Your current car is leased and you are ready -- before the lease runs out -- to move on to a new vehicle. Although a lease is more restrictive than a finance contract when it comes to early termination, a lease also gives you a couple of different options to pay the lease off early and trade for a new car. Do your homework before heading out to the new car dealer and your lease buyout will go smoothly and you will drive home in a new car.
Lease Termination Options
You have two ways to pay off or buy out an auto lease. One option is to pay off the entire contract, leaving you as the owner of the car. The pay-off amount will be approximately the end-of-lease residual value plus the total of remaining payments. The other option is to make the remaining payments and turn the car in to the leasing company. You do not need to complete either choice before going in to lease or buy a new car. The dealership will help you complete the transaction with either alternative.
Evaluating the Options
The best option to get out of the lease depends on the trade-in value of the leased auto. If the car is worth more than the lease contract's residual value, the better option is to pay off the entire lease contract and then use the car as a trade-in. If the car is worth much less than the residual value, the better financial option is to let the vehicle go back to the leasing company. The best possible outcome is if the value of the car is more than the residual value plus the remaining payments, giving you equity in the vehicle.
Working With the Dealer
At the dealership, the salesman should be able to outline your trade-in options for the leased auto and show the financial outcome of each alternative. Research your lease pay-off options and the car's approximate trade-in value before going to the dealership. If the dealer plans to pay off the lease to own the car as a trade-in, make sure you negotiate the best possible trade-in value. Depending on your credit history, the dealer may be able to roll some of the cash cost to get out of the lease into the new lease or purchase contract, reducing the amount of money you need to put down to get out of your lease and into a new car.
The lease pay-off amounts are firm numbers for you, but may not be for the dealership. The leasing company may be willing to make a deal with the dealer to get you out of the lease for less money, especially if the car was leased through a car manufacturer and you are buying a car from the same manufacturer. You should always remember you have the option of staying with the car lease if you cannot negotiate a new car deal with which you are comfortable. It may be a better financial choice to stay with the lease for a few more months and turn in the car or try again to trade.
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