What Happens When a Car Lease Ends? You Have More Options Than You Think
If your lease is up, you may be able to make money off a vehicle you don't own.
Leasing can be a more convenient and more affordable option for car-buyers who always want to drive a new car with the latest safety and comfort features. According to
“You have more options at the end of your lease than you may think—and more than the leasing companies want you to know about,” says LeeAnn Shattuck, automotive expert and professional car buyer at
Edmunds senior consumer advice editor Ron Montoya agrees: “As a consumer’s lease deal comes to a close, they have many options: buy the vehicle, sell or trade in the vehicle, turn in the vehicle and apply it toward another lease or purchase, or extend the lease.”
Before deciding what will happen when your car lease ends, you must first know how much your car is currently worth. You can do this by using online value and pricing tools from sources like Kelly Blue Book and the National Automotive Dealers Association. In addition to (or instead of) that, you can have your local dealership or an online used-car retailer make an offer on buying the car.
Knowing how much your car is worth and the buyout number gives you a solid foundation for making a decision on what to do with your leased car. The current nationwide shortage of new and used vehicles makes things more complicated than they usually are, but understanding the pros and cons of those options can help you make the best decision.
1. Buy Out Your Lease
When you decided to purchase your car at the end of a lease, you typically end up paying more than if you had just bought the car in the first place. But since you can’t go back in time, this could still be a financially prudent decision for you. If the replacement car you want to buy is considerably more expensive or not readily available, buying out your lease might very well be a way to make the best of a bad market.
This option means you reap the benefits of knowing the car. “You know its history, where it has been, and how well it has been maintained, so there is less risk than buying someone else’s used car,” says Shattuck. “If there is positive equity, you are getting a better financial deal than if you buy a similar used car at market value,” she added.
There is one downside to be aware of before buying out your lease: In some states, you may have to pay sales tax again, effectively doubling the taxes you pay on the car.
2. Extend Your Lease
If you are set on replacing your leased car but are having difficulty finding a vehicle at the right price or with the options you want, “many leasing companies will allow you to extend your lease for up to six months,” says Shattuck. Call your leasing company and ask if the option is available to you.
If you can extend the lease, typically, it would also extend the miles allowed on the lease and decrease the buyout number.
3. Sell Your Leased Vehicle to the Highest Bidder
In the past, you might not have much, if any, positive equity when it came time to turn in your leased car. But with the current shortage of vehicles available for sale, your vehicle is likely worth more than the price you’d pay to buy it. “In order to maintain the equity, the consumer’s best option could be to sell the car,” says Montoya.
While you don’t technically own your leased car, some manufacturers allow you to transfer your option to buy out the lease to someone else. That buyer then hands you a check for the balance between what they agreed to pay and what you owed on the buyout.
Here’s an example of how that works that: Three years ago, you leased a 2019 Subaru Impreza, which now has 35,000 miles on it. Your cost to buy out the lease was set at $17,000 when you originally leased the vehicle. CarMax offers you $20,400. After some negotiation, the local Subaru dealership offers you $20,000.
If you turn in the car, you’ll lose $3,400 in equity. Instead, you can sell the vehicle to CarMax or the dealership. They would pay off the lease, and cut you a check for the balance—in this case, $3,000 or $3,400, depending on whom you sell it to. You can pocket this money or apply it to the purchase of another vehicle.
Unfortunately, this end-of-lease option may not be available based on which automaker you originally leased from. "Due to tight inventory caused by the chip shortage, a number of manufacturers and their dealership finance arms want to protect their inventory and don't allow for selling leased vehicles," says Montoya. "In 2021, that list included Nissan, Infiniti, Honda, Southeast Toyota Financial, GM, Ford, and Mazda."
If you find yourself in this scenario, you can still execute a similar deal, but it will be performed as two separate transactions. You’ll buy the car from the company that originally leased it to you, then you’ll sell it to another dealer.
4. Turn Your Lease In
When you leased your car, this might have been your plan: drive the car for three years or so, then return it to the dealership for a new car. Typically it’s a simple process as long as you meet the terms of your lease.
In that case, your biggest decision when your lease ends would be picking your next car. If you plan to lease or buy from the same dealership that arranged your expiring lease, “it doesn’t hurt to try to use your leased car as a bargaining chip, as dealers are desperate for any decent inventory they can get,” says Shattuck. In this situation, you use your equity in the vehicle to negotiate a better deal on the new car. You may end up with a significant discount in the current market.
On the other hand, if you’ve exceeded the mileage or the car has more than minimal wear and tear, you might need to prepare for what can be a hefty bill after the vehicle is inspected and processed. “Consider having that repaired prior to turn in to avoid excessive wear and tear charges,” says Shattuck. “If you are over your mileage allowance, check to see what options you may have to eliminate those excess charges.”
If the bill is more than you can stomach, or you have more equity in the car than you are willing to lose, one of the above options might be a better solution.