What to Do at the End of a Car Lease

by Ray Shefska | Last updated Apr 20, 2023 | Leasing

When it comes to the end of a car lease, you have a few different options for what you can do. To make the best choice possible, it’s important to understand a few factors that go into the different lease-end options you have at your disposal.

Deciding what to do at the end of a car lease depends mostly on how you feel about the car. Of course, your financial situation and inclinations also come into play. We’re about to explore each of the options available to you as your lease ends.

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What to Do at the End of a Lease: Return the Vehicle

When you return your leased car, it will be thoroughly inspected, this is called the “lease-end inspection,” and it’s important to understand that you may be charged fees for excessive wear and tear to the vehicle. When you take your vehicle to the dealership they’ll be looking for:

• Scratches or dings on the exterior
• Cracks or other damage in any of the windows
• Any form of damage to the interior of the car, such as burns or rips
• Excessive wear on the tires

Before you head for the dealership, you should ensure you have everything that came with the car to avoid additional fees. This means you’ll want to bring both sets of keys, make sure the spare tire is in the trunk, have the original floor mats in the vehicle, etc, etc.

If you plan to simply return the vehicle, you should also be prepared to pay the lease disposition fee, which is often around $400 (although the exact amount is on your lease contract). This fee is to cover the costs of reselling your leased car, and if you plan to return your vehicle (and not lease another vehicle from the same manufacturer) you cannot get out of paying this fee. If you went over your mileage allotment expect to get a bill sent to you, and if you’re terminating your lease before it’s over, expect even more fees (as well as the reality that you’ll still need to make your remaining lease payments).

What to Do At the End of a Lease: Move Into a New Lease

Let’s say you want to return your car and then get a new lease. That is of course also an option, and one the dealership will be excited to help with. It’s likely that the dealership has contacted you in the months leading up to your lease-end to try and get you into a new lease already, and so by the time you show up to return your vehicle you may have already put together your new lease deal.

When you return a vehicle and then lease another from the same manufacturer they will waive the lease disposition fee. The vehicle you are returning will still need to go through a lease-end inspection, and you’ll face fees if you don’t have the second set of keys, or went over the allotted mileage.

You may be able to roll any lease equity over into a new lease as well. Lease equity is the positive equity created when your car is worth more than the residual value stated in your lease terms. Lease equity typically only occurs when you have severely under-driven the mileage stated on your lease, or when you simply get lucky because of an increased demand for your specific car.

For example, let’s say you lease a Honda Accord, and the stated residual value at the end of the term is $15,000. You lease it and barely drive it during the 36 month lease. You head to the dealership to return your current lease and move into a new Accord. When you arrive the dealership lets you know that the vehicle’s “book value” (how much they’re willing to buy it for) is $16,000. Rather than return the vehicle, you work with the dealer to buy it, trade it in, and roll over the equity ($1,000) into the new lease.

When leasing a car, many people decide to move into a new lease with the same dealership. While reasonable, you should shop around before jumping into another lease. Like we always preach, you should negotiate the largest dealer discount from MSRP before committing to a car deal.

What to Do at the End of a Lease: Buy the Car

If you’ve enjoyed your leased car you always have the option of buying it outright at the end of your lease. You know exactly how much you’re going to pay for the car (the residual value set when you signed the lease contract), and you know everything about the vehicle (since you’ve been driving it for the past few years).

The residual price is in your leasing contract and was determined based on their estimation of what your car would be worth at the end of the lease. Comparing the residual value against the current market value is often the deciding factor for people considering buying their leased car.

For example, John leases a Toyota Prius, and at the time the contracts are drawn up, the manufacturer calculates that the Prius will be worth 58% (residual values are always represented as percentages) of its original MSRP. That means John can buy his Prius outright, at the end of the lease for $17,000 (remember, this is a hypothetical). Because of market conditions, and the fact that John only put 18,000 miles on the Prius, he knows the vehicle is worth $20,000 if he sold it to a private party, or $18,500 if he sold it to the dealer. These figures mean John should almost certainly buy the car since it’s $1,500 cheaper than the market rate.

However, if John’s lease comes to an end and the book value on his Prius is actually $15,000, John would be paying an extra $2,000 over his Prius’ market value if he bought it outright at the end of the lease. In this case John would be better off turning in the leased Prius and buying one elsewhere for $15,000.

Leasing a Car or Buying – Which Is Better?

One of the most challenging decisions people face when considering what to do at the end of a car lease is often the same decision that originally led them to their lease: should you lease it or buy it?

There are pros and cons to both options. Objectively considering both will ultimately help you decide what to do at the end of a car lease.

Should You Buy the Car?

People decide to buy cars at the end of their leases all the time. There are many good reasons why. However, there are also a few notable drawbacks.

Pros:

• You have no restrictions on your driving habits (such as mileage allotments)
• Buying is often cheaper than leasing
• Monthly payments go directly towards owning the vehicle

Cons:

• You’ll end up owning an older car rather than continuing to lease new cars
• The value of your car will depreciate the longer you own it
• Monthly payments are often higher than leasing

Buying a car usually makes more financial sense than leasing a car. One benefit of purchasing the vehicle that you’ve been leasing is that you know exactly how it’s been driven and maintained, as compared to buying a used car off the lot.

Our Car Coaches are ready to help you determine which option is best for you. Our community saves thousands of dollars every day. Check out these uplifting success stories!

In case you missed it: Check out this 100% FREE car buying negotiation cheat sheet.

Should You Lease the Car?

Some people are serial car leasers. They’d never want to commit to owning the same car for longer than a lease. Let’s take a look at some reasons why.

Pros:

• Every few years, you get to have a brand-new car stocked with cutting edge features
• Your car is always under warranty, which can save you a lot of money on repairs
• Monthly payments are typically lower than financing

Cons:

• It’s more expensive than buying in the long run
• You’ll be given a yearly allotment of miles, and you’ll be charged if you go over it
• You don’t gain any equity since you don’t own it

You may notice that these pros and cons lists are quite similar to the lists you might make before you first got into a lease. That’s because deciding what to do at the end of a car lease is similar to deciding to start a lease in the first place: lease a new car or buy the one you’ve been driving.

Which Option Is A Good Fit for You?

Deciding between the three lease end options detailed above can often be tricky. It typically comes down to how you feel about the car. If you love the way it drives and you want to keep driving it, buying it is usually the best option, even if the numbers say you should turn it in. Conversely, if you dislike driving it and you’ve been counting down the days, it’s probably best to turn it in and walk away.

Now you know what to do at the end of a car lease, but you still have homework to do. You need to determine the car’s current market value and compare it against the residual price. The difference between these numbers will help you decide what to do at the end of a car lease.

How to End Your Car Lease Early (Explained by a Car Dealer)

by Ray Shefska | Last updated Apr 20, 2023 | Leasing

One thing you learn as you get older is that there’s no such things as an “easy way out.” Although, when it comes to ending your car lease early you may have a few options. Depending on your circumstances, there are a few creative ways you can end your car lease early without hurting your bank account.

Car dealers, and their manufacturers are always looking for two things;

1. Ways to make more money; and
2. Ways to sell more cars.

If your lease isn’t due for another few months, but you really want to get into a new car, the odds are that a dealer is going to put their best foot forward to help you make that a reality. Why? Because they’ll make money selling the new lease, and they’ll sell another car. Both of those things benefit the dealer.

Although, this positive attitude needs to be taken with a grain of salt. Your current lease agreement is a legally binding document. It says you will make a certain amount of payments over a certain term, and that if you don’t, there will be specific consequences.

Buying a car (and getting a good deal) is all about leverage. If your lease isn’t due for 3 months, and you have a legally binding contract that says you’ll make the remaining payments, you don’t have too much leverage. Don’t fret though, because remember, the dealer and the manufacturer do want to help you get into a new car, but they also don’t want to give up the money they could be making if you completed the full term of your lease.

With all this being said, there are some creative ways you can approach this situation. Let’s get into the weeds of how you can end your car lease early.

Will they “forgive” my payments?

The short answer is “no.” The long answer is “probably.” Why do I say that? Because a lot of factors are in play.

First, how many monthly payments do you have left on your current lease? One, two, twelve? If you have less than three, the odds are high that the dealer and the leasing company will work with you to forgive your remaining lease obligations in exchange for getting into a new car (although there are caveats to this that we’ll cover below). On the other end of the spectrum, if you have six, eight, or twelve payments left on your lease, there is less likelihood that the dealer or the leasing company will have any interest in helping you out. Why would they? You’ve got a whole year’s worth of payments to continue making, and with each check you write, they make money.

Take a look at your original lease agreement and locate the termination date of the lease (the date you would return the car if you completed the lease). You can typically also find this information in your online payment portal, if you have access to that. This date is the most important thing for you to keep in mind, and it’s the date that the dealership and the leasing company will be referring to when they consider how “friendly” they’ll be in forgiving your remaining lease payments.

When will they “forgive” payments? (Lease pull ahead programs)

To end your car lease early without penalty, you’ll want to research lease pull ahead programs. Car lease pull ahead programs are specific incentive programs that leasing companies create to entice prospective customers to lease a new vehicle.

Leasing companies generally do not provide this information in a publicly available way. Instead, each month the captive finance company (BMW Financial Services, for example) will send it’s dealerships (BMW dealerships) a list of new and ongoing incentive programs for customers.

These lists are humongous, complex, and not particularly easy to understand. Within these monthly guidelines dealers may find pull ahead programs (among other things) that are intended to incentivize customers to buy new cars. Keep in mind that incentive programs are different for each region within the United States. Two dealerships may have two very different incentive programs in any given month. This is partly why you don’t see lease pull ahead programs advertised nationwide.

You can try and find this information online, although your best bet is to call your local dealership, or the leasing company itself.

If you want to research online for lease offers, my recommendation would be to search for a specific manufacturer, for example “Chrysler lease offers” and go directly to the manufacturer website (like the example above).

Or, another option that is worth your time is a website called LeaseHackr, where individuals share lease deals they are aware of. Be warned that the offers you see on this website may not be available in your specific area.

It’s important to understand that dealers and leasing companies typically have more incentives in place if you lease the same vehicle, or with the same manufacturer again. Generally speaking, there are fewer programs if you end your lease early with Audi and then get a BMW, other than a conquest program to encourage a current Audi owner to move to a BMW, for example. That isn’t to say that programs don’t exist (they do), it simply means that incentives and offers are greater when you stay with the same brand from one lease to the next, especially when you want to end your current car lease early.

When does it make sense to end your car lease early?

To this point we’ve talked about how you can end your lease early, but we haven’t spent any time discussing when it makes sense to actually do so. If you’re reading this near the time of its publication (April of 2020), then you know we are in the midst of the global coronavirus pandemic. It may be surprising to read this, but now (this month) is a good time to end your car lease early and get into a new car.

There are two reasons why.

1. First and foremost is that leasing companies are offering very aggressive incentives to sell new cars right now. With that in mind, you should be able to negotiate a good deal.
2. Residual values are most likely going to decrease starting next month (May). The residual value of all cars is most likely going to decline as there is an economic downturn and less demand for vehicles. With that in mind, if you leased a car this month (April) your lease payment will most likely be substantially less than if you lease the same car next month. (May).

At the end of the day, if you’re looking to end your car lease early you need to recognize that you have a legal obligation to fulfill the contract you signed. With that being said, you know that dealers and leasing companies want to lease you a new car, and you can use that to your advantage to ask for incentives and programs to help offset the remaining payments you have on your current lease.