What Are My Options at the End of a Car Lease?

As a car lease term approaches its end, lessees face several choices regarding their current vehicle. Evaluating these options early helps in making informed financial and logistical decisions. This guide explores the various avenues open to individuals as their car lease agreement nears its expiration.

Returning Your Leased Vehicle

Returning a leased vehicle involves a process that begins before the lease termination date. Lessees should review their original lease agreement to understand mileage allowances and wear and tear standards. Most lease contracts specify an annual mileage limit, commonly between 10,000 and 15,000 miles, with charges for exceeding this cap typically ranging from $0.15 to $0.30 per mile.

Prepare the vehicle for return by removing all personal belongings and ensuring all original equipment, such as floor mats, owner’s manuals, and spare keys, are present. Many lessors offer a complimentary pre-inspection, often 30 to 90 days before the lease end, to identify potential excess wear and tear charges. Addressing minor damage like small dents, scratches, or tire wear before the final inspection can reduce costs.

Schedule a return appointment with the dealership or lessor. During this appointment, a representative will conduct a thorough inspection, assessing the vehicle’s condition against wear and tear guidelines and verifying the odometer reading. After the inspection, lessees will complete final paperwork, including an odometer statement and a lease termination agreement. A disposition fee, often between $300 and $500, is a common charge, covering costs for processing the return and preparing the vehicle for resale.

Purchasing Your Leased Vehicle

Purchasing the vehicle is another option at lease end. The purchase price, known as the buyout price, is determined by the residual value in the original lease agreement, plus any purchase option fees. This residual value represents the estimated wholesale value of the vehicle at lease end, as projected when the lease began. Purchase option fees can range from $250 to $700, depending on the lessor.

Research the vehicle’s current market value through independent sources, such as automotive valuation guides. Comparing this market value to the buyout price helps determine if purchasing is financially sound. If the market value exceeds the buyout price, buying the vehicle is favorable.

To proceed, contact the lessor directly to obtain an official buyout quote, including any outstanding fees or taxes. Financing is often necessary, with options including traditional auto loans from banks, credit unions, or the lessor’s financing division. Once financing is arranged, paperwork, such as a bill of sale and odometer statement, will be completed. The vehicle’s title will then transfer to the lessee’s name, followed by registration.

Leasing a New Vehicle

Many lessees choose to transition into a new lease at the end of their current agreement. This involves selecting a new vehicle and negotiating new lease terms. Key components of a new lease include the capitalized cost (the vehicle’s selling price), the money factor (the interest rate), and a new residual value.

When considering a new lease, any equity or negative equity from the expiring lease influences the new transaction. If the current vehicle’s market value exceeds its residual value, the lessee may have “positive equity,” usable as a credit towards the new lease’s capitalized cost, potentially lowering monthly payments. Conversely, if the vehicle’s market value is less than its residual value, resulting in “negative equity,” this amount might roll into the new lease, increasing capitalized cost and monthly payments.

The process involves returning the expiring leased vehicle at the same dealership arranging the new lease. After the old vehicle’s final inspection and return paperwork, focus shifts to finalizing the new lease agreement. This includes signing the new lease contract, which details all financial terms, and taking delivery of the new vehicle. This approach allows for a seamless transition.

Extending Your Current Lease

Extending a current lease offers flexibility, though it is less common. Reasons for extension include waiting for a new vehicle model, saving for a down payment, or navigating temporary financial adjustments. Eligibility depends on the lessor’s policies and payment history.

Contact the leasing company directly, not the dealership, to inquire about extension options. Lessors may offer month-to-month or fixed-term extensions, typically for a few months. Extension terms, including new monthly payment, administrative fees, and revised mileage allowances, will be outlined in a formal agreement.

Formalizing the extension involves signing an addendum to the original lease or a new short-term contract. This ensures all parties acknowledge revised terms and duration. Extending a lease usually continues the original lease’s conditions, including charges for excess mileage or wear and tear.