Car Lease Caveats
Deciding on leasing a car as opposed to buying a new car has its advantages---you get a new model car every 2-4 years, maintenance and repair costs are typically much less, you have the pleasure of enjoying that new car smell and pride of ownership of the newest models with the latest safety features and comforts.
Previously, we’ve talked about when buying your leased car is the right decision for you;
which leased vehicles offer the most profit in buyback deals; car lease deals that are the least expensive; and, even lease-related swindles that occur with dealerships.
Related Article: Now Is the Right Time to Sell Your Used Toyota Tundra
However, the downsides to leasing a car are that you if you exceed mileage limits, you might be tempted to hire someone to alter your odometer to save thousands in extra fees tagged within the lease agreement. Furthermore, any nicks, dings, scratches, dents etc. that come with normal wear and tear of a car can lead to even more added costs once the lease period ends.
But the biggest downside to leasing a vehicle is that you can tire of the leased vehicle because it does not live up to your driving expectations and/or a new model has come along that you desire but will have to wait for until your current vehicle lease ends because early termination means extra leasing fees.
Today, however, we are looking at when ending your lease early is not necessarily an unwise decision and how that you can terminate your lease early without losing the shirt off your back.
CARFAX Research on Lease Breaking
According to a recent CARFAX study, breaking a lease does not always have to result in a loss of money for the lessee. In fact, they found that in some cases breaking a lease early can benefit both parties and provide a lessee with a new car.
Summary of Lease Ending Options
That said, here is a summary of how to terminate your lease early with the pros and cons involved when doing so:
1. Lease Buyout---End your lease early by initiating an early buyout where you pay the car’s residual value and all remaining payments (plus any fees) and then resell the vehicle yourself. This method works if you can sell the car for more than what you’ve paid for the buyout. You might even consider a temporary loan with no interest the first few months to give you the funds to buyout the lease and sell the car afterward in a timely manner and pay back the loan before the interest kicks in.
• May be financially advantageous if you can sell the car for more than you’ve paid for the lease buyout.
• Requires time and effort into reselling the car and might require a loan.
• Costs less than early lease termination fee.
• Less time-consuming than buying out the lease and re-selling the car.
• Might have to pay a transfer fee
• Lease transfers are not legal in all states.
• Not allowed by some leasing companies.
• Leasing company may hold you liable if the person who acquires the lease defaults.
• New lessee credit score must meet the leasing company’s standards.
3. Lease Trade-In--- Trade your leased vehicle for a new car by ending your current lease and begin a new leasing or financing contract for your replacement vehicle. If the car is worth more than the buyout amount paid by the dealer, you will gain a credit for the trade. However, if the buyout amount exceeds the car’s value, the difference will roll into your new lease or loan.
• It’s a convenient way of ending the lease if you want to replace your car with a new model.
• You may get a trade credit if the car is worth more than the buyout amount paid by the dealer.
• It might increase the monthly payment on your new car if the amount paid by the dealer to acquire the car exceeds its current value.
• You may not qualify for a new lease or financing if your credit has recently suffered.
For additional recent articles about how to make that leased car look its best before letting it go, here is an informative article on how you can make the best deal for yourself with your trade-in or selling your used car.
Timothy Boyer is Torque News automotive reporter based in Cincinnati. Experienced with early car restorations, he regularly restores older vehicles with engine modifications for improved performance. Follow Tim on Twitter at @TimBoyerWrites for daily new and used vehicle news.
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