First, you need to know the cost of buying out your lease. Read the fine



print of your contract and look for the ?purchase option price?. This

price is set by the leasing company and usually comprises the residual

value of the car at the end of the lease plus a purchase-option fee

ranging from $300 to $500. When you signed on the dotted line, your

monthly payments were calculated as the difference between the vehicle's

sticker price and its estimated value at the end of the lease, plus a

monthly financing fee. This estimated price of the car value at the end

of the lease is what is termed in leasing jargon ?residual value?. It is

the expected depreciation ? or loss in value ? of the vehicle over the

scheduled-lease period. For example, a car with a sticker price of

$40,000 and a 50% residual percentage will have an estimated $20,000

value at lease end.

Now that you know the cost of buying out your lease, you need to determine

the actual value, also termed ?market value?, of your vehicle. So, how

much does your car retail for in the market? To pin down a good, solid

estimate you need to do some pricing research. Check the price of the

vehicle, with similar mileage and condition, with different dealers. Use

online pricing websites, such as Cars.com, Edmunds.com and Kelly Blue Book

for detailed pricing information. Gleaning pricing information from various

sources should give you a fair estimate of your vehicle's retail value.

All you have to do now is compare the two amounts. If the residual value is

lower than the actual retail value, than you're into a winner.

Unfortunately, there is a good chance a car coming off a lease is a little

on the high side.

Don't despair though. Leasing companies know as much that residual values

on their vehicles are greater than their market value and as such are

always on the look out for offers. You can knock down on the price of your

leased vehicle with some smooth negotiating tactics. Put forward a price

that is below your actual target and negotiate hard until you wind up near

that figure.