Leasing a car is an affordable way to drive a trending automobile that you cannot afford to buy. You can find a luxury car lease deal that lets you drive one of the latest SUVs at less than $400 a month. Going for a lease helps you avoid the long term commitment and challenges that come with owning a vehicle.
The lease agreement is more of a long term car rental, as you can only lease for a specific period. Most lease contracts take between two and four years after which you should return the vehicle. Furthermore, most dealerships accept turning in a leased car early for another lease, if you are not satisfied with your current lease.
However, things do not always turn out the way you planned. You can lose your job, making it difficult to make the monthly payments as agreed. You should not wait until it is too late. Instead, turn in the car and go for the cheapest car lease you can afford. This guide offers everything you need to know about returning a leased car early.
What Returning a Leased Car Early Option Do You Have?
Turning in a leased car early for another lease is not the only option you have if you need to terminate the contract early, although it is the least complicated option. As per the terms of your lease, your contract should come to an end or you should purchase the vehicle to end the agreement. That said, there are other options you can take that are not in your contract. Some of the actions you can take to end a lease early include:
1) Trade in your leased vehicle
Trading in your car is the least complicated as you only need to visit your dealership to get everything sorted out. However, it is not always the best as it tends to offer the lowest value for your car. Dealerships buy your car to sell for a profit and thus, you should not expect to get the market value for your leased car.
Turning in a leased car early for another lease enables you to use the equity towards paying a down payment, taxes, and fees. It can also help you build equity in your new car. Nonetheless, you will need to be careful as some dealerships tend to bury certain fees into your new contract, making it more expensive.
2) Transfer lease to another person
You can find someone who qualifies for the lease to take over the lease deal. Also, you can ask your friends and relatives or you can use the lease swap websites to find a buyer. You will have to contact the leasing company to ensure the person qualifies for a lease deal before you can sign anything.
If the lease swapping is legal in your state and the buyer meets the minimum requirements, you will be able to end the lease early without a problem. The method may require you to give the buyer an attractive offer and pay a small transaction fee, but the costs are lower than what you would pay the dealership for early termination.
3) Buyout the leased vehicle
Buying out the lease car is usually the least practical as it requires you to pay the buyout fee. However, it is a good option if you can afford to settle the buyout fee as it offers more value from your car. You should consider buying out a lease car if the resale value is higher than the payoff amount.
Once you buy out the car, you can choose to keep it or sell it for a profit. The method makes sense if you are looking for the least expensive way to get out of a lease deal, but it may take longer to sell your car.
4) Sell the vehicle privately
This method is not totally different from buying out the leased car, only that you need to sell the car before activating the buyout close. Selling the vehicle privately is ideal if you do not have the upfront money to pay the buyout fee. It helps you avoid looking for financing while offering the same benefits of buying out the lease deal. You only need to find a buyer willing to pay more than the payoff fee to terminate the contract early and make a profit.
What You Should Know Before Turning In a Leased Car Early For Another Lease?
Turning in your car for another lease is quick and easy. You only need to visit the dealership and complete both transactions under one roof. You may not even have to talk to different sales agents as you can trade-in your car and lease another in a single desk. The sales agent will make you an offer and take you through the process.
Once you accept the offer, the dealership will take care of the paperwork and pay off your existing loan. It can also help you save on taxes as you will only need to pay sales tax for the difference in price. However, you will need to closely evaluate the new lease deal to ensure you get the best value. Sales agents can blend all components into one package and sell you the monthly payments, which can be confusing.
Before you can walk into your dealership for a trade-in, you must understand the main components of the deal. Some of the terms that will affect your turning in a leased car under mileage deal include:
It is your vehicle’s worth at the end of the lease agreement. Although the dealerships are accurate in their estimations, the residual amount can be higher or lower than the actual price.
It refers to the current market price. It is the amount you can sell your car. If the market value is higher than the actual price, you can earn equity by turning in your car early.
It is the price you should pay to own the leased car. It is usually fixed during contract negotiation. You can make a profit buying out your leased car if the market price is higher than the payoff amount.
You can claim equity from the dealer if the car is worth more than the buyout price. Turning in a leased car under mileage can offer you equity. Positive equity can help subsidize the cost of your new lease as it can be used as a down payment. Negative equity is when the car is worth less than the buyout value. It can increase the cost of your new lease as most dealers roll the amount into your new lease.
Factors to Consider Before Turning in a Leased Car Early for Another Lease
Value vs. buyout
Is it better to trade in or buyout your leased car? It is usually a good idea to buyout a leased car if you have to pay excessive mileage and maintenance fees, making the cost surpass the market value. Trading in your car is valuable when turning in a leased car under mileage as you are likely to have positive equity.
Ending your lease early can attract fees, depending on your contract terms and conditions. The termination fees can make the transaction costly and thus, you must factor in the cost before making your decision. Carefully go through your leasing agreement to find the penalties you must pay to terminate the contract. Some dealers will not explain the penalty fees but will factor them into your new lease deal.
Some manufacturers offer incentives to help buyers terminate their lease deals to purchase a new car make. The incentives target buyers of a competitor model ready to terminate their lease deal. The incentives go towards making your new lease deal more affordable. It is a good option if you are looking to change the brand. You can also find manufacturers offering incentives to help customers turn in a leased car early for a new model lease as a customer loyalty reward.
Negative equity will work against you having a better deal. Most dealers will choose to carry forward your negative equity to your new lease deal, which will affect your equity in the future. Ask the salesperson about discounts and incentives that can help you reduce the cost of your leased car. You might also consider putting a down payment to avoid the negative equity causing problems in the future.
Trading in a leased car for another lease may not turn out well if you have exceeded your wear and tear allowance or mileage. You should contact your dealer to determine the amount you should pay for overages and then consider whether it makes sense to trade in the vehicle.
Preparing Your Trade-in For a Better Deal
The purpose of returning a leased car early should be to help you get a better deal. You should prepare your car in the same way you prepare for a private sale. Returning a car to a dealer without cleaning or maintaining it will lower its value. You need to ensure it is in the best possible condition. Some of the things you can do to get your car ready for a trade-in before taking it to the dealer include:
You do not need to refurbish the car before a trade-in, but it is necessary to show that you have been following the maintenance guidelines. Putting all your service records and payment receipts in one file will act as proof that you have taken good care of the vehicle. You may also need to include receipts of things you have replaced lately like brakes and tires. The documents can help you get a better value as part of your trade-in offer.
Clean it up
Dealerships do not require you to clean the vehicle before returning it, but it is always nice to return it clean. However, you should look at the fine prints for flexibility. It does not offer any benefit to thoroughly clean the vehicle before returning if the dealer will still charge you cleaning fees. Nevertheless, you should delete all your details, including your home address and destinations from the navigation system. Also, remember to terminate the data link, satellite subscription, and Homelink transmitter among other personal details.
Pay parking tickets
Clear all unpaid tickets before returning the vehicle to the dealer for smooth registration.
Research market price
Knowing your car’s market value will help you know whether you are getting a good or a low deal. The dealer will take into consideration several factors during the appraisal, including age, mileage, condition, matching tires, mechanical condition, market demand, and paint color.
Frequently Asked Questions (FAQ)
Can I trade in a leased vehicle early?
Yes. You can always trade-in a leased vehicle early, but it does not always give you better value. The best time to trade in your leased car is usually at the end or near the end of the contract when you are likely to get positive equity. Trading in the vehicle in the early or middle stages of the deal is usually not a good idea as the termination cost is usually very high and you are likely to have high negative equity and no trade credit.
Can you roll a lease into another lease?
Yes. It is possible to roll your current lease into another lease at the dealership, but you will have to pay early termination fees. Some dealers can include the penalties in the monthly payments of your new lease deal.
Can you upgrade your leased vehicle?
Yes. You can upgrade your leased vehicle usually at the end or near the end of your contract. The terms vary among dealers, but you can a company willing to help you upgrade your leased car without any termination fees.
What is the penalty for ending a car lease early?
It depends on your lease contract and dealership. While some dealers make it mandatory to pay termination fees, others are ready to help you terminate your lease without attracting a penalty. You should talk to your dealer to find out about the penalty and incentives available.
Can you get money back for unused miles on a lease?
It depends on the specific dealers and terms of the agreement. However, most dealers will not give you money back for unused miles on the lease, but the unused miles can help you have positive equity.
Turning in a leased car early for another lease is not a bad idea, but you will need to understand the process better to get the maximum value from your leased car. You should avoid terminating your lease contract during the early or middle stages as you will only lose money from the trade-in. Instead, wait until you have build equity or have access to incentives that make ending a lease early costly.