How to Trade In a Leased Car Early
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When you first leased your car, you enjoyed the benefits of lower monthly payments, driving a vehicle with a factory warranty, and having the latest technology and features.
But now, for one reason or another, you want to trade it in before the lease term is complete. Maybe you're set on a new car or used car that suits your needs better. Or perhaps you want something less expensive with lower monthly payments or costs less to insure.
Can you trade in a leased car early? Let's look at the options you have for trading in your current lease.
Auto leasing explained
Like renting an apartment or house, when you lease a car, it grants you use of the property for an agreed-upon time while meeting specific conditions during the term.
And also, like renting real estate, when the lease ends, you no longer have use of the vehicle, and it returns to its owner, the lessor.
When you lease a car, you have to keep it well-maintained and drive it under normal conditions. If you subject the vehicle to extra wear and tear, you'll likely be responsible for additional fees at the end of the term.
Car lease contracts contain many elements that decide your monthly payment amount. The cap cost, residual value, mileage limit, and money factor are among those.
The capitalized cost on a lease, or cap cost, is a deciding factor in determining your monthly payment amount. The cap cost is another term for the purchase price you and the lessor agreed to. Securing an advantageous cap cost goes a long way toward improving all other aspects of your lease contract.
The money factor on an auto lease is similar to the interest rate on an auto loan. Sometimes called the lease factor, the money factor is a financing charge added to your monthly lease payments.
Lease contracts limit the number of miles you can drive per year during the term. Typical mileage limits are 10,000, 12,000, or 15,000 miles per year. The lower the mileage limit, the less your monthly payment, and vice versa. Additional charges may apply if you turn in a vehicle at the end of a lease with excess mileage or excess wear.
The residual value is the estimated value of the leased car at the end of the term while taking depreciation and miles driven into account. When your lease ends, you'll have the opportunity to buy the vehicle for the residual value. This is also known as the residual value.
Owning a car comes with various costs like insurance and maintenance, so saving money wherever possible keeps extra cash in your bank account. One way to reduce your expenses month to month is obtaining a good car loan. Shift works with a network of trusted lenders who compete for your business, so you get the best deal on financing. Obtaining a loan through Shift is so convenient that nine out of 10 buyers choose us when financing. Got a low credit score? Don't worry. At Shift, we welcome cosigners. Shift's website has a large selection of fully inspected cars located across the country that are ready to go. The website is user-friendly, and you'll be able to find various makes and models to suit your needs and budget. Shift offers fair, no-haggle prices driven by powerful machine learning algorithms and tons of data.
Trading in explained
Trading in your current vehicle is a streamlined way to divest yourself of it and put a nice down payment toward your next one.
Rather than going through the time-consuming work of privately selling your car, when you trade in, all you have to do is accept an offer, then use it to reduce the price of one that's new to you.
While selling your car to a private party may take weeks or even months, trading in can take as little as a few hours, allowing you to drive away in the vehicle you want the same day.
It offers the valuable advantage of reducing the sales tax owed on your purchase when you trade in. You're only responsible for tax on the amount left in many states after subtracting the trade-in amount from the purchase price. This has the potential to save you thousands of dollars, letting you keep essential funds around for other important obligations.
When it's time to sell your old vehicle, Shift makes it easy. All you'll have to do is enter the make, model, year, and mileage on Shift's easy-to-use website, and you'll instantly receive a purchase offer that's valid for seven days. You can get a fair offer, better than at the dealership, driven by powerful machine learning algorithms and tons of data. And with Shift, there's no need to spend extra time washing and waxing your car. A little dirt won't affect the quote, and we fully detail the cars ourselves before putting them up for sale.
Can you trade in a leased car?
You may want to trade in your leased car for various reasons. And you have the option for a lease trade-in if that's the path you want to take. Several methods exist to end your lease early or do a lease trade-in.
While returning or selling your leased vehicle back to the lessor is the easiest choice, you have other options too.
When you begin the process of a lease trade-in, knowing the following information assists you in choosing a way forward: monthly payment, when the lease ends, end of lease charges, and residual value.
By simply adding the rest of your payments to the fees due at the end of the lease, you have a good idea of how much you owe to end the contract. Or you can contact the leasing company and compare the cost of early lease termination versus buying it out altogether.
As your lease comes to a close, it's wise to check how much equity you've invested in the vehicle. One way to find this information is by comparing the market value of your car against the buyout price. If the car's market value is more on the open market than the residual value, you have the option of selling it back to the lessor for a profit or using it as a trade-in for your next one.
Most lease contracts allow you to transfer the remainder of the agreement to another person. With this convenient method, you pay a small fee to a website, where you post the details of your lease and find someone to make your remaining payments.
If you happen to drive a popular car with strong market pricing, paying the early lease buyout price on your lease, then selling it yourself can net you a nice amount of cash.
Whichever way you decide to proceed on a lease trade-in, keeping yourself well-informed of the details of your lease agreement helps you make a wise financial choice.
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April 15, 2022
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