When deciding to lease or buy a car, it is important to consider a few things. Leasing cars is a great alternative to taking out a car loan if you like to drive different kinds of cars every few years. Paying car loans for the allotted loan term can become very expensive, especially if you are not looking to keep the car for a long duration of time. Leasing companies allow people to drive luxurious cars at an affordable price for a certain amount of time. Before leasing, you might want to think about the number of miles that you drive every year. Some leasing companies might require you to pay an excess mileage fee due to the mileage limits of leases if you end up driving more than around 12,000 miles per year. Leasing is also better suited for people who can maintain the condition of their car well because some leasing companies also might require excess wear and use fees if there is too much damage to the car upon return.
Many people do not know what happens when you trade in a leased car. The biggest thing to consider when trading in your leased vehicle is the timing at which you decide to do so. The consequences and effects of trading in the leased car are different depending on the specific timing during the lease term when you decide to trade in the car. The lease term is the period of time that the lease is active and in effect. If you are thinking about trading in your leased vehicle, it is important to think about when you are trading in the leased car and what consequences are associated with the timing. The timing affects many different factors, especially with regard to financial cost.
If you are thinking about trading in the leased car towards the beginning of the lease term:
If you are still in the beginning stages of your lease term, it might not be the best idea to trade in your leased vehicle. There are many expensive fees with ending a lease contract early, such as an early termination fee. Towards the beginning of the lease term, you also have high negative equity. Having high negative equity means that you owe more for your car lease payment compared to what the car is actually worth. With all of the costs associated with trading in the car towards the beginning of the lease, it might not be worth it to do so. All of the fees and payments could end up costing more than the value of the car itself. Also, some leasing companies could make you pay the rest of the lease payments when you trade in your leased car. So it might be worth it to just keep the car and be able to drive it if you have to pay for the remaining payments anyway.
If you find yourself in a circumstance where you must absolutely leave your car lease early, Swapalease can help you with a lease trade and find somebody to take your lease.
If you are thinking about trading in the leased vehicle near the end of the lease term:
If you are thinking about trading in your lease vehicle near the end of the lease term, there are a few things that could happen. Very similarly to if you decided to turn in our car lease towards the beginning of your lease term, you might still be required to pay an early termination fee because you technically have not reached the end of your lease term yet. This fee could be unreasonably costly. Sometimes your dealer will require you to pay the remaining balance or sometimes they will help pay the lease balance. However, if it costs the dealer more than the credit for your car, then you will need to pay for the negative equity amount for the difference. However, if the lease balance is less than the credit for your car to the dealer, then you will most likely have a positive equity amount so you might be able to get compensated for that amount. You might be able to apply this sum of money to a new car lease or auto loan payment.
If you are thinking about trading in your leased car at the actual end of the lease term:
If you are thinking about trading in your leased vehicle at the actual end of the lease term, then this is probably the most reasonable timing to trade in the car. If you want to trade in your leased car and get a new car, then you can calculate the purchase value option within your lease contract. If the trade-in value of the car is larger than the residual value of your car by the end of the lease term, then you might be able to apply some equity toward a new car. The residual value is the value of your car at the end of the lease term. The value of the car depreciates with wear and use and an increase in mileage on the car. It is fairly rare that the trade-in value of the car is greater than the residual value of the car. Normally the trade-in value is lower than the residual value so it is more reasonable to just restart the whole process if you are interested in a new vehicle.
You can find the trade value of your car and compare it with the residual value. You might have positive equity if the trade value is higher. If you decide to lease or purchase a new car, then you might be able to apply that positive equity to the new car.
Unfortunately, most leases are built so that positive equity rarely happens so that the leasing companies can make as much profit as possible. Trade value is usually lower and it is easier if you return the leased car and start a new purchase fresh.
Trading in your leased vehicle at the end of the lease term is the ideal time to trade in your leased car.
Things To Do To Prepare For Your Trade In
- Clean the inside and outside of your vehicle. Make sure to remove all personal belongings from the inside of the car. If the car appears clean and well-kept, then it makes a great impression and might be valued higher.
- Research your car’s value at the end of the leasing term. It is very important to know what your car is worth approximately at the end of the car lease term so that you know the financial aspects of the lease agreement when you trade it in. You want to know the financial aspects of your car lease so that you are not losing any money if the leasing company values the car too low.
- Find all of the paperwork associated with your leased car. Most of the time, the leasing company or the dealer will value your car at a higher value if you can prove all of the maintenance work that the car has obtained. If you do a good job keeping up with the maintenance of the car, then you should be compensated for that. The paperwork, which includes any copies of receipts, is a good way to show that the car has been well taken care of.
As mentioned above, it is very important to know the terms and conditions of the car lease that you are wanting to sign. If you sign a car lease before knowing the circumstances, then there could be some serious and expensive consequences. After signing a car lease contract, you are expected to pay the monthly payments for the fixed term. If you end the car lease early, you might have to pay many different fees and costs.