Easy to Follow Guide to Your End of Lease Options

So, the end of your lease is finally coming. You might be wondering what the next steps are. There is no need to worry because we’ve collected some tips to help you decide what’s the best option for you at the end of your lease. Read through carefully to make the most out of your situation!

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Let’s Begin

First things first – you should start your research even 120 days before the end of the lease. Find your lease contract and inspect it carefully. You have probably forgotten it by now. The thing you need to find is the residual value. Sometimes it’s also called the lease-end value. This is a number that will help you determine whether you have equity, and it’s set in stone. It’s how much you can buy the car for at the end of the lease. Even if you don’t plan on buying your leased car, this is the number that determines whether you have equity, and that’s why you need to know it.

What’s the Real Value of Your Car?

Besides the residual value, there is one more important number you need to know. It is the true value of your vehicle. So, how do you find out the true value of your car? What you need to do is get an offer from a dealer. The trick is just to talk to a used car manager. Don’t talk to a salesperson because you will get a trade allowance, which can be manipulated. Ask him what he would pay for if you decided to sell it. There are many large used car dealers who have an easy process for making you an offer, so you can use that to your advantage.
There are several options you can choose at the end of your lease. The first one is to simply walk away from the lease. You’d owe a disposition fee, mileage charges if you’ve exceeded the limit, and wear and tear charges if you didn’t take good care of your car during the lease term. The other two are:

1. Buy Your Car
You can buy the vehicle you’ve been leasing. If you really love the car, this is a good option for you. Or you might just want to break out of the cycle of leasing. If you don’t buy it, the dealership has the next opportunity. If the dealership does not buy it either, it goes back to the leasing company, and they send it to the auction. If you buy it, there will be no fees or charges (except in Texas – they charge sales tax there because the law differs). Before buying, make sure to compare the residual value to its market value. If the buyout price is much lower than the average price, you’re getting a good deal.

2. Trade the Vehicle In
Before doing this, it’s good to find out the trade-in value and to compare it to the residual value. If the trade-in value is much higher, you can trade in the vehicle, pay off the contract, and use that cash as a down payment toward your next car. You are not tied to the dealer you leased from; you can trade it in anywhere. You will avoid the disposition fee, mileage charges, and wear and tear if you decide to trade. Of course, it’s essential that you prepare for the trade-in. You need to gather all the necessary paperwork and clean up your car. It’s also good that you check if there are any repairs that need to be made.

Making the Right Choice

After getting the numbers you need, it’s time for you to decide what’s best for you. We’ll use three examples to help you out.

• A dealer wants to write a check for 20000$ for your car. Your residual value is 18000$. You have 2000$ in true equity belonging to you. You can use that money to reduce your next payment if you trade in the vehicle, or you can take the car to the dealership that was high bidder. They will pay it off ,and you’ll get 2000$. You can do whatever you want with them.
• In the opposite case, your residual value is 20000$, and your best deal is 18000$. You should walk away.
• In the final case, the numbers are the same. Then what’s best for you is to trade the car or sell it to avoid the end-of-lease charges.

Don’t Forget to Inform Yourself

It’s really important for you to do your research well. For example, in some states, the laws differ, so to sell your car, you’ll have to purchase it first. It’s like this in Texas and California. It basically means you must pay sales tax for your leased vehicle, and that can cut into or eliminate your equity.
Some companies won’t allow you to buy your leased vehicle within 120 days before the end of your lease. So inside those 120 days, you are required to return the vehicle and walk away. Your options are severely limited. That’s why you need to read the contract. You can call the lease company instead if that suits you better.

Good luck!

I’ve helped a friend of mine because I made her go through the process above. She was about to walk away from a low mileage Cadillac. She wanted to turn it in and lease an Infiniti instead. She ended up with 9000$ in equity she pocketed.
Will everyone have equity? Of course not. Many factors determine whether you are going to have equity or not, like what’s going on in the market, for example. It’s something that will play a huge role, and we can’t influence that. A ton of leases will be ending soon because of the high used car prices thanks to the COVID-19 crisis.
No matter what kind of car you have or where you are located, it’s vital for you to know where you stand before you end your lease. Use the information from this article to your advantage!

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