Lease Buyout: Count the Lease-End Charges You Avoid, Not Just the Equity
2026-09-18
Short answer: A buyout is worth it when market value exceeds the residual plus fees and tax — plus the lease-end charges you avoid by not returning the car. On a $19,500 residual against a $21,200 market value, fees and tax make buying cost $21,395 and look like a $195 loss; add the $395 disposition fee and $1,500 of excess mileage you escape, and buying is $1,700 ahead.
Why the usual comparison is wrong
The advice you find everywhere is: compare the buyout price to what the car is worth, and buy if the car is worth more. That is half a calculation. It prices the asset and ignores the alternative, and the alternative — returning the car — is not free.
buyout advantage = market value + charges avoided − (residual + fees + tax + registration)The arithmetic
Worked example — a lease ending with a 19,500 residual, a car worth 21,200, and a driver 6,000 miles over the allowance.
The cost of buying:
| Item | Amount |
|---|---|
| Residual (buyout price) | $19,500 |
| Purchase-option fee | $350 |
| Sales tax at 7% | $1,365 |
| Title and registration | $180 |
| Total cost to buy | $21,395 |
Against a 21,200 market value that is 195 underwater — and on the usual comparison you would hand the car back.
The cost of returning:
| Item | Amount |
|---|---|
| Disposition fee | $395 |
| Excess mileage, 6,000 at $0.25 | $1,500 |
| Total charges avoided by buying | $1,895 |
Both sides together:
$21,200 + $1,895 − $21,395 = +$1,700Buying is $1,700 ahead. Nothing about the car changed between the two calculations; the second one just counted the option it was being compared against.
The mileage point, stated plainly
Excess-mileage charges exist to price depreciation you have already caused. If you hand the car back, you pay for that depreciation in cash. If you keep the car, you own the depreciation instead — you have already paid for it in the buyout price, which was fixed years ago and does not adjust for your mileage.
That is why being over the allowance is the strongest single argument for a buyout, and why the driver most likely to be talked into returning a car is often the one who should keep it.
What would reverse the conclusion
- The car is worth less than the residual. Then the residual guarantee is working in your favour and returning is right. The lessor set that number years ago and carries the risk of having set it too high.
- Tax treatment in your state. Some states have already collected tax through the monthly payments, some tax the full buyout price, and some tax only the residual. A 7% assumption can be several hundred dollars wrong in either direction.
- You are under the mileage allowance and the car is clean. Then the charges avoided fall toward just the disposition fee, and the decision comes back to equity alone.
- The financing rate on the buyout. If you cannot pay cash, the buyout loan’s rate is part of the cost. At a poor credit tier, financing
19,500 can add more interest than the1,700 advantage.
Run your own numbers in the car affordability calculator →