Leasing a vehicle offers several advantages over purchasing, from shorter contracts to lower monthly payments. These benefits are why nearly 30 percent of vehicle consumers chose leasing over buying in 2016, according to a 2017 Experian Automotive report.
If you need a different vehicle or no longer want to be bound by restrictive contract terms, ending your car lease early can be more complicated (and expensive) than selling a vehicle you purchased.
Before handing the keys over to the dealership and driving away from your lease, consider these three things:
Review the Paperwork
It’s essential to understand the car lease termination fees associated with ending a lease. The costs can range from early termination fees and covering remaining payments to paying to prepare the car for sale. After reviewing the contract, you might discover it’s less expensive to wait until the lease ends.
Understand the Options
Returning the vehicle to the leasing company is just one option for terminating an existing lease. Understand all of the possibilities before making a decision:
- Return the vehicle: This is the easiest way to get out of a lease but it’s also likely to be the most expensive. You’ll be responsible for all of the fees set out in the contract.
- Transfer the lease: See if the dealership allows a lease transfer or swap. If it does, look for someone to take over the lease. There are also online lease-swapping companies that can help find a suitable lessee, but remember to assess costs such as commissions and fees before signing up.
- Use the vehicle as a trade-in: Ask the dealership about rolling your current lease into the lease or purchase of another new vehicle. Treating the leased vehicle as a trade might help avoid early termination penalties.
- Sell the car: The vehicle you no longer want might be just the one another buyer needs. Ask the dealership for the lease payoff and compare it to the value of the vehicle. If the payoff is lower or equal to the value, sell the vehicle to cover the payoff.
- Buy the car: If you want to keep the car but no longer want to abide by lease terms for maintenance or mileage, you can buy it. Every lease has a “buyout” clause for this scenario. Be warned: The buyout amount could exceed the value of the car, forcing you to pay more than the car is worth, so proceed with caution.
Prepare the Car
Whether you plan to return the vehicle, transfer the lease or sell it, it needs to be in peak condition. Have the vehicle washed and detailed. Also have the oil changed, fluids topped off and tires checked — and replaced, if needed. A clean, serviced vehicle will fetch a higher sales price or incur fewer penalties than one needing extra TLC.
Before making a decision on your next vehicle, use our online calculator to determine whether it’s better to buy or lease. No matter if you decide to keep leasing or you opt to purchase the vehicle, you’ll want to be sure you and your vehicle is covered. Connect with a local Farm Bureau agent to ensure your auto insurance goes the extra mile.