The car lease you entered nearly three years ago is about to end, and you want to know what you should do. Here are some options.
In times before the COVID-19 pandemic, when the supply chain was running smoothly, you had a lot of easy options to get out of your lease. That’s not the case any longer. Some automakers halted the early lease buyout programs of old and, more recently, limited where you can take your leased vehicle when the contract ends. Let’s explore why this happens and what you can do with your leased vehicle.
The Pandemic Messed Up Everything
You might think that the supply chain would be back up and running by now. Why wouldn’t a few months of overtime do the trick to get the supplies back to where they need to be? Semiconductors are the answer. It doesn’t matter how many shifts are running; producers of semiconductors can only turn these items out at a specified speed. The only way to increase the production of these items is to build more places where they can be made. This takes time, and we aren’t at a point in the process where new locations have been completed and are making these items.
With No New Cars, Used Cars are Extremely Valuable
The supply of new models is interrupted, but the collection of used vehicles remains relatively strong. Unfortunately, this supply is also being depleted. Where can a car dealer find cars no more than three years old with low miles on them? The most significant supply of models that fit this description is leased vehicles. This makes the end of your car lease a time that your local dealership looks forward to nearly as much as you do.
Your Lease Deal Could Change During Your Term
You might think you should be immune to the troubles this event caused because you entered your lease before the pandemic, but that’s not the case. If you take your leased vehicle to a used car dealership or a location with a different brand on the sign, the financing company you’re leased through could refuse to accept a payoff from that dealership. Many automakers direct their financing institutions to only take lease payoffs from their dealership network and not other dealers outside the network. Currently, the brands that only allow same brand lease returns are:
Before the pandemic, the limitation of where to return your leased vehicle was never in effect.
The Dealer Holds All the Cards, Including the Final One
When you entered your car lease, you went over all the paperwork, but you might have missed a couple of items. The excitement you felt of driving off the lot in your newly leased vehicle made you ignore that you have to pay a disposition fee when the lease is over. Even if your car is under the mileage limit, in perfect condition, and has impeccable service records, this fee could cost you an average of $400.
Of course, if you have dents or dings on your leased vehicle, pending parking violations, or went over the mileage limit, you’ll pay a lot more than the disposition fee.
What Can You Do?
We know why automakers limit where you can return a leased vehicle, and we know that dealers are waiting for your car so they can sell it again at a high margin as a certified pre-owned model; what should you do. You have three options when your car lease ends.
Will You Buy Out Your Lease?
If you don’t want to enter another lease or buy a brand new car, you can buy out your lease. Doing this means you finance the remaining value of your vehicle. This is a highly advantageous situation because the amount was fixed in the contract when you first signed it. This means you avoid the higher prices of used cars, making this vehicle a severe value benefit for you. This could be the best option for you to continue to drive the car you’ve enjoyed for the past few years.
The fact that the residual value of your vehicle is listed in your lease contract is one of the main reasons many automakers began to disallow early lease terminations at any location that is not part of their dealer network. Many leases entered in 2019 and 2020 are significantly undervalued considering the 2022 prices of used vehicles. Of course, if you enter a lease in 2022 and the prices of used cars drop, you’ll have an overvalued car lease when the term ends.
Do You Need to Swap Your Lease?
This is one of the most complex and limited ways to end a lease early. While the brands mentioned won’t allow you to sell your leased vehicle to a third party, other brands still allow this practice. Some lease contracts will enable you to transfer your lease to another person, which could also benefit you. Of course, if your agreement requires you to remain on the car lease, you might be better off continuing to drive the vehicle until the term ends. Otherwise, you’ll have to pay an early termination fee, which can become costly when you want to end your lease before the time is up.
Should You Enter a New Lease?
Tell them you want to lease another vehicle if you want to see a massive smile on your dealer’s face. They love this. They get to take your old ride, sell it as a low-mileage certified pre-owned vehicle, and put you in another car you lease. Sometimes, if you intend to lease another vehicle, you can get the dealer to waive the disposition fees to help offset some of the costs. You might see some lease terms that are much shorter than before, which could be to your benefit.
Are you considering ending your car lease? If so, keep in mind the limitations of the pandemic that impact whether or not you can complete your lease early and where you need to go.
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