In the great debate of owning vs. renting, leasing a car has advantages. Your monthly payments are typically lower, maintenance costs are usually less, and you can drive a new car every few years. All of these perks can make leasing attractive.
If you’re one of those drivers, you know all good things must end, including your car lease. Knowing what to expect can help you take the appropriate steps to prepare for a smooth ride to the end of your lease term.
Prepare for the lease inspection
As part of the return process, a leasing company (or a third-party inspection company hired by the leasing company) will usually inspect the car to check for damage. This typically takes place within five days after the vehicle is turned in.
The inspection itself will look for things like:
Burns, stains, cuts or tears in the upholstery
Dents, scratches or punctures in the car’s exterior
Windshield cracks and broken headlights or taillights
Excessive tire wear, gouges or cuts
Broken, cracked, mismatched or bent wheels
Broken or missing parts, such as radio knobs or door handles
Aftermarket alterations, such as window tinting or body kits
Before the inspector takes a peek at the vehicle, look for these things yourself or have a mechanic give the car a once over. If there’s any major damage that needs to be repaired, you may want to address it before the inspection by having it repaired by a qualified professional. Otherwise, you could be responsible for excess wear charges from the leasing company.
Make the car look like it just came off the car lot by washing and detailing it and removing any personal belongings before the inspection. You’ll also want to make sure that all of the vehicle’s original accessories and equipment — including floor mats, seat covers, cargo covers and the owner’s manual — are returned to the car if you’ve removed them for any reason.
Estimate excess mileage costs
When leasing a vehicle, one of the stipulations you agree to is how many miles you are going to put on the car. Lease agreements typically allow you to drive between 10,000 and 15,000 miles each year; they also usually contain an overall mileage cap for the duration of your lease. If you exceed the mileage limit, you’ll likely be charged an excess mileage fee that can typically range from 12 to 30 cents per mile, depending on the type of vehicle and the leasing company itself.
Avoid sticker shock by taking the time to estimate any potential excess mileage expenses before your lease ends. All you need to do is subtract the number of miles showing on the car’s odometer from the total number of miles allowed by your lease agreement. If you have a positive number, good news! You’re still under your mileage cap and aren’t subject to any additional mileage fees.
If your calculation is negative, you’ll need to multiply it by the per-mile charge included in your lease agreement. The final number is the estimated minimum amount you’ll likely have to pay for driving too many miles during your lease.
Add up any lease return fees
Just because you haven’t racked up any excess mileage or wear fees doesn’t necessarily mean you can walk away from your current set of wheels without any additional charges.
For instance, at the end of a lease, you may be responsible for paying a disposition fee. The leasing company or dealer levies this charge to take the car back. The actual dollar amount will vary and should be spelled out in your lease agreement.
Another expense to keep in mind is a late fee. The reason for this charge is in the name: If you don’t return the vehicle by the lease expiration date, you could get hit with this penalty. Some leasing companies offer a grace period of a few days, but to be safe, you should turn the car in on or before the lease end date to avoid this fee.
Review the fine print of your lease agreement
Hopefully, you reviewed your lease closely before signing it. Now is the time to revisit it before it’s time to hand in the keys. Read your agreement so you’re not surprised at the last minute by any of its terms and talk to your dealer or leasing company about the timeline of your lease’s final days.
Avoid sticker shock by taking the time to estimate any potential excess mileage expenses before your lease ends.
Consider your future
When your lease term is winding down, it’s time to think about what’s next, how your car needs have changed and what you need going forward. Choosing to part ways with your car at the end of your lease is one option, but here are some other ideas if you’re still debating what to do next:
Extend the lease
Continuing your lease may be the simplest option if you must have a car but aren’t ready to go through the lease end process or select a new vehicle. Keep in mind, this isn’t a long-term solution. Ultimately, it’s the leasing company's call and they may only agree to a short-term extension of up to six months or no extension at all.
Buy the vehicle
Buying your existing leased vehicle is also something to consider if you want to drive it longer. Your lease agreement should spell out the purchase price for the car but take note: You’ll want to compare that price against the vehicle’s resale value to make sure you’re not paying more than what it’s worth.
Lease or buy a different vehicle
Turning the vehicle in and leasing a new one can be a smooth transition. You’ll have to sign a new agreement with the dealer and if the terms are similar to your previous agreement, you might not experience a significant increase in your monthly payments.
When considering buying another car, it’s smart to compare the cost of owning versus leasing. If you’re taking out a loan to buy the car from the leasing company, will the monthly payment be higher or lower than your lease payment? Will you be responsible for paying property taxes on the car? Don’t forget to think about the costs associated with maintenance, upkeep and repairs.
Alternatively, you could downsize to just one family car or rely on public transportation for a while. Whatever you choose, this lease end checklist can help make the return of your car as painless as possible.
Stay buckled up
Even though you knew this day would come, the reality of deciding your auto future can still be intimidating. By taking the time now to review your lease agreement and your car needs you can confidently navigate the road ahead for you and your vehicle.
