Leasing a vehicle gives you a chance to drive a new car for a set term. Many people prefer leasing as its payments are generally lower than the monthly loan payments for a new vehicle. If, for any reason, you do not want to complete the lease term, you have the option of trading in your vehicle, either to sell it off or get a new vehicle. If you are thinking about trading in a leased vehicle but do not know how, visit eAutoLease.com to find out how to do it right without suffering any losses.
Helpful References About Car Leasing:
- Audi Lease Options
- Toyota Special Lease Offers
- BMW Lease near me
- SUV Leasing Programs
- Chevrolet Lease Specials
- Best Cadillac Lease Deals
Leasing is a popular financing option for getting a new car. A leasing company purchases the vehicle from the dealer and rents it to you for a fixed amount of time, also known as the lease term. Just like a traditional loan, you must pay an agreed-upon amount to the leasing company every month for the length of the lease term.
Is it possible to trade in a leased car?
Yes. You can trade in a leased car that is nearing the end of its term and use the equity to get a new lease or as a down payment for a new car financing. These days, a shortage in the used cars inventory makes leased car trade-in a good option.
Read on to learn how leasing works, how to trade in a leased car, and what you need to do before making a decision.
Read more: Should you Rent or Lease a Car?
How does leasing work?
Leasing is very different from financing. When you finance the purchase of a car, you pay toward ownership, and it is yours once the car loan is paid in full. On the other hand, when you lease, you are paying to use it for a short period, usually 2 to 4 years. At the end of the lease, the vehicle can be returned to the leasing company, purchased for its residual value, or traded to the dealer you got it from or even to another dealer.
You can also break a car lease in case of unexpected situations. If you lose or change of job, are unable to afford the payment, or have moved to an area with a good public transit system or if the type of vehicle you are leasing no longer meets your needs. In any of these situations, ending the lease is the best option.
If you don’t want to keep the car and break the lease before time, there are certain options. You can trade in the leased car depending on what you want to do next.
Before trading in your lease
If you have made up your mind about trading in your lease, there are several important factors you need to keep in mind to move forward successfully:
- Penalties and fees – Terminating a car lease early does not come cheap. The more time that remains on the contract, the more you will be charged. The lessor will calculate this charge based on the current market value of the vehicle and the time left in the completion of the lease. Also, if you have driven excess miles or the vehicle has excessive wear and tear, it will add to the fees.
- Residual value – It is the assumed or estimated value of a vehicle that it will be worth at the end of the lease term. It is the price you will be paying if you choose to buy the car after the lease term ends.
- Lease equity – It is the value of the car at the end of the lease. If the leasing company estimated a low residual value initially, but the car is in high demand now due to low inventory or the popularity of the model, you will have a higher equity by the lease end.
- Lease purchase or buyout fee – It is an add-on charged by the leasing company in case you want to buy the car you leased. It can be a few hundred dollars.
Is trading in a leased car a good option?
Trading in a leased car is a good option only if there is equity in the car. If the model you are driving is popular and in demand since you signed the lease, chances are there will be a good value for it.
The key to getting a fair deal when trading a leased vehicle is knowing the true market value of the vehicle. You can trade in your leased vehicle and prevent loss by keeping your eyes open for the vehicle’s worth.
How does trading in a leased vehicle work?
Some lessees choose to do a lease buyout and then sell the vehicle for a profit. This option works when the residual value is less than the current market value, and they can make some profit. The first step to trade in is to determine the current value of the car. There are several ways to do this:
Look up online
You can look up online marketplaces and websites that facilitate leases and car sales. Compare the current value of your vehicle to its residual value. If the residual value is higher than its current value, it shows there is no equity, and you may not get much value from the trade-in. On the other hand, if the current market value is more than its residual value, you can trade it in and use the equity for buying or leasing your next car.
Visit dealers
You can also visit car dealers who will look up the car’s current value. If they are interested, they may offer to purchase your lease. If they offer more than the residual value of the car, there is a chance you will make some money. If you can negotiate such a deal, you can use this money as a down payment for trading in a leased car for a new lease or purchasing a new vehicle.
Regardless of which option you opt for, the first and most crucial step is finding out the residual value of the car. This value is mentioned in your lease contract, or you can also ask the leasing company to find out more about it.
Before going for a trade-in, check out how much time is left at the lease end. Trading in a car at the end of the lease is the most effective option, as it helps you avoid early contract termination fees.
Read more: Insurance For Leased vs. Financed Cars
Some other options for terminating your lease early
Breaking your lease before time is not a good option as it comes with financial penalties and hassles. However, there are times when getting out of a lease is a necessity, and sometimes its benefits outweigh the costs.
Here are some other options for getting out of your lease before the term ends:
Sell or transfer your lease to a private party
Also known as a lease swap or takeover, this process includes transferring your lease to another person. It is best to check with your leasing company about this, as many leasing companies do not allow lease transfers. While many of them allow transfer to a new driver, others only allow a limited transfer, which means you would remain the lessee while someone else will take over the payments. It is a risky option because if the new driver fails to make timely payments or does not pay at all, you will be responsible for paying.
Sell your lease to the dealership
These days, due to the high demand for used cars and low inventory, dealers are willing to buy leased vehicles. It is because they know they can sell it for a profit later, especially if the car is in good condition with low mileage. If you want to get a new car and have positive equity in your leased car, the dealer will be ready to negotiate, and you can use this trade-in value to get a new lease or purchase a new vehicle. If you just want cash, it is best to check with a few dealers and see which one offers the highest price.
Do not take a hasty decision. If you are not at the end of the lease term or near it, terminating the lease before time can cost you heavy penalties. If you are at the end of the lease, some leasing companies allow you to sell or trade in a few months early. No matter what you do, make sure to contact the leasing company to check out the residual value of the vehicle you are driving to calculate its current worth before doing anything.
Is it worth leasing a car?
Many people prefer to lease as it gives them a chance to have a brand new car at the end of every lease term, usually for two to three years. This way they can avoid costly repairs associated with driving an old car.
A lower up-front cost, lower monthly payments compared to buying, and no resale hassle make leasing worthwhile for those who seek more flexibility and want to drive a vehicle that may be more expensive than they could afford to buy.
Trading a lease is a bit more complicated than trading a purchased car, and there are certain factors you need to consider. You must focus on the particulars of the trade-in to ensure you are getting a profit and things work to your advantage. Visit eAutoLease.com to find out the best ways to trade in your leased car without making a mistake. With the right information and expert guidance, you can make better financial decisions.
