What to Do at the End of Your Car Lease
Unlike romantic relationships that can crumble at any moment, your relationship with your
leased car is far more predictable. As your
auto lease comes to an end, it'll be
up to you to negotiate the future of your relationship with your car. And lucky for you, you'll
have plenty of options to choose from:
- Return the car and walk away
- Buy the car
- Extend the lease
- Re-lease it as a used car
- Trade your leased vehicle in on a new lease
Walk Away From Your Car Lease
If you've decided to turn your vehicle back into the dealership, here's what you'll need to do:
- Check your mileage
If you've gone over your mileage maximum, chances are you'll be charged for those excess miles.
See your lease agreement for specifics.
- Check your lease carefully
When you first signed your car leasing deal, you may have inadvertently
volunteered to pay an additional fee - also known as the disposal fee or turn-in fee - to return
your vehicle to the dealership. You won't be required to pay the fee if you decide to once
again lease a car. And if you're going to pay the fee, just be sure you don't get
overcharged.
- Prepare for an inspection
You'll need to schedule an inspection, during which time an inspector will thoroughly check the
car's interior, exterior and mechanical condition. While you will not be charged for normal wear
and tear, this term varies from manufacturer to manufacturer. You will want to check with your
dealership to see what constitutes "normal wear and tear," as you will be responsible for
anything outside that range.
A word to the wise: When leasing a car, if
you are required to pay for any repairs to your vehicle before turning
it back in, you should know that you don't have to pay the dealership's service department prices.
Feel free to shop around for the best deal on your repairs. And investigate whether or not you have
coverage left on your warranty. If so, take advantage of that remaining coverage.
When to Buy Your Car Lease
Thinking about buying your leased car? Here are some important questions to consider:
- Has your car maintained its condition? Visit your mechanic for a thorough inspection before
deciding to buy your used car.
- Does it meet your current and future needs? Are you expanding your family? Then you may need a
bigger car. Moving to a new location with fluctuating weather conditions? Then maybe that
convertible is no longer a viable option. These are important factors to consider.
- How much will it cost to buy your car? You should be able to find this information on your
lease agreement.
- What is the car actually worth, or its wholesale value?
If you're serious about buying your leased car, be sure to do your homework. First, find out
what the residual value of the vehicle is. You can determine this by checking your original
contract. Next, call the bank who financed the lease and see if you can negotiate a better purchase
price. Here's why: Oftentimes, banks will inflate your vehicle's residual value in order to make
the monthly payments reasonable. Which means that the bank is challenged to make a profit if at
the end of the lease their customer simply returns the vehicle to them. In order to recoup their
costs, the bank will most likely take your car to an auction in hopes of getting close to the
vehicle's residual value. Chances are, the bank ends up losing money on these vehicles. So, if you
call your bank and acknowledge this factor, telling them you're willing to pay just a little bit
more than what you think they'll get for the car at an auction, the bank may accept your offer.
It's worth a shot.
Extend or Re-Lease Your Car
You may negotiate to extend your car lease short-term or re-lease your used car altogether. By
re-leasing your car (versus buying it), you should be able to get a considerably lower payment.
However, experts advise against this, pointing out that it's not a savvy financial decision to
re-lease your vehicle.
When it comes to the end of your
car lease, there are no right or wrong
answers. Whether you choose to break off the relationship or continue for months or years to
come, it's important to investigate all your options and choose the one that makes the most
sense for you.
