Imagine you leased a car, and it served you well. You stayed with it for some time and got used to it and don’t want to give it up, or perhaps you’re now tired of it. Now, your car lease is nearing its end, and it’s time to give “your car” back. You don’t have any idea of what should happen next. In your mind, you’re thinking, “what happens at the end of a car lease?”
Many people ask themselves the same question.
Here, we have the answer.
When the car lease contract ends, you should hand back the car keys to the car lease company. They’ll collect the car for free if it’s in good condition. Depending on the lease agreement, you may pay damage charges if the vehicle is not in good condition.
What Exactly Happens at the End of a Car Lease?
A few months before your car lease ends, the car lease company should call to inform you of the near end and arrange when and where to collect it. But, that is not all.
The car leasing company will also want to know what your plans are. Will you be taking another lease? Did you love the car and want to keep it?
That said, what’ll happen when your car lease ends depends on the car lease company. However, there are three standard options:
- Turn in the car
- Extend the lease or Trade in the car for another lease
- Buy the car
Turn in the Car
One of the lease agreements is to return the car at the end of the lease period. Usually, this is what the lease company expects you to do.
If you make this choice, you will turn in the car and walk away from the lease. But, you have to do a few more things :
- Prepare the car for collection
- Make all sets of keys ready for the car collection
- If necessary, pay any mileage, tear and wear, and lease termination fees
Extend the Lease/Trade-in the Car
The leasing company may allow you to extend the car lease if you’re not ready to give it up. But, you have to ask first.
The company may give the same or similar terms but with conditions. For instance, you may have kept the car in a relatively good condition or made on-time payments.
Alternatively, you may want to keep the lease but, for another car. One benefit of leasing a car is that you’re not tied to one particular vehicle.
But, for trade-in, the leasing terms may change depending on the new car you’re taking or the leasing company. Talk to your leasing company to understand their terms.
Buy the Car
If you love the car and don’t want to let go of it, you can buy it from the leasing company. Most car lease agreements come with the option to buy the car at the end of the lease, called leasing to own.
If you love the car and decide to buy it, the cost will depend on the vehicle’s residual value and the remaining amount of payments you had left on the lease.
You also need to find out the value of your leased car by the end of the lease. This is called the residual value in the lease contract. Compare the residual value and the actual value of the vehicle at the end of the less.
If the car’s actual value is less than the residual value, then purchasing it is not a good option. However, if the actual value is equal to or more than the residual value, buying might be a smart idea. But, but there are still some other costs to consider, including:
- DMV fee that is charged at the start of the lease
- Sales tax (depending on your state)
What Happens If You Have Damaged The Lease car?
The leasing company doesn’t expect you to return the car in a brand-new condition after driving it for 36 months. That is why the lease contract document has a measure for the tear, wear and damage conditions and guidelines.
However, that notwithstanding, you need to keep the car in good shape – ideally, closer to its original condition.
Damage includes such thing as:
- Dents and scratches
- Accident damage
- Missing keys, documents or service history
- Minor-looking windscreen chips
- Wheel damage
If you have damaged the lease car, two thing can happen:
- Repair the car before handing it over to the leasing company, or
- Let the leasing company inspect it and ask you to repair the damages.
Note:
If you wait for the latter, you will be charged. The leasing company will inspect the car and have the damages fixed, but you’ll pay for the damage costs. If you get the car repaired before handing it over, you’ll choose the garage (usually has to be approved by the leasing company), which can be cheaper.
How To Prepare For The End Of A Car Lease
After arranging for the car collection, the next thing is preparing it for lease-end.
Whether you rerun the car and walk away, lease it again or buy it, you must prepare the lease-end car.
Preparing the car does not only involve ensuring that it is in good condition, but you also have to make it ready for lease inspection.
When preparing for the end of a car lease, you can do the following things:
- Examine the car (interior and exterior) for any damages
- Check for wear and tear (body and wheels)
- Check for cracks in the moonroof, windshield, or other windows
- Have the car professionally cleaned
- Remove all your personal items
- Have all sets of keys
- Excess mileage (you’ll be charged for this),
- Organize Your Paperwork: Arrange all your original documents, service history & a valid MOT
certificate (if required)
Tip: you can read the car lease document to ensure that you get everything correct.
Will You Get Money Back At The End Of A Car Lease?
This is where lease equity comes in.
The car leasing company expects you to take good care of the car, and even put fewer miles on it than the ones allotted in the lease agreement.
If you can achieve this, the car may be worth more than the stated residual value when the lease ends. The positive difference is what’s known as lease equity.
However, the leasing company will not cut you a check for the equity.
Returning the car and walking away from the lease will waste the equity. But, if you extend the lease or buy the car, the company will factor in (rollover) the equity value.
That’s the only possible way to “get your money back” when the car lease comes to an end.
Wrapping Up
As your lease car nears the end, you have a few options. To get the best deal, you shouldn’t wait for the car to expire before taking the next step. Check if you have equity and make use of it. Otherwise, talk to your car leasing company to understand your options better.