For many drivers, leasing a vehicle can be an attractive option to reduce monthly payments. It also opens the door to driving a newer car more often and having the flexibility of deciding whether or not to keep the vehicle. When the lease term ends and you start to consider buying it out, you will find one glaring question remains: what happens to the car warranty attached to the car?

In most cases, the warranty you have on your vehicle will remain intact, but its lifetime will not restart. Understanding how your warranty coverage changes, or perhaps disappears, after a lease buyout is an essential part of determining whether this course of action is right for you.

Understanding Lease Buyouts and Residual Value

In the event that you’re a first-time leaseholder, understanding how a buyout works is important. When your lease term is up, your contract usually gives you the option to purchase the vehicle you’ve been driving for a pre-set price that is known as its residual value. This figure represents the leasing company’s best estimate as to what the car will be worth at the end of the lease based on depreciation, mileage limits, and market sentiments.

As an example, if you lease a car for three years and the manufacturer predicts it will lose 50% of its value during that time, then the residual value might be set at half of the sticker price. This residual value, in addition to any remaining lease payments (if you’re buying out early), fees, and taxes, is known as the buyout price of the car. Opting to buy out your lease can be financially smart in three primary situations:

• If the end of your lease buyout price is lower than the car’s current market value
• If you have exceeded the lease mileage limit and want to avoid overage fees
• If you love the car and its features and want to retain it

Unlike when you finance a brand-new vehicle, though, a lease buyout involves a car that already has some age to it. This means that the original factory warranty clock has been ticking ever since the day you left the lot, and it doesn’t restart when you become the official owner.

What Factory Warranty Coverage Typically Remains After Buyout

The majority of new vehicles come with a factory warranty attached, sometimes called a manufacturer’s warranty, which covers specified repairs and defects. There is a time limit on this coverage that is measured in both miles and time in most cases. Standard coverage that remains on your vehicle may include:

• Bumper-to-Bumper Warranty: Typically covers most components under the hood, except the bumpers, for around 3-5 years or 36,000-60,000 miles
• Powertrain Warranty: Typically covers the engine, transmission, and drivetrain for 5 years or 60,000 miles
• Corrosion or Emissions Warranties: A specialized warranty that often lasts longer, depending on the manufacturer

In the vast majority of situations, when you opt to buy out your lease, the warranty status doesn’t reset. This means that if you have a leased vehicle for three years in August of 2022, as an example, with a five-year or 60,000-mile powertrain coverage, your warranty would have two years remaining (or the number of miles left to 60,000) before expiration if you buy out the lease in August of 2025.

Why Warranty Expiration May Come Sooner Than You Think

It’s understandable to assume that because you bought a car, you view everything on it as “new”. However, warranties do not apply for three reasons:

1. Warranties are measured in time, not just mileage: Warranties are usually written as “X years or X miles, whichever comes first.”, meaning even if your leased car is relatively low-mileage, the warranty clock starts the day the vehicle is delivered
2. Lease term alignment: Many lease terms last 36 months, which is the exact length of most bumper-to-bumper warranties, meaning that by the time you buy out your lease, that coverage may be gone.
3. Mileage catch-up: Lease contracts often cap annual mileage at 10,000 to 12,000 miles, but if you drove more, your car may already be creeping past mileage limits tied to warranty coverage.

The above factors mean that vehicles bought during a lease buyout often end up without bumper-to-bumper protection or only partial powertrain coverage left.

Repair Costs That Often Begin After the Factory Plan Ends

A car is designed to last well beyond the end of its warranty period, but repairs become more common the older a vehicle gets. If you are choosing to buy out a lease agreement, it is probably a vehicle at least 3-5 years old, which puts it right at the tipping point of when some common repairs start appearing. This means you may notice the following older vehicle issues:

• Brakes: Pad and rotor replacement can cost between $243 and $890 per axle, depending on your vehicle.
• Windshield heater core: A failed heater core can cost $207-$286 to cover.
• Electrical issues: Power windows, infotainment systems, and sensors often fail after 3–5 years, with repairs ranging from $200 to $1,500.
• Transmission and engine repairs: A major transmission or engine rebuild or replacement can cost anywhere from $3,000 to $6,000.

Without any type of warranty protection, even just a couple of the above repairs can burn a hole in your wallet.

How Extended Warranties Help Protect Lease Buyout Vehicles

To guard against unexpected repairs once the factory warranty ends after a lease buyout, many new vehicle owners choose to invest in extended warranties or vehicle service contracts. These plans, offered by third parties, can help bridge the gap between your factory warranty’s expiration and the years of ownership that you will have with the vehicle.

Endurance Warranty offers numerous customizable plans that can suit the needs of every driver on the road, but the flagship Supreme plan is the best option for those seeking total coverage. This package is most similar to a manufacturer warranty that accompanies a car and includes protection for everything from large components, such as the engine, to small components, like seals and gaskets.

Those seeking effective but less comprehensive protection may enjoy the Secure Plus or Superior plans, which offer more targeted protection. In addition to these plans, contract holders can enjoy a year of Elite Benefits, offering bonus perks such as key fob replacement, reimbursements for up to four tires per year due to road hazards, and more.* Partnering with Endurance means protecting your vehicle for the foreseeable future.

Protect your investment after a lease buyout

A lease buyout can be a financially smart decision, giving you a car that you know and trust without the uncertainties of tackling the used car market. However, your warranty clock may have expired or be expiring, and the last thing you want is your new purchase to be unprotected right when it reaches the peak age for issues to start appearing.

Continue your financially smart path by investing in a vehicle service contract with Endurance. To learn which plan may be right for your needs, contact one of our plan advisors at (800) 253-8203 or request a FREE quote. You can also see your price and plan recommendations instantly by shopping on our online store.