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How to Read a Car Lease Agreement (and Prepare for a Lease Buyout)
Published 6/6/25
Read Time: 7 minutes
TL;DR: Car lease agreements are filled with fine print, confusing terms, and numbers that make your head spin. Understanding your lease contract is crucial—especially if you’re considering a lease buyout. Look out for key details like the buyout price (residual value), mileage limits, fees, and early termination clauses. Lease End makes it easy to navigate your lease agreement and secure the best loan if you decide to buy out your lease.
Let’s be honest—nobody enjoys reading contracts. They’re long, full of legal jargon, and about as thrilling as watching paint dry. But when it comes to your car lease agreement, skipping the fine print could cost you thousands.
Why Reading Your Lease Agreement Matters
Whether you’re at the beginning of your lease or nearing the end and considering a buyout, understanding your lease terms will help you:
✔ Avoid surprise fees
✔ Know your buyout options
✔ Make smart financial decisions
✔ Know your buyout options
✔ Make smart financial decisions
Let’s break down the most important sections of your lease agreement so you can actually understand what you’re signing—and prepare for a potential lease buyout.
Key Sections of a Car Lease Agreement
1. Residual Value (aka Your Buyout Price)
This is the pre-determined price of your car at the end of your lease. If you decide to buy out your lease, this is the number that matters most.
👀 Example: If your lease agreement says the residual value is $20,000, that’s how much you’ll need to pay (plus taxes and fees) to buy the car. If the car is worth more than that on the market, a lease buyout could be a great deal.
🔍 Where to Find It: Look under the “Purchase Option” or “Residual Value” section in your lease contract.
2. Mileage Limits (and Overages)
Most leases come with an annual mileage cap—typically 12,000–15,000 miles per year. Go over that, and you’ll pay a per-mile fee when you return the car.
👀 Example: If your lease allows 36,000 miles over 3 years, but you return the car with 45,000 miles, you’ll be charged for 9,000 extra miles. At $0.25 per mile, that’s $2,250 in fees! Buying out your lease could help you avoid this.
🔍 Where to Find It: Look for “Mileage Allowance” and “Excess Mileage Charges” in your lease agreement.
3. Disposition Fee (aka the Lease Return Fee)
When you return your leased car, most companies charge a disposition fee—which is basically a “thanks for leasing, now pay us one last time” fee.
👀 Example: If your lease agreement states a $500 disposition fee, that’s how much you’ll owe when you return the car—unless you buy it out.
🔍 Where to Find It: Look under “Lease-End Fees” or “Disposition Fee”.
4. Wear & Tear Charges
Leasing companies expect some wear and tear, but if they decide your car is too “loved,” they’ll charge you for excessive damage.
👀 Example: A few small scratches? No problem. A dented bumper or stained seats? That’s gonna cost you. Buying out your lease could help you avoid those repair fees.
🔍 Where to Find It: Look for “Excess Wear & Tear” or “Vehicle Condition Standards”.
5. Early Termination Clause
Thinking of ending your lease before the contract is up? Be prepared to pay big. Many lease agreements require you to pay the remaining lease balance, penalties, and fees.
👀 Example: If you have 12 months left on a $400/month lease, you could owe $4,800 plus early termination penalties if you return it early.
🔍 Where to Find It: Look under “Early Termination” or “Lessee Responsibilities”.
6. Sales Tax on a Lease Buyout
Yes, you’ll likely owe sales tax if you buy out your lease—but it depends on your state. Some states only charge tax on the buyout price, while others charge tax on the full original price of the car.
🔍 Where to Find It: Your lease agreement might not mention taxes—check your state’s DMV or ask Lease End for details.
How to Prepare for a Lease Buyout
If you’ve read your lease agreement and decided that buying out your lease is the way to go, here’s what to do next:
- Check Your Buyout Price – Find the residual value listed in your lease.
- Compare Market Value – Check sites like Kelley Blue Book to see if your car is worth more than the buyout price. If it is, buying it out could save you thousands.
- Secure Financing – Unless you’re paying cash, you’ll need a lease buyout loan. Lease End shops multiple lenders to get you the best rates.
- Avoid the DMV Hassle – Lease End handles all the paperwork, including title transfers and registration.
Final Thoughts: Understanding Your Lease Agreement Pays Off
Your lease agreement might not be the most exciting read, but knowing what’s inside can save you serious money. Whether you’re planning to return your car or buy it out, understanding key terms like residual value, mileage fees, and lease-end charges will help you make the best financial decision.
Thinking about a lease buyout? Let Lease End handle the financing, paperwork, and DMV headache—so you can keep the car you love without the stress.
About the author
Adam Broud
Adam Broud is a writer and comedian based out of Salt Lake City, Utah. As a professional stand-up comedian with an MBA, his writing uniquely blends the worlds of business and comedy. Adam's writing for ads and comedy has appeared in places such as Buzzfeed, Vanity Fair, your television, and his mom's box of keepsakes. Feel free to review his writing from any of those places, but just know it's kinda weird if you choose his mom's house.
Lease End's mission is to empower auto lease owners with the technology to easily exit their lease. If you'd like to learn more about the lease-end options available to you, please don't hesitate to contact us. Our expert advisors are always prepared to answer your questions and are committed to finding the right plan for your individual needs.
©2025 Lease End
©2025 Lease End
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