Should you buy your leased car? Compare payoff vs. market value, fees, and tax
| Line Item | Typical Range | Notes |
|---|---|---|
| Payoff / residual amount | Set by contract | Residual + remaining payments; call the lender for the exact figure |
| Purchase-option fee | $0 – $500 | Most brands charge around $300 |
| Sales tax on payoff | 0% – 10.5% of payoff | Most states tax the payoff; a few credit tax already paid at lease signing |
| Title & registration | $50 – $250 | Same as any used-car transfer in your state |
| Disposition fee | Waived when buying | $300 – $500 charged only if you return the car |
| Lease-end inspection | $0 – $150 | Usually skipped when you buy, but third-party buyouts may need one |
Tax treatment varies by state and some lenders add a small buyout administrative fee. Your lease contract's "purchase option" section lists the fee and any conditions, and the lender's payoff quote is the number that counts.
A lease buyout means paying the lender the payoff amount, the residual value plus any remaining payments, to keep the car. The decision is almost purely arithmetic: compare what you'd pay all-in against what the car would sell for on the open market today.
Total buyout cost = payoff + purchase-option fee + sales tax × (payoff + fee) + title/registration. Buyout equity = market value − total buyout cost. Cost of returning = disposition fee + excess wear and mileage charges. Positive equity says buy (or resell and pocket the spread); negative equity says return the car and let the lender eat the loss.
Find your payoff on your lease statement or by calling the lender, then get the car's market value from Kelley Blue Book, Edmunds, or a firm offer from CarMax or Carvana. Firm offers beat estimates, because a retailer's number is one you can actually transact at. Enter your state's sales tax rate, a realistic fee total, and the loan terms you'd use to finance the buyout if you're not paying cash.
Take a three-year-old SUV with a $18,500 payoff and a market value of $21,500. The contract carries a $300 purchase-option fee, sales tax is 6%, and title and registration run $150. Tax applies to the payoff plus the fee: 6% of $18,800 is $1,128. All-in: $18,500 + $300 + $1,128 + $150 = $20,078. Against a $21,500 market value, that's $1,422 in equity, so buying wins whether you keep the SUV or immediately resell it. Financing the $18,500 payoff at 7.5% for 48 months runs $447.31 a month.
Flip the numbers and the answer flips. If the same car is worth $13,800 against a $14,200 payoff with 8.25% tax and $200 in fees, the all-in buyout is $15,896.25, a $2,096.25 loss versus just returning it and paying a $400 disposition fee. When the market is below your payoff, walk away, that gap is the lessor's problem, not yours.
Buy when the car's market value exceeds your payoff plus buyout costs. Your payoff (or residual plus remaining payments) plus the purchase-option fee, sales tax on that amount, and title and registration makes your all-in cost. If the car is worth more than that number, you have equity and buying wins, either to keep or to resell. On an $18,500 payoff with a $300 fee, 6% tax, and $150 in DMV fees, the all-in cost is $20,078, so any market value above that is profit you'd otherwise hand back.
Total buyout cost = payoff amount + purchase-option fee + sales tax on the payoff and fee + title and registration fees. For an $18,500 payoff with a $300 fee, 6% tax, and $150 in DMV fees: tax is $1,128 and the all-in total is $20,078. Check your lease contract for the payoff number or call the lender, since it includes any remaining payments plus sometimes a small administrative fee.
Expect a purchase-option fee of $0 to $500 (most brands charge around $300), sales tax on the payoff in most states, and $50 to $250 in title and registration fees. The good news is the disposition fee, the $300 to $500 charge for returning the car, is waived when you buy, and many lenders skip the purchase inspection entirely. Third-party buyout services and some states add documentation fees on top.
Usually not with the lender directly, since the payoff is a contract term set at signing. Where negotiation lives is market value: get buyout quotes from CarMax, Carvana, Vroom-style retailers, and dealers, because some states let third parties buy out the lease, and their offers sometimes beat your payoff by thousands. If a retailer pays your lender $18,500 for a car worth $21,500 and hands you the $3,000 spread, you captured the equity without financing anything.
Compare the two all-in numbers. Buying costs payoff plus fees and tax, but leaves you owning an asset worth its market value, so the real cost is total buyout minus market value. Returning costs the disposition fee ($300 to $500) plus excess wear and mileage charges, but only when the car is worth less than the payoff does walking become cheaper. When used-car values spiked in 2021-2022, buyouts routinely beat residuals by $3,000 to $8,000; in a normal market the spread is thinner, so run the numbers both ways.