After nearly 30 years as a financial planner, I’ve been asked countless times to help friends, family, and clients navigate major money decisions. One question that comes up repeatedly – what should I do when my car lease ends?
Most people just turn in their leased car and get a new one when the term expires. That’s what my wife has always done each time her 3-year lease was up. But this time, it was different.
New car prices are finally settling after years of supply chain issues and shortages. However, they’re still much higher than normal. At the same time, auto loan interest rates have soared to levels not seen in over a decade.
This combination makes attractive new car leasing deals hard to find these days. So when my wife’s latest lease approached its end, we sat down together to assess all her end of lease options – something we’d never bothered doing before.
After reviewing the pros, cons, and financial impacts of each choice, she made an informed decision tailored to her situation.
We aren’t the only ones facing this leasing dilemma given the current economic climate. That’s why I wanted to share our thought process and experience in this article to help others.
Join me as we explore the various options at the end of the lease. I’ll offer insider tips and guidance for making the optimal financial decision based on your individual needs and circumstances. By the end, you’ll have the knowledge to move forward confidently – just like we did.
Let’s get started!
Key Points Of Handling Your Car Lease Ending
- Review your entire lease agreement to understand all terms, fees, and policies related to lease end.
- Consider your budget, lifestyle needs, driving habits, and future plans when weighing options.
- Research current car values and compare offers to get the best possible deal.
- Explore all lease-end options like buying out your lease, returning the car, lease transfer, trade-in, or lease renewal.
- Schedule a lease-end inspection to identify any excess wear, tear, or needed repairs.
- Contact your leasing company to discuss lease-end requirements and early termination policies.
- Take time to thoroughly compare the pros and cons of each option before deciding.
- Be aware of potential charges like disposition fees, excess mileage fees, and early termination penalties.
The key is being proactive, doing research, understanding your lease, and weighing all lease options beforehand. This ensures you make the optimal choice when your car lease ends. Let me know if you need me to provide any other summary points from our previous article sections.
What Happens at the End of a Car Lease
Leasing a car can be a great option if you want to drive a new vehicle without the commitment of buying one. I often recommend leasing to my clients who like changing cars frequently. With a lease, you make lower monthly payments compared to financing a car purchase. Plus, the lease term usually lines up with the manufacturer’s warranty, sparing you expensive repair bills.
But eventually, every lease must come to an end. As your final months approach, you have decisions to make. What should you do at the end of your lease?
Here are the most common options to consider months before your lease period ends:
- Buy your leased car at the end of the lease – You can purchase the car by paying the remaining monthly payments, plus any lease-end fees. This transfers ownership to you. Buying your lease lets you keep driving a car you know and love.
- Transfer the lease – Find someone to take over your lease by meeting your leasing company’s qualifications. This usually costs less than early termination fees if you no longer want the car.
- Return the car – Give back the car to the dealer or leasing company. But beware of excess mileage and wear-and-tear charges mentioned in your lease agreement.
- Trade it in – Dealers will appraise the car’s value and apply it toward another if you lease or buy a car.
- Extend your lease – Some leases can be extended for a limited time. This creates flexibility if you need more time to decide on your next car.
Carefully review your lease agreement and touch base with your leasing company to confirm the exact terms for ending your lease. There are often fees for early termination, so weigh your options wisely.
Coming up, I’ll share tips on what to do two to three months before your car lease ends to make the transition smooth.
Understanding Your Car Lease & End of Lease Term Options
Navigating the end of a car lease can feel overwhelming if you’re unfamiliar with the process. But understanding your options in advance makes for smooth sailing.
If you have 2-3 months left on your car lease, here are some tips:
- Carefully review your entire lease agreement. This prevents surprise fees at turn-in. Make note of important terms for excess mileage, wear and tear, and any lease-end fees.
- Weigh all end-of-lease options before deciding: lease or buy, buyout, lease transfer, return, trade-in, or extension. Compare costs and benefits to choose what works best for you.
- Return the car in pristine condition if going that route. Clean thoroughly, repair damages, and remove any personal items to avoid charges.
- Ask about lease-end incentives from the dealer or leasing company. You may qualify for perks like waived dispo fees or cash back offers.
- Don’t rush and start a new lease or car purchase. Research market prices ahead of time so you can negotiate the best possible deal.
By planning ahead, you can make a smooth transition to your next vehicle. Taking the time to understand the lease-end process gives you control over this major financial decision.
Summary of Common Options at the End of Your Lease Vehicle
When your car lease ends, you face important decisions about what to do next. I guide my clients through all the possibilities so they make the best choice for their situation. Let’s walk through the pros and cons of each option:
Return the Car
This allows you to simply hand back the keys and walk away from the lease at the end of the ter. However, charges may apply for excess mileage or wear and tear exceeding your agreement’s limits.
- No need to buy the car or sell the car yourself
- Freedom to start fresh with a new lease or purchase
- Potential charges for excessive mileage or wear
- No equity in your leased car or residual value retained
Buy Out the Lease
You can purchase the car at lease-end for the predetermined residual value stated in your agreement. This allows you to keep driving the vehicle if you love it.
- Keep a car you enjoy driving and know the history of
- Potentially own a vehicle that retained value
- Requires large lump-sum payment or auto loan financing
- May pay more than current market value
Lease a New Vehicle
Continuously leasing new cars allows you to regularly upgrade models and tap into the latest features.
- Lower payments than financing
- Drive new vehicles with the newest technology
- Never-ending monthly payments
- Mileage and wear restrictions apply
Trade it In
The car dealership will appraise your car’s value and apply it toward another lease or purchase. But trade-in values tend to be lower.
- Convenient one-stop transition into a new car
- Potential to negotiate fair value
- Trade-in value often disappointing
- Limited to dealer’s current inventory
Review all options and compare costs and benefits before deciding what suits you best. I’m happy to further discuss the pros and cons and make personalized recommendations based on your financial goals.
Option 1: Lease a Car After You Turn in Your Leased Car
When your current lease ends, you may want to transition into a brand new leased vehicle. This allows you to keep enjoying the benefits of leasing – lower monthly payments and regularly driving newer cars with the latest features.
Some dealers even offer lease-end upgrade options to entice you to lease again. These specials let you move into a newer model more seamlessly.
- Access the most up-to-date automotive technology
- Lower payments compared to financing purchases
- Drive a new car every couple years
- Monthly payments continue indefinitely
- Mileage and wear restrictions still apply
Carefully weigh your budget, lifestyle needs, and personal preferences when deciding. Review the entire new lease agreement – don’t just focus on the monthly payment. Compare mileage limits, fees, and all terms with your current lease.
Additionally, contrast leasing vs. financing or buying new. Make sure leasing best aligns with your financial situation and goals.
And remember to negotiate! Research multiple dealers and pit their vehicle lease offers against each other. Look for the best possible terms and overall value for your money.
By exploring lease-end upgrade options while also considering your needs, you can decide if transitioning into another leased car makes sense.
Option 2: Return the Car and Walk Away At The End Of a Lease
Returning the leased vehicle to the dealership is a common end of car lease choice. But the car lease end process isn’t as simple as just dropping off the keys. Here’s what to expect if you go this route:
- Schedule an Inspection Call ahead to arrange a vehicle inspection. This evaluates the car’s condition and identifies any excess wear and tear or mileage fees you’ll owe.
- Clean Thoroughly Detail the car inside and out before the inspection. Fix any dents or scratches. Remove all personal items. This prevents extra car lease end charges.
- Turn In the Car On the inspection day, return the car with all paperwork – your lease agreement, registration, insurance info, etc. Don’t forget anything!
- Pay Any Fees You’ll be responsible for any wear and tear or mileage fees assessed. These range from a few hundred to a few thousand dollars depending on the vehicle’s condition.
- No further lease obligations or hassles
- Avoid selling your car or trading it yourself
- May incur excessive wear or mileage charges
- No equity or residual value
Carefully review your lease agreement so you understand all lease-end fees and terms before turning in the car. Proper preparation minimizes surprise charges.
Option 3: Buy Out Your Lease or Lease Buyout
Purchasing your leased car at lease-end lets you take ownership. But should you buy out your lease? Here’s what to consider:
- Residual Value The residual value set in your lease agreement determines the buyout price. It estimates what the car is worth at lease-end.
- Market Price Research the car’s current market value. Compare it to the residual to ensure the buyout price is fair.
- Remaining Payments Account for any outstanding lease payments you must make in addition to the buyout amount.
- Fees and Taxes Factor in applicable fees like the disposition fee and sales tax on the purchase.
- Ownership – You keep and fully own the car after buying it out.
- Familiarity – You know the car’s history and condition for added peace of mind.
- Potential Value – Sometimes the market value exceeds the residual value, allowing you to buy it below market price.
- Upfront Payment – Requires large lump-sum or auto loan financing, which may be challenging.
- Overpayment – You may pay more than the car’s actual worth depending on the residual value.
- Maintenance and Repairs – As owner, you’re responsible for all maintenance and repair costs.
Carefully weigh the residual value, market prices, payments due, and total costs. Make sure buying out your lease fits your financial situation and goals. Thoroughly researching this lease-end option allows you to make an informed decision.
Option 4: Lease-End Lease Transfer
Lease transfers let you hand your leased car over to someone else before the lease-end. Here’s how it works and potential perks:
- Find a Transferee Search online listings and ask friends/family to locate someone to take over your lease.
- Check Eligibility Contact the leasing company to confirm they allow transfers and learn any requirements or fees.
- Negotiate Terms Discuss transfer terms with the transferee – payment of remaining amounts due, transfer fees, etc.
- Complete Paperwork Work with the leasing company to officially change the lease agreement and registrations to the new lessee.
- Avoid Termination Fees – Transfers let you exit a lease early without early termination fees.
- Transfer Obligations – The new lessee takes over remaining payments and potential wear and tear charges.
- Flexible Options – Benefits both parties. Original lessee exits early, new lessee gets shorter term or lower payment.
However, transfers require leasing company approval and may have fees. The original lessee could still be liable if the new lessee defaults.
Thoroughly vet transferees and get all agreements in writing. Carefully weighing the lease transfer costs and risks allows you to make an informed decision.
Option 5: Extend Your Lease or Car Lease Renewal
Lease extensions let you renew your existing car lease for an additional term. Here are potential benefits and key considerations:
- Flexibility – Both parties can continue the current lease agreement.
- Familiarity – Keep driving a car you know and love.
- Lower Payments – Renewal may offer better terms than a brand new lease.
- Mileage Limits – Renewal may come with stricter yearly mileage restrictions.
- Wear and Tear – You’re responsible for any additional wear and damage during the extension.
- Market Changes – Stuck with the same car when better deals or new models could be available.
Carefully review the lease renewal terms and compare costs/benefits to a new lease or purchase. Factor in your budget, lifestyle needs, and future plans. A lease extension provides short-term flexibility but may not align with your long-term goals.
Weighing all lease-end options including renewal allows you to make the best financial decision at the end of the lease.
Option 6: Get a Car Loan to Buy a New or Used Car
Financing a car purchase is an alternative when your lease ends. Here are the pros and cons of getting a car loan:
- Ownership – You fully own and control the car when you finance it.
- No Mileage/Wear Restrictions – No worrying about lease mileage limits or wear and tear fees.
- Potential Equity – Loan payments build equity that can help future trade-in or sale value.
- No Lease-End Obligations – Avoid returning the car or lease-end negotiations.
- Higher Monthly Payments – Loans cost more per month than leases, since you’re financing the entire car price.
- Depreciation – As owner you lose money to the car’s depreciation.
- Maintenance/Repairs – Owning means paying for all maintenance and repairs yourself.
- Long Commitment – Stuck with loan and car for years, unlike short lease terms.
Compare your budget, plans, and needs when deciding on financing. Research car values and loan terms to ensure a fair deal. While ownership has benefits, also weigh the costs and responsibilities.
Carefully considering all factors allows you to determine if buying with a loan or leasing again better suits your situation when your current car lease ends.
Contact The Lease Company About An Early Lease Termination
Ending your car lease early has financial implications to consider. Here’s what to keep in mind:
- Remaining Payments – You may need to pay the full balance left on the lease term upfront.
- Early Termination Fees – Companies charge fees for ending a lease prematurely, which can be very costly.
- End of Your Lease Contract Terms – Review your agreement for specific early termination policies. These must be disclosed per federal law.
- Financial Impacts – Early termination should be a last resort if you can no longer afford payments. There are serious financial consequences.
- Alternatives – Instead of defaulting, look into options like lease transfers or buyouts. While not free, these may cost less than termination fees.
Contact your leasing company directly to discuss the implications and early termination fees for ending your lease early. They can explain costs and guide you through the process based on your specific lease agreement.
Carefully weighing the penalties and financial impacts allows you to make an informed decision before moving forward with prematurely terminating your car lease.
End of a Lease Factors to Consider
When deciding how to proceed at lease-end, several key factors should influence your choice:
- Car Depreciation & Residual Value – Consider if it makes financial sense to purchase the vehicle at the end, based on current value versus residual value stated in your lease.
- Lease-End Fees – Account for disposition fees, excess mileage, and other lease-end charges stated in your agreement.
- Lease-End Vehicle Assessment – Get an inspection before turning in the car to identify any excess wear and tear or needed repairs.
- Financial Aspects – Evaluate each option’s costs and benefits. Compare monthly payments, fees, and other expenses based on your budget.
- Personal Preferences – Factor in things like car features, mileage limits, and driving restrictions that impact your lifestyle.
- Future Plans – Upcoming life changes may make flexible options like a new lease or loan better than buying your current car.
Carefully weighing these financial, logistical, and personal factors allows you to make the optimal lease-end decision for your situation. Be sure to thoroughly review your lease, consult the lessor, and compare all options before deciding.
Making the Decision On Your Leased Car
When your car lease ends, weigh all options carefully before deciding what to do. Here are tips for making an informed choice:
- Review Your Lease Agreement – Understand the terms, fees, and policies outlined in your specific contract. This provides the foundation for your decision.
- Consider Your Budget – Evaluate each option’s costs and benefits. Make sure your choice aligns with your financial situation.
- Evaluate Your Lifestyle – Factor in driving habits, mileage needs, and other personal requirements that impact your selection.
- Research the Market – Compare prices and offers across dealerships and lenders to ensure you get the best possible deal.
- Consult the Lessor – Ask your leasing company or dealer for guidance based on your particular agreement and situation.
Taking the time to thoroughly review your lease, research your purchase options, and weigh the pros and cons allows you to make the optimal financial decision at lease end. I’m always happy to walk through these key steps with clients to ensure they pick the choice that best fits their needs and goals.
So What Did My Wife Decide To Do With Her Car?
After reviewing all the options, my wife chose to extend the lease by 6 months. Here’s why:
- She likes her current car but isn’t sure she loves it enough to buy it long-term. The extension gives her more time to decide, up to 6 months.
- New car prices may come down in the coming months as supply issues ease. The extra 6 months gets us to the end of the year, which is the best time to get a great deal if buying a new car.
- She’s leaning toward buying out her leased car. During the next 6 months, each monthly payment will lower the eventual lease buyout price if she goes that route.
By opting for a short lease extension, she delayed the final decision while potentially positioning herself to get the best price. She has delayed her buy or lease decision until the time is right. She can still choose to buy out the current car, lease something different, or buy a car later on.
The extra time allows her to see if car prices normalize while keeping her options open. It was the perfect compromise given the current uncertain auto market.
Next Steps: What You Should Do With Your Vehicle At The End of a Lease
When your car lease ends, being proactive and informed ensures you make the best decision. Here are key steps to take:
- Review your entire lease agreement to understand all terms, fees, and policies.
- Evaluate each option considering your budget, lifestyle, driving needs, and future plans.
- Research current car values and offers to get the fairest deal. Many choose to use Kelley Blue Book (KBB)
- Consult your leasing company or dealer for guidance based on your situation.
Taking the time to weigh the pros and cons of each choice allows you to make the optimal financial decision at lease-end. Remember to be thorough in reviewing your lease, assessing your needs, and comparing all options first.
What has been your experience at the end of a car lease? Do you have any tips or lessons learned to share? Join the conversation below!
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Note: The content provided in this article is for informational purposes only and should not be considered as financial or legal advice. Consult with a professional advisor or accountant for personalized guidance.