Leasing is an excellent way to try out a vehicle, but once the contract duration approaches its end, there’s a lot to consider when returning a leased car. From preparing the four-wheeler for the inspections to the handover procedures, the whole process can get a bit confusing. So, here’s the ultimate guide to help you know your options and exactly what you can expect.
The process begins a few months before the contract expires, and that’s when the leasing company will contact you to discuss the next step. No matter what option you go for, the vehicle needs to be examined by a professional. Only when it’s established that everything is in order can you talk to your company about returning or buying off the vehicle.
A Lot of People Are Choosing to Lease a Vehicle Rather Than Take a Loan Out to Buy One
With car prices being so high nowadays, more and more people are opting to lease their desired vehicle. Instead of going for more cost-effective options such as buying a used car or even one with a salvage title, leasing it allows you to drive a brand-new one that you otherwise couldn’t afford.
Buying vs. Leasing – Which One Is the Better Idea?
There are many factors to consider when choosing between buying or leasing a vehicle, and most of them are personal, so the best course of action varies from person to person. While buying entails higher monthly costs, you actually own your car. Leasing might be lower in monthly costs, and you have the opportunity to get a vehicle you otherwise couldn’t afford, but it’s not in your ownership.
Learn What Happens When You Return a Leased Car by Familiarizing Yourself With the Contents of Your Lease
Leasing a vehicle entails entering a contract that allows you to use your chosen four-wheeler for a predetermined amount of time and miles, usually for two to five years and from 2,000 to 15,000 miles each year.
Getting a good deal on a lease can be even more complicated than getting a good deal when buying a vehicle. So, it’s important to know what happens at the end of the lease and avoid getting significant charges when it’s time to return it. Here are the most important aspects you need to know:
Lease Term and Allowable Miles
The most obvious aspect of your lease contract is the amount of time you get to use the vehicle, as well as the number of miles you’re allowed to drive. As mentioned, it’s usually for a few years and for up to 15,000 miles per year, so if you plan on exploring all of the most famous routes in the US with this vehicle, you need to agree upon additional contracted miles.
You can contract for the additional miles above the allowed limit for an extra fee in advance, and it’s most commonly expressed in cents per mile. However, excess uncontracted miles will result in a penalty at the end of the lease, and it can get very expensive, so it’s important to keep an eye on the odometer throughout the whole duration of the lease.
Agreed Upon Value
Always remember to figure out the price of the leased vehicle first before leasing. This price, known in leasing contracts as the agreed-upon value, is a key factor in determining the final cost, so it’s important to gather the same data, just as if you were planning on buying the car in question. Of course, the prices for purchases and leases can be different, but it’s a good idea to be informed.
Capitalized cost, also known as simply cap cost, is separated into gross and adjusted capitalized cost. The first one includes the agreed-upon price, as well as any fees and additional things you have to pay upfront.
On the other hand, adjusted cap cost is basically the gross cap cost with a deduction resulting from a down payment and rebate. So, the capitalized cost can be minimized by a cash down payment – in simple terms, the bigger the down payment, the lower your monthly expenses are.
Residual Value and Annual Percentage Rate
Residual value is basically the estimated value that the car will have when the contract expires, and it’s calculated by the leasing company, usually as a percentage of the manufacturer’s suggested retail price (MSRP). The amount of principal you have to pay during the lease term is actually the difference between the adjusted capitalized cost and residual value. So, the higher the residual value is, the lower your monthly payments will be.
One more thing that greatly influences how much you’ll have to pay off monthly is the annual percentage rate and the money factor. Money factors depend on the lease terms and vary between different car models, and by multiplying it by 2,400, you get the annual percentage rate. So, the lower this money factor is, the lower your monthly payments are.
Early Termination Penalty
If, for some reason, the lease needs to be terminated before the agreed-upon expiration date, there will be an early termination penalty. The consequences of this will be defined in the contract itself, and you also have the option to acquire gap insurance in case the leased vehicle gets stolen or damaged in an accident.
How Much You Cash In for Down Payment Will Greatly Influence Your Monthly Expenses
When you sign the lease, you will be expected to pay a security deposit, which is usually about the same amount as one monthly payment, and a down payment, which greatly influences your monthly expenses.
For example, if we take a vehicle with an MSRP of $30,000 and a final negotiated price of $25,000, here’s how the down payment affects the monthly expenses for a lease with a 3% interest rate paid off during the term of 24 months:
|Down Payment||Depreciation Cost||Lease Fee||Tax||Monthly Payment|
There Are Three Different Options When Your Lease Contract Is Coming to an End
A few months before the lease term ends, your chosen company should get in touch with you to figure out the next steps. It’s up to you to figure out what exactly you want to do, and there are a few different possibilities. Here are your options:
You Can Extend Your Lease if You’re Not Ready to Return the Vehicle
Maybe you’re interested in a newer model that isn’t yet available or simply want to try it out for a few more months and see if it’s the right fit for you. No matter the reason, you can extend your lease term by simply contacting the company. More often than not, you’ll get a fair deal for that lease extension.
You Can Buy It Out if You’ve Realized It’s the Right Car for You
If you carefully look through your lease contract, there should be a buyout clause that sets the conditions around purchasing the vehicle in question. This can happen during or at the end of the lease term, so if it’s something you want, it’s your last chance to do it now that the term is coming to an end.
You Can Return the Leased Vehicle
The most common course of action is to simply return the vehicle, and if you want a new one, with a little bit of preparation, you can have it ready as soon as your lease expires. However, it’s not a must – if you’ve paid off everything, you have an option to just walk away. But even that entails some advanced preparation for the whole thing to go over smoothly.
How to Return a Leased Car – The Process Is Not Difficult, but You Need to Be Prepared in Advance
If you’re not interested in buying the leased vehicle, you are obligated to return it once the contract expires. The process of turning in a leased car is relatively straightforward, but there’s some planning ahead that needs to be done for everything to go smoothly.
The Return Process Begins About Three Months Before the Lease Contract Expires
While the exact procedure varies from company to company, the lender usually gets in touch with you around 90 days before the lease is up to discuss what’s next. It’s a good thing that the return process starts this early because you can prepare in time for the inspection. Once you know the exact date a professional will come to examine your vehicle, you’ll be able to start with the preparation.
A Thorough Inspection Is Needed to Conclude That the Car Is in Good Condition
During the length of your lease, you are responsible for any repairs or maintenance that the vehicle requires. There’s a possibility that it’s still covered by the manufacturer’s warranty, and in that case, you’re not the one responsible for paying for the repairs. Every lease plan has an excess wear-and-tear policy, so a professional must come to determine if you’ve exceeded the limits.
The Vehicle’s Condition Will Be Examined by a Professional Assessor Sent by the Company
An inspector will come on the agreed date and carefully examine the vehicle for any dents, scratches, cracks, or missing and non-working equipment. All damages will be documented in a report, probably along with photos, and with the measurements and the severity factored in. Once the process is done, you will receive this report and get repair cost evaluations for the existing damage, if there is any.
It’s Best to Be Personally Present During the Inspection
During the examination process, it’s important to be present because you can sign off on what the inspector has recorded. If there is any problem with the evaluation, you can always contact the company and file a report, and the vehicle will be examined by a qualified professional who wasn’t there for the original inspection.
Preparing in Advance Is the Key to a Smooth and Successful Return Process
So, let’s see what you can personally do so that the examination and the final steps go over without any surprises. Since the inspection will establish the condition of the vehicle and, consequently, the additional charges you might need to cover, the best thing to do is to prepare the leased car in advance and get it in good condition for the examination.
Clean the Leased Vehicle Inside and Out – It Will Be Easier to Spot Any Damages
If you’re wondering how to return a lease car, cleaning the vehicle thoroughly will help you avoid unnecessary charges and see any damages more clearly. So, visit a car wash or set aside some time to clean the vehicle yourself, and do it as thoroughly as you can. There’s no such thing as being excessive when it comes to it – clean everything, from the steering wheel to the dog hair in the back seats. After all, a little bit of hard work can save you a lot of money in the long run.
Assess the Car’s Condition as Objectively as You Can
Once clean, the vehicle will be easier to assess for damages. Carefully examine the vehicle inside and out, and confirm that all of the items that originally came with the car are still there. Here’s what you need to check:
- Original and spare winter or summer tires,
- Full set of keys with spares,
- Owner’s manual,
- Floor mats,
- Cargo covers,
- Other removable features, such as car emblems.
Once you’ve established that everything is in order, you should remove any personal things you might have in the vehicle or any other added accessories that weren’t there originally. Lastly, check the odometer to confirm that you haven’t exceeded the mileage, and delete any electronic information that was stored during your time with the four-wheeler in question.
The Last Part of the Process Is to Schedule the Date for Returning the Vehicle and Stick by That Agreement
If you’ve done the preparation and are well aware of the car’s condition, the inspection should bring no surprises. Once it’s done, you should get in contact with the leasing company once more to set a date and location for returning the vehicle. It’s best for this to be done around 30 days before the contract expires so that there are no hiccups along the way that might end up negatively affecting your credit score.
Now That You’re Familiar With the Process of Returning a Leased Car, It’s Time to Plan Out Your Best Course of Action
Now that you know how to turn in a leased car, the whole ordeal will surely be done without any major problems. Depending on your plans, you can simply return the car and walk away, or you can look into other options, such as leasing another model or buying out the current one. No matter what you go for, keep yourself informed, and you’ll be happy with the final result.