Spelling: lease pur·chase op·tion
What Is a Lease Purchase Option?
A lease purchase option is a provision in a car lease agreement that gives you the right, but not the obligation, to buy your leased vehicle, either at the end of the lease or earlier if allowed. The price to purchase the car is usually set upfront as the residual value and may include a small purchase option fee.
This option is common in most consumer auto leases. It gives you a path to ownership.
Lease Purchase Option Meaning in Car Leasing
In automobile leasing, the purchase option represents a built-in opportunity to buy the vehicle you’ve been driving. It’s not automatic; you have to actively request it. It allows you to:
- Avoid returning the vehicle
- Skip wear-and-tear or excess mileage fees
- Keep a car you’re already familiar with
Your lease agreement will state whether your lease includes:
- An end-of-term purchase option (most common)
- An early lease buyout option (less common)
- A purchase option fee, which usually ranges from $150 to $500
The purchase price itself is typically the residual value, calculated when the lease was signed. It doesn’t fluctuate with the used car market, which can work in your favor if the car holds its value well.
How the Lease Purchase Option Works
Here’s how it typically works:
- Check your lease contract to find the residual value and confirm the option.
- Request a buyout quote from your leasing company 30–90 days before lease-end.
The quote includes:
- Residual value
- Sales tax
- Title and registration fees
- Purchase option fee (if applicable)
You pay for the vehicle using:
- Cash
- A lease-end loan
- Third-party financing
Once payment clears, the title is transferred and the vehicle becomes yours.
Note: You may also need to complete DMV paperwork depending on your state.
Lease Purchase Option in Car Leasing Agreements
You’ll usually find the lease purchase option in a section titled “End-of-Lease Options,” “Purchase Option,” or something similar. It may also appear in your maturity notice from the leasing company.
Look for:
- Residual value: The fixed price to purchase the vehicle
- Purchase option fee
- Timeline: Typically 30 days before or after the lease ends
- Instructions for requesting the payoff quote
If early buyout is allowed, that section will outline additional costs like remaining payments or early termination charges.
Pro tip: If the market value of your car is higher than the lease buyout price, exercising your purchase option can give you built-in equity.
Related Terms for Lease Purchase Option
- Prev Term: lease payoff amount
- Next Term: lease residual value
- Related Terms: lease buyout, residual value, lease-end financing, early lease buyout