Leasing a car versus buying one can have its advantages. Often lower monthly payments, cheaper maintenance costs, and the ability to drive a new car every few years can make leasing attractive to some.
If you’re one such driver, all good things must come to an end, and that includes your car lease. (Insert sad face emoji.)
Knowing what to expect can help you take the appropriate steps to prepare for a smooth ride to the end of your lease term. Watch the video below or keep reading for the low-down on tips to prepare for your lease end.
Estimate Excess Mileage Costs
When leasing a vehicle, one of the stipulations you agree to is how many miles you are going to put on the car.
Lease agreements typically allow you to drive between 10,000 and 15,000 miles each year; they also usually contain an overall mileage cap for the duration of your lease. Exceed the mileage limit and it’s likely you’ll be responsible for paying an “excess mileageages” charge that can range from 10 to 30 cents per mile, depending on the type of vehicle and the leasing company itself.
Avoid sticker shock by taking the time to estimate any potential excess mileage expenses before your lease ends. Doing so is quite simple: Subtract the number of miles showing on the car’s odometer from the total number of miles allowed by your lease agreement. If you have a positive number, good news! You’re still under your mileage cap and aren’t subject to any additional mileage fees.
If your math gives you a negative number, you’ll need to multiply it by the per mile charge included in your lease agreement. The final number is the estimated minimum amount you’ll likely have to pay for driving too many miles during your lease.
Prepare for the Lease Inspection
As part of the return process, a leasing company (or a third party inspection company hired by the leasing company) will inspect the car to check for damage. This typically takes place within five days after the vehicle is turned in.
The inspection itself will look for things like:
- Burns, stains, cuts, or tears in the upholstery
- Dents, scratches, or punctures in the car’s exterior
- Windshield cracks and broken headlights or taillights
- Excessive tire wear, gouges, or cuts
- Broken, cracked, mismatched, or bent wheels
- Broken or missing parts, such as radio knobs or door handles
- Aftermarket alterations, such as window tinting or body kits
Before the inspector takes a peek at the vehicle, look for these things yourself or have a mechanic give the car a once over. If there’s any major damage that needs to be repaired, you may want to address it before the inspection by having it repaired by a qualified professional. Otherwise, you could be responsible for excess wear charges from the leasing company.
Make the car look like it just came off the car lot by washing and detailing it and removing any personal belongings before the inspection. You’ll also want to make sure that all of the vehicle’s original accessories and equipment — including floor mats, seat covers, cargo covers, and the owner’s manual — are returned to the car if you’ve removed them for any reason.
Add Up the Lease Return Fees
Just because you haven’t racked up any excess mileage or wear fees doesn’t necessarily mean that you can walk away from your current set of wheels without any additional charges.
At the end of a lease, you’ll be responsible for paying a disposition fee. This charge is levied by the leasing company or dealer to take the car back and the actual dollar amount should be spelled out in your lease agreement.
Another expense to keep in mind is a late fee. The reason for this charge is self-explanatory: If you don’t return the vehicle by the lease expiration date, you could get hit with this penalty. Some leasing companies offer a grace period of a few days, but to be safe, you should turn the car in on or before the lease end date to avoid this fee.
Consider Your Future
When your lease term is winding down, you typically have four options:
- Extend the lease
- Return the vehicle and lease a new one
- Buy the vehicle outright
- Buy another car (new or used)
Continuing your lease may be the simplest option if you must have a car but aren’t ready to go through the lease end process. A dealer may only agree to a short-term extension of up to six months, so you shouldn’t view this as a long-term solution.
Turning the vehicle in and leasing a new one can be a smooth transition. You’ll have to sign a new agreement with the dealer and if the terms are similar to your previous agreement, you might not experience a significant increase to your monthly payments.
Buying your existing leased vehicle is also something to consider if you want to drive it longer. Your lease agreement should spell out the purchase price for the car, but take note: You’ll want to compare that price against the vehicle’s resale value to make sure you’re not paying more than what it’s worth.
It’s also smart to compare the cost of owning versus leasing. If you’re taking out a loan to buy the car from the leasing company, will the monthly payment be higher or lower than your lease payment? Will you be responsible for paying property taxes on the car? Don’t forget to think about the costs associated with maintenance, upkeep, and repairs.
Review the Fine Print
Read your agreement so you’re not surprised at the last minute by any of its terms and talk to your dealer or leasing company about the timeline of your lease’s final days.
The end of your lease doesn’t have to be a painful — or costly — breakup. If you’re prepared, you’re more likely to end up on the road to happiness, driving either your current set of wheels, or a new set for a similar price.