If you buy out, the payoff amount is just what you have to pay. The payoff amount is an important number whether you want to buy your way out of the lease or trade into a different car. You will get the better end of the deal and if you want, you may be able to sell the car at a gain. If the payoff amount is less than the car’s market value, you’re looking at a good financial decision. There’s a fair chance that at the time when you’re thinking to terminate your lease, your vehicle’s market value is actually quite different than the residual value calculated at time of signing. But the reality of the car market is about as predictable as the weather. Remember that your car’s residual value, as specified in your original lease contract, is just an expert prediction of how much it will depreciate (lose value over time) by the end of your lease period. Whenever you’re considering a buyout, the most important factor is whether the payoff amount is higher or lower than the car’s current market value. This number may or may not be specified in your lease contract, so if you’re considering taking the buyout option, contact your leaseholder to get an exact quote. You can calculate it by adding the car’s residual value plus the amount you still owe on it, including interest. It’s the amount you would have to pay to buy the car at any given point during the lease. The payoff amount is similar to the car’s residual value, but not exactly the same. What is the payoff amount for a lease car? Usually, the dealer will pay off your remaining lease balance and either buy the car from the lease company, giving you trade-in credit or simply return the car to the company.īe aware though that you may not get away so easy: many dealers will add this payment to the cost of your new lease! And if the car is returned to the company, you will still be on the hook for normal lease-end conditions, such as fines for damage, extra mileage or excessive wear and tear. If you are near the end of your lease, and you’re not interested in pull ahead, depending on the dealership you still may have some options to trade in for a different car. Trading in your car before the end of the lease. Most car leases are structured so that the opposite is the case, making it more worthwhile to just return the car and start your next contract from scratch. This works only if the trade value of your car is higher than the lease-end residual value. In certain situations, trading in a vehicle at the end of the lease contract can provide you with positive trade equity that can be used as a credit against the down payment for a new lease or purchase. Trading in the car at the end of the lease. Provided you were planning to lease again, rather than wait until the end of the contract you can get a head start with pull ahead.ĭifferent brands offer different terms with pull ahead, allowing it anywhere from one to six months from the end of the original contract. This is an ideal way to trade into a new lease if you like the brand of car you drive but your vehicle no longer suits your needs. In a pull ahead, the car company will waive early termination fees for a customer who wants to change cars, if they’re towards the end of the lease and they sign onto a lease for another car from that same company. Pull ahead programs are a sort of incentive offered by manufacturers to car lessees to build brand loyalty and encourage return customers. There are a few possible scenarios in which a trade happen. The good news is, there are more options for this than if you were in the middle of paying off a purchase, though early termination fees and other costs can make it a very expensive option compared to just waiting to the end of the lease to get a different car. There are many reasons why you might want to trade for a different vehicle in the middle of your lease period. Had a baby during your lease contract and need a bigger vehicle? Kids moved out of the house and finally, you can drive something more compact? Monthly payments are getting too heavy and you want to drive something more affordable? Is it possible to trade in your leased car? For those looking to trade in their lease car for a different vehicle or take the buyout option before the end of the lease, it’s important to understand a few key financial concepts, namely trade-in value and payoff amount.ĭoes lease jargon sound like a foreign language? No worries, here’s an easy-to-follow guide to the nuts and bolts of trading in or buying out.
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