In the debate of whether to take the plunge to purchase or lease a car - leasing tends to have its advantages. Your monthly payments and maintenance costs are typically lower; plus, you can drive a new car every few years.
But like all good things, your car lease must come to an end. Knowing what to expect can help you prepare for a smoother ride at the end of your lease term.
Read more: How to keep your expenses on track with spending buckets
Considerations as your car lease comes to an end
You generally have a few options: return the vehicle or buy it. You may also be able to extend your current lease. When deciding, there are a variety of factors to consider, including:
Availability: If new or used inventory is low, extending your lease (if your lease or lessor allows) could buy you time.
Financing options: Compare terms if you’re interested in financing a buyout.
Depreciation: If the car’s market value is lower than the buyout price, it could make sense to return.
Mileage and condition: Buying the car could help you avoid expenses if you’ve exceeded mileage limits or have excessive wear and tear.
Your options when a car lease ends
When your lease term is winding down, it’s time to think about what you need going forward and if your car needs have changed.
Return your leased car
You may want to reach out to your lessor as you approach your lease end date to confirm the details of the return process. Your car dealership may be able to help you too. To prepare, start by gathering all relevant paperwork like your lease agreement; keep an eye out for communications from your lessor about lease end.
Extend your current car lease
Continuing your lease may be the simplest option if you must have a car but aren’t ready to select a new vehicle or go through the lease end process (for example, Ally’s). Reach out to your lessor to see whether you can extend your lease and for more information about eligibility and limitations like time, mileage, and costs.
Buy out your car lease
Your lease agreement should define the purchase price for buying your existing leased vehicle, but take note: You’ll want to compare that price against the vehicle’s resale value to make sure you don’t pay more than what it’s worth.
Whatever you choose, this lease end checklist can help make the return of your car as painless as possible.
5 steps to prepare for the end of your car lease
Take these steps as your lease end approaches:
1. Prepare for the lease inspection
As part of the return process, a leasing company (or a third-party inspection company) will usually take a close look at the car by searching 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
Damaged or missing parts, such as radio knobs or door handles
Aftermarket alterations, such as window tinting or body kits could also be considered as damage or a lease violation
If you have major damage, consider repairing it before inspection. Otherwise, you could be responsible for excess wear charges.
2. Estimate excess mileage costs
When leasing, a stipulation you agree to is how many miles you are going to drive. Go over the mileage limit? You’ll likely be charged an excess mileage fee. Avoid sticker shock by estimating any potential excess mileage expenses.
3. Add up any lease return fees
Other return costs could include:
Disposition fees: This covers the leasing company’s costs like preparing the car for resale
Late return fees: Turn the car in on or before the lease end date to avoid this fee
Early termination fees: While it is generally possible to get out of your car lease early, it often involves charges
4. Carefully review your lease agreement
Read your agreement thoroughly to make sure that you understand the particulars of your lease. Pay close attention to terms regarding mileage limits, wear and tear policies, fees for early termination and any penalties for late returns. Understanding these details can help you avoid costs at the end of your lease.
5. Start saving in advance for lease-end costs
Between fees, repair costs and a potential down payment on your next vehicle, it’s smart to set money aside now. Start by allocating funds in savings buckets in your Ally Bank Savings Account.
Staying ahead of the curve
With a little preparation in reviewing your lease agreement, assessing your current vehicle and thinking through your future car needs, you can move forward with confidence and navigate the road ahead.
