How to Refinance a Car Lease (Can You Do It?)

You are at the end of your car lease. You love the car, you are under the mileage limit, and you want to keep it. However, paying the full "lease buyout" price in cash isn't an option, and the financing offered by the dealership has a high interest rate.

Can you refinance a car lease? The short answer is yes—but it's technically a two-step process.

Step 1: The Lease Buyout

You cannot refinance a lease directly, because a lease is a rental agreement, not a loan. To refinance, you must first buy out the lease. This converts the rental agreement into a traditional auto loan.

Your leasing company will provide you with a "lease buyout quote." This includes the residual value of the car (what it was estimated to be worth at the end of the lease), plus any remaining payments, fees, and taxes.

Step 2: Refinance the Buyout

Once you know the buyout price, you apply for a used car loan from a bank, credit union, or online lender. The new lender pays the leasing company the buyout amount, and you now make monthly payments to the new lender instead.

When Does it Make Sense?

• Your credit score improved: If your credit was fair when you leased the car, but is now excellent, you can get a much lower interest rate.
• Interest rates dropped: If market rates are lower than the rent charge (interest) on your lease, you can save money.
• You want to modify the car: Leased cars usually have strict rules against modifications. Once you buy it out, you own it and can do what you want.
• You drive more than expected: If you are going to blow past your mileage limit and face huge penalty fees, buying out the lease avoids those charges.

Things to Watch Out For

• Sales Tax: When you buy out a lease, you have to pay sales tax on the residual value. (Some states allow you to roll this into the loan).
• Disposition Fees: Some leasing companies charge a fee just to process the buyout paperwork.
• Negative Equity: If the car is worth less than the buyout price, you will have a hard time getting a bank to finance the full amount.

Calculate Your New Payment

Before going to the bank, find out what your new monthly payment would look like. Use our Refinance Calculator to compare your current lease payment against a new auto loan. You can also use our Auto Loan Calculator to factor in taxes and fees for the buyout.