*7 min read – Last updated May 25, 2026*
In this article
– How to calculate your real position right now – Disposition, mileage, and wear: the fees most drivers forget – Lease buyout vs return vs new lease: side by side – Buyout financing rates by credit score in 2026 – The three paperwork steps to lock in a buyout – Frequently asked questions
Marcus, a 42-year-old systems analyst in Charlotte, signed a 3-year lease on a 2023 Toyota RAV4 XLE Hybrid in July 2023. The residual at lease-end was set at $24,360, or 56 percent of MSRP. His lease ends in July 2026. He pulled an Edmunds private-party market value on his exact vehicle, same trim, same mileage, two weeks ago: $27,800. He has $3,440 in equity sitting on the table, plus a $395 disposition fee and an estimated $480 in mileage overage he avoids if he buys out instead of returning. His dealership has been pushing a “we will take care of the return paperwork” pitch without mentioning any of it.
How to calculate your real position right now
Three numbers decide whether a lease buyout makes sense, and they are all available within an hour:
The residual (buyout price). It is printed on the lease contract under a line usually labeled “purchase option” or “purchase price at end of lease term.” If the contract is not handy, call the leasing company (Toyota Financial Services, Ford Credit, Honda Financial, etc.) and ask for the current payoff figure. The number on a current payoff may be slightly lower than the contract residual if you are mid-term.
The current market value. Pull two numbers: Kelley Blue Book private-party value and Edmunds True Market Value for the exact trim, mileage, and condition. If both numbers fall above the residual, you have positive equity. If both fall below, you have negative equity. If they split, average them.
The combined fees you would owe at return. Add the disposition fee (in your contract, usually $350 to $500), the mileage overage if you went over the mileage allowance ($0.15 to $0.25 per mile is typical), and the estimated wear-and-tear charges if there are any chips, dents, or interior damage that exceed the contract’s wear standard.
Equity at lease-end is calculated as: (market value) minus (residual) plus (fees avoided by buying out).
In Marcus’s case: ($27,800 market) minus ($24,360 residual) plus ($395 disposition fee) plus ($480 mileage overage) = $4,315 in combined value if he buys out instead of returning. That is the number to compare against the cost of replacing the vehicle.
Disposition, mileage, and wear: the fees most drivers forget
The disposition fee is automatic. It is a flat charge (typically $350 to $500) the leasing company adds whenever a vehicle is returned at lease-end and not purchased. The fee compensates the leasing company for prepping the car for auction. It is waived if the lessee buys out the lease or rolls into a new lease with the same manufacturer.
The mileage overage is calculated against the contract’s annual allowance, usually 10,000, 12,000, or 15,000 miles per year. Drivers who exceeded the allowance pay per-mile penalties at lease-end, at rates between $0.15 and $0.25 per mile. A driver who went 4,000 miles over a 12,000-mile contract pays $600 to $1,000 at return.
The wear-and-tear charge is the most variable. Leasing companies have published wear standards (a credit-card-sized scratch is acceptable; a coin-sized dent is not). At lease-end, the leasing company sends an inspector who documents anything that exceeds the standard. The average wear-and-tear charge on a 3-year lease is $300 to $700, but it can run far higher on heavily used vehicles.
All three fees disappear if the lessee buys out the lease. That is the second half of the equity calculation. For most drivers, the avoided fees alone add another $1,500 to $2,500 to the buyout case before the market-value equity is even counted.
Lease buyout vs return vs new lease: side by side
| Factor | Lease buyout | Return + walk away | Return + new lease | |——–|————–|——————–|——————–| | Disposition fee | $0 | $350 to $500 | Often $0 if same brand | | Mileage overage | $0 | $0.15 to $0.25 per mile over | $0 | | Wear-and-tear charges | $0 | $300 to $700 average | $0 | | Ownership at end | Yes | No | No | | Equity captured | Yes, if market exceeds residual | No, lost to the leasing company | No | | Monthly cost | New buyout loan at 6.17% to 15.61% APR | None until next vehicle | New lease payment, often higher than current | | Best for | Drivers who like the car and have positive equity | Drivers replacing with a different segment | Drivers loyal to one brand wanting newer models |
Buyout financing rates by credit score in 2026
Lease End’s May 2026 lease-buyout APR data shows a wide credit-tier spread. Average rates by score band:
– 800 or above: 6.17 percent – 740 to 799: 6.59 percent – 670 to 739: 8.10 percent – 580 to 669: 11.25 percent – Below 580: 15.61 percent
The choice of lender matters as much as the residual math. Credit unions and online lenders (LightStream, PenFed, Navy Federal for members) generally beat the leasing company’s own buyout loan rate by 1 to 2 points. The leasing company will offer a buyout loan as part of the return process, but it is rarely the best rate available. Get a pre-approval from an outside lender first.
The buyout-loan APR is the swing factor on whether a deal that looks great at residual still works on monthly cash flow. For more on how loan rates and term shape monthly payment math, our breakdown of what an 84-month auto loan actually costs walks through the term/rate interaction. The same logic applies to buyout financing: the longer the term, the lower the payment and the more total interest paid.
The three paperwork steps to lock in a buyout
Once the math points to a buyout, the execution is the easy part. Three steps:
Confirm the current payoff. Call the leasing company directly and request the payoff in writing. The payoff includes the residual, any prorated remaining payments, and applicable taxes. Note: in most states, sales tax applies to the buyout amount; in some (Texas, Illinois) you may have already paid tax up front and the buyout is tax-light. Check before you sign.
Lock the financing. With a pre-approval from a credit union or online lender in hand, set the loan term, rate, and monthly payment before you commit to the buyout. If financing is tight, a 60-month term keeps interest down; a 72- or 84-month term keeps payment down at the cost of more interest. The same loan-fit logic from our understanding your auto loan guide applies.
Execute the title transfer. The leasing company will either send the title directly to your lender or to you, depending on state and lender. You sign the bill of sale, the lender pays the leasing company, and the title transfers. The process takes 7 to 21 days in most states. The vehicle is yours, the disposition fee, mileage overage, and wear charges are all waived, and the equity from the residual-vs-market gap is captured rather than lost.
Before you negotiate, know your financing. Compare auto loan rates from top lenders so you walk in with a real number.
Frequently asked questions
How do I find my lease residual value?
It is printed in your lease contract, usually on the first or second page under a line labeled “purchase option” or “purchase price at end of term.” If you do not have the paperwork, call the leasing company directly and request the current payoff in writing. Most companies send it within 48 hours.
Should I buy out my lease in 2026?
If your vehicle’s current market value (from Edmunds or KBB) exceeds the residual on your contract, plus you would owe disposition, mileage, or wear-and-tear charges at return, the buyout almost always wins. Most 2023 leases hitting term in 2026 have positive equity because used-car prices outran the residual forecasts set in 2023.
Can I finance a lease buyout?
Yes. Most banks, credit unions, and online auto lenders offer lease-buyout loans. Average APRs in May 2026 range from 6.17 percent for credit scores 800 and above to 15.61 percent for scores below 580. Credit unions and online lenders typically beat the leasing company’s own buyout loan rate by 1 to 2 points.
What fees do I avoid if I buy out my lease?
The disposition fee ($350 to $500), any mileage overage at $0.15 to $0.25 per mile, and any wear-and-tear charges the inspector would assess. For a driver over their mileage allowance with some wear damage, those fees alone can add $1,500 to $2,500 to the buyout case.
What if my car is worth less than the residual?
That is negative equity. Returning the vehicle is usually the cheaper option, since you only owe the disposition fee and any mileage or wear charges. Buyouts still work if you love the car, your mileage and wear penalties are high, or the cost of replacing the vehicle in today’s market would exceed the negative equity gap.
