than your buyout price

• You’ve exceeded mileage limits

• The vehicle is in excellent condition

• You prefer keeping a car you’re familiar with

If the market value is lower than the buyout price, returning the vehicle may be the better option.

Can You Use the Purchase Option Early?

Some leases allow an early buyout, but:

• The payoff amount may include remaining payments

• Additional fees may apply

• You must request an official payoff quote

Policies vary by leasing company.

Are There Taxes on a Lease Purchase Option?

Yes. In most states, you must pay:

• Sales tax on the purchase amount

• Title and registration fees

Tax rules vary by state.