Lease End Advisor

Make the Right Choices About the End of Your Car Lease

When your car lease ends, you have a number of choices that you can make. The right choice depends on your specific situation. We’ll explain below.

If you have reached this page because you want to end your lease early, you should go our Early Lease Termination page.

Your Lease-End Options

At the normal end of your lease, you have the following options available to you:

1.  Return your vehicle to the lease finance company
2.  Extend your lease for up to six months
3.  Re-lease your vehicle long-term as a used vehicle
4.  Purchase your vehicle from the lease finance company
5.  Arrange for a third-party buyer to purchase your vehicle
6.  Use your vehicle as trade-in on new lease or purchase

Even if it seems obvious to you to which option you think you’ll choose, your first choice may not be your best choice. Let’s take a look.

Return, Extend Lease, or Purchase/Trade?

If you’re tired of your leased car, or have some other reason for not wanting to drive it any longer after the end of your lease, there may be reasons you should not simply return it to the leasing company. Why? Consider the following possibilities:
Your vehicle may be worth more than the residual value purchase price as stated in your lease contract, which means you hand over your “positive equity” to the leasing company if you return your vehicle

1.  You may have exceeded your mileage limit and would be required to pay a substantial excess mileage fee if you return your vehicle
2.  You may have damage to your vehicle for which the leasing company will bill you if you return your vehicle without expensive repairs
3.  Your lease may be ending at a bad time, before you’re ready for a new vehicle, or when it’s difficult to get a good deal on the new model you want
4. On the other hand, you may have already decided that you want to extend your lease, purchase, or trade your vehicle. Again, a little homework is required to determine the option that is best for you. Therefore, you should read this entire section of the Lease Kit before you make your decision.

Option 1: Return Your Lease Vehicle to the Lease Finance Company

A couple of months before your lease contract ends, you should receive a letter from your leasing company instructing you regarding how to handle your vehicle return. If you haven’t heard from them within one month of the end date, contact them and ask for instructions.

Never, ever, simply return your vehicle to a dealer and walk away without instructions from the leasing company. Furthermore, never let a dealer give you return instructions without involvement by the leasing company. Remember, it’s the lease company’s car, not the dealer’s.

The Inspection

Most, but not all, lease companies have a process in which your vehicle is inspected for excessive wear and tear, damages, and operational problems before you return to it a specified location. The inspection should take place about a month before the return.

Some companies hire a professional inspection company to examine your vehicle; others do it themselves. Some rely on dealers to perform inspections, particularly if the leasing company belongs to the car manufacturer, although this is becoming less common.

Generally, the important items about which you should be concerned are:

•Broken or dinged glass
•Long deep scratches (more than one inch long)
•Dents of any size
•Unrepaired, or poorly repaired accident damage
•Worn tires (less than 1/8″ thread); mismatched tires
•Non-working equipment (radio, instruments, lights)
•Missing equipment (spare tire, jack, CD player)
•Torn, worn, stained, or burned seat fabric, carpeting, or headliner

The inspector will typically use a checklist and make his notations on a form as he goes about his task, and may even take pictures. He should leave you a signed and dated copy of the form. This provides you protection in case damages occur to the vehicle after it has left your hands, but before it gets to the leasing company.

Even though the inspector may be very meticulous in identifying even almost unnoticeable flaws, this does not mean that the leasing company will bill you for everything noted in his report. Your lease contract should specify (in the small print) exactly what is considered excessive wear and tear. Lease companies differ in how strictly they interpret these specifications.

Many lease companies are becoming much more relaxed in what they consider to be billable wear and damages. Some specify, for example, that you’ll not be billed for any dings and scratches that would cost less than $50 to repair. Some specify the maximum size of dings or scratches that they’ll ignore. Some won’t bill unless the total cost of repairs exceeds a specified amount, say $500.

If you know that you have excessive wear and tear or damages, you should take steps to minimize your costs by getting the repairs done yourself. See the section below, “Avoiding Wear and Tear Fees.”

Clean Your Car

It’s a good idea to clean your car, inside and out, before you return it. This doesn’t mean you should spend $250 to have it detailed. It simply means wash the exterior, touch-up paint dings, dust the interior, clean stains off carpets and seats, and replace non-working lights.

Cleaning your car will help avoid close scrutiny by the lease company who might assume that, if you didn’t keep your car clean, you might also have not maintained it well. A clean vehicle also makes it more attractive to the dealer, to whom you return it, who might want to purchase it for his used car lot. Since this means the car never goes back to the lease company, it may also avoid some wear-and-tear issues.

The Return

The leasing company will instruct you, typically in writing, as to where you should return your vehicle. If you still live in the same location as when you first leased, it may be the dealer where you leased. If you moved, it could be another dealer or location in your new city. It’s also possible that the leasing company will actually arrange to pick up your vehicle at your home or business.

Make sure you get a signed and dated receipt from the dealer or whoever takes possession of your vehicle. This is to protect you from potential problems if the vehicle “disappears” on its way back to the leasing company. Notify your lease company as soon as the vehicle has been returned, letting them know the place and name of the dealer person who handled the return.

Return all keys, manuals, and equipment that came with the car. Make sure the spare tire and jack are there. Your tires should have a minimum of 1/8th inch thread left (check your lease contract for the exact amount). All tires should match and must be of the same quality as the original tires, although not necessarily the same brand as on the car originally.

Check with your state Department of Motor Vehicles (DMV) to determine whether you take the license plates or if they stay with the vehicle.

Make sure you retrieve all your personal items and documents from your vehicle because you won’t be able to access the vehicle later.

It’s good advice to take pictures of your vehicle, inside and out, on the day you return it. If there are damaged areas, take close-up pictures. This helps protect you in case the vehicle is damaged further after you return it — and it may help you if there are later disputes regarding the seriousness of existing damages.

Follow-up

A few weeks after you’ve returned your vehicle, the leasing company will contact you. At that time they will refund your security deposit (if any), minus any charges for excessive mileage or wear and tear. If you disagree with any of the charges, protest immediately to the lease company.

You may also be required to pay a disposition fee (specified in your lease contract), which compensates the lease company for cleaning, transporting, and otherwise preparing the vehicle for resale or auction.

What Happens to Your Returned Vehicle?

When you return your vehicle, any number of things can happen to it. It’s possible that the dealer to which you returned it could buy the vehicle from the leasing company and sell it on his used-car lot. Another possibility is that the leasing company may have an arrangement with a company that specializes in arranging buyers for off-lease vehicles. Or the vehicle might be sold at a wholesale auto auction and end up on a used-car lot somewhere.

Remember the residual value in your lease contract? If the lease company can’t get at least this amount of money for your vehicle, they lose money. This has happened in such cases as with the old Audi 5000; GM diesels; and, more recently, with Volkswagen diesels. A number of lease finance companies had significant losses because of this kind of problem. The result has been more conservative residuals, which has created higher lease payments.

Option 2: Extend Your Lease

Lease extensions are useful when you need more time to decide about returning or purchasing, or you need to get your finances in order to buy/lease a new car, or if the timing of the end of your lease is less than ideal for other reasons.

For instance, if your lease happens to terminate at the end of the model year, just before next year’s models come out, you may want to extend your current lease a few months to give yourself the option of moving into the newest models. Lease rates on new models are often better than on last year’s models because of higher residual values on the new models.

How Does it Work?

Many leasing companies will allow you to extend your lease by as much as three to six months at the current payment. Six months is the limit. They may come to you and offer first, or you may have to ask. Don’t just assume that the lease company will agree to the extension. Be sure to make arrangements with the lease company well in advance of your lease-end date if you decide to go this way.

What to Watch For

Be aware that your lease extension may not automatically mean that your mileage limit is increased too. Ask your lease company about this if you think you’ll possibly exceed the limit stated in your contract. It’s possible that you would have to pay a per-mile charge for any additional miles over your allowance.

Also consider your vehicle’s general warranty and whether an extension of your lease will carry you beyond the protection period of that warranty. If your vehicle’s warranty expires before or during the extension period, you would be responsible for any repairs after the expiration date.

Option 3: Re-Lease Your Vehicle

Lease companies frequently offer what they call a “lease extension” which is not really an extension of your old lease at all. It’s really a new lease on your old vehicle that goes for another two years or more. They end the old new-car lease, and give you a new used-car lease. If their “extension” offer is to re-lease for more than six months, it’s not an extension; it’s a new lease on a used car.

Be very careful

We advise very careful evaluation of these offers, as they are frequently not great deals. Remember, if you re-lease your old vehicle, you don’t have the advantage of new-car interest rates, manufacturer’s incentives, high new-car residuals, nor a new-car warranty. In fact, you may be able to get a better lease deal on a brand new vehicle of the same make and model if you shop around.

Examine all your options thoroughly before you make your final decision. Re-leasing may not be your best option, even though you may feel a certain attachment to your vehicle and would like to keep driving it.

Option 4: Purchase Your Leased Vehicle

Most leases provide for an option to purchase your vehicle at lease-end. If you have this option, it’s stated clearly in your contract. Typically, the purchase price is the same as the residual value. Sometimes, however, the contract purchase price is a little higher than the residual, which gives the leasing company and dealer one more chance to extract a little extra profit from you before your lease has ended.

When Should I Consider Purchasing?

Purchasing your vehicle from the leasing company allows you to do one of the following:

Continue driving the vehicle, assuming you want to. This means you’ll probably get a purchase loan from either the same financial company that provided your lease, or from another financing source such as a bank or credit union. It’s no different than buying any used car. Be aware that used-car loans generally have a higher interest rate than new-car loans.

Purchase and sell/trade the vehicle, which is a good strategy when the market or trade-in value for your vehicle is more than the lease-end purchase price, meaning you have “equity” or accumulated value that you would simply be handing over to the lease company if you returned the vehicle to them. Remember, the purchase price in your lease contract was set many months ago and was a best-guess at the vehicle’s lease-end value. If your lease company guessed too low, you can take advantage of their error. Therefore, you can buy the vehicle and then sell it to reclaim your money.

Be aware that, in most states, you’ll pay sales tax on the purchase and there may be title transfer and registration fees.

What If the Purchase Price is More Than the Vehicle is Worth? Is the Purchase Price Negotiable?

Just as a leasing company’s guess at lease-end values can be too low, it can also be too high — which is more often the case. Lease companies typically set high residual values to keep your monthly payments low. But this means the lease-end purchase price will be more than the car is actually worth at the time you might want to buy it.

Some lease companies realize that you’ll notice this and will offer you a better price in a letter that you’ll receive about two months before your lease ends. However, most lease companies hope that you won’t notice and that you will pay the full asking price.

Your lease-end purchase price is usually negotiable, even though the leasing company might try to convince you otherwise. In most cases, the lease company would prefer not to get the car back. Recent information says, however, that some lease companies such as Ford Motor Credit have now taken a hard line on negotiating, possibly because they have “residual insurance” (see explanation below).

What Should You Pay?

There are three ways to view the question of what is a fair price to pay the lease company for the purchase of your vehicle:

1.When leasing, you pay for the car’s depreciation. The remainder is the residual, which is the same (in most cases) as your lease end purchase price. So, by buying the car for the residual value, you’re simply paying for the part of the car’ s original price that you haven’t already paid. It’s a fair price in this respect. Nobody gets cheated.

2.However, another way to look at the price is from a market value viewpoint. If you had to buy another car (used), from an individual or dealer, just like the one you’ve been leasing, with the same equipment and mileage, what would you have to pay? This would be a fair price to you if you bought your leased car from the lease company, although it might not be quite fair to the lease company if your residual had been set high (and you benefited by making low payments).

3. Finally, another way to look at it. If you were to return your car to the lease company, they would only expect to get wholesale value (think trade-in price) by selling it at a dealer auction. In this respect, any price you offer them that is more than wholesale is fair to them, and probably a good deal for you.

Check the market value for your vehicle at Edmunds (www.edmunds.com) or Kelley Blue Book (www.kbb.com), or check the “asking” prices for your year/make/model vehicle in your local newspaper classifieds and “auto trader” magazines. Remember, actual selling prices are usually lower than “asking” prices.

Having said the above, your lease company may simply not be willing to negotiate the purchase price. Some lease companies now buy “residual insurance” to protect themselves from losses on returned vehicles that are worth less than the contract residual value. The insurance pays them the difference between auction price and residual value.

This means that it will be very difficult, if not impossible, for you to negotiate a lower lease-end purchase price with companies that have residual insurance. However, there’s no way to know ahead of time whether your lease company has residual insurance of not. They will either be willing to negotiate, or they won’t. So, you should always try, and be a little persistent in your attempt.

What if I’ve Exceeded My Mileage Limit or Have Excessive Wear? What Price Should I Offer?

If you’ve exceeded your lease mileage limit and would have to pay excess-mileage or wear fees if you returned your vehicle, it really doesn’t affect your purchase offer since the lease company doesn’t know the mileage and condition of your vehicle.

Be aware, however, that if you and the lease company agree on a purchase price that is based on the vehicle’s current fair market value, assuming normal mileage and condition, your vehicle may not actually be worth that much with its extra mileage and wear.

Don’t expect to negotiate a lower purchase price based on the extra miles that you put on the car. The lease company should not have to pay for the extra depreciation that you caused by driving more miles than your contract specified. These are your miles to pay for.

What About Insurance?

If you decide to purchase your vehicle at the end of your lease, you may decide to change your insurance to lower your costs. For example, you may want less coverage than the lease company required you to carry. To explore new insurance cost, we recommend getting free quotes from national auto insurance providers who have reputations for competitive rates and good customer service.

Option 5: Third-Party Purchase

If you think you want to purchase your leased vehicle and then quickly resell it for a profit, ask your lease company about doing a “third-party purchase” so that only the new buyer, not you, pays the taxes and fees. This eliminates you as a middleman, allowing the new buyer to deal directly with the lease company on the purchase of the vehicle.

Obviously, this is a good option only if you think you can sell your vehicle for a price higher than the lease-end purchase price. It allows you to recover your equity in a simple easy way.

Some lease companies pay you a “finder’s fee” of $250 or more if you find a buyer willing to purchase the vehicle that you might otherwise return to them. Ask friends and relatives, and make yourself a few dollars.

Option 6: Trade Your Leased Vehicle

Trading your vehicle at lease-end is similar to buying except that you must be much more careful since there’s a third party involved — the dealer. The dealer pays the lease-end purchase (residual) price to buy your car from the lease company. The dealer gives you whatever trade-credit you and he agree upon — which may be more or less than the lease-end residual purchase price.

You should use your leased car as a trade-in only if you have positive equity — the vehicle’s trade-in value is more than your lease-end residual. Unfortunately, many people who do not have positive equity fall victim to dealers’ claims to “we’ll pay off your old lease/loan regardless of what you still owe.” The difference is simply added to the price of the new vehicle.

You should always know the trade-in value of your vehicle ( use Edmunds (www.edmunds.com) and Kelley Blue Book (www.kbb.com) ) and compare this to the residual purchase price in your lease contract.

Positive Equity Trade

If the trade-in value is higher than your lease-end contract purchase price, fine. The amount of the difference — your positive equity — can be used as trade-in credit to lower the price of your new vehicle, assuming your dealer offers you at least the fair trade-in amount that you found in your research. You should always consider this option at the end of a lease.

Example of Positive Equity Trade

As an example, let’s say your purchase price as stated in your lease contract is $10,000 but Edmunds says your car is worth $11,000 trade-in and $13,000 retail. If you trade it on a new car, you receive $1000 trade-in credit after the dealer pays off the $10,000 to close out your lease. Even better, if you buy the car directly from the leasing company and sell it yourself on the open market for $13,000, you have $3000 profit to apply to a new car as a down payment.

Negative Equity Trade

This is one of those situations that seems obvious at first — if the lease-end purchase price is higher than the vehicle’s trade-in value, don’t use it as trade. Simply return it the lease company, get out clean, and buy/lease your new car without a trade.

However, if you’ll owe excessive mileage and wear fees if you return the vehicle, trading might deserve a further look, even with negative equity.

Example of Negative Equity Trade

Let’s say your vehicle has a $9,000 trade-in value, but the lease-end purchase price is $10,000 — $1000 negative trade-in equity. Further, let’s say you will owe $3000 in excess mileage and wear charges if you return the vehicle. If the dealer gives you $9000 credit and pays the lease company $10,000 to buy the vehicle, say, for his used-car lot, he’ll add the $1000 difference to your new car loan or lease. You saved $2000 by not returning the vehicle.

If you know you have no trade equity in your car, DO NOT let the dealer “handle the details” of your vehicle return for you as part of leasing or buying a new car if he is not the same dealer that you would be returning the car to anyway. You can’t return a Chevrolet to a Ford dealer. If the dealer says he’s going to handle the return for you, get a signed and dated return receipt and notify the lease company when, where, and to whom the vehicle was returned.

Trade-in Warning #1

Trading a leased vehicle should be approached with great caution. Be sure the numbers in your new contract make sense and properly reflect that a trade-in is involved. The dealer could give you the impression he’s buying your car as a trade-in, but actually returns the car to the lease company without buying it. This means you could get a surprise $3000 bill from the lease company later for excessive mileage or wear-and-tear, or early termination charges. Make extra effort to know exactly what is happening with your vehicle.

Trade-in Warning #2

This is the opposite situation of Warning #1. If you have positive trade-in equity, a dealer can claim that he can’t offer you that much money for your trade, or that he’s simply not interested in your trade-in. He can then offer to handle the return of the car for you. However, after you’re gone, instead of returning your car, he can contact the lease company, buy the car for the lease-end residual value (remember, the car is worth more than residual value), and sell it on his used-car lot for a nice profit. Part of the profit was stolen from you. The way to prevent this situation is to either get the dealer to offer you the fair trade-in price for your car, or sell the car yourself to claim your equity.

Bottom line: It’s best to just avoid these risky convoluted lease trade-in deals. They are simply potential disasters waiting to happen.

Avoiding Wear-and-Tear Fees

Your lease contract requires you to keep your vehicle in good condition, but there are going to be times when you have excessive wear or damage that would require payment of penalties at lease-end.

The Easy Way Out

The simplest way to avoid payment of wear-and-tear fees is to purchase your vehicle at lease-end (see the section, “Purchasing Your Leased Vehicle”). This may seem a little radical but it might be your best alternative in certain situations.

But if purchasing is not the right answer, how can you minimize, if not eliminate, payment of wear-and-tear fees?

Inspection Control

The key is to take some control of the inspection process. Generally, the inspection of your vehicle at the end of the lease goes off without any problems. But you should be aware of the possibility of problems, and be prepared for them if they occur.

First, make sure the inspection is done in your presence. As we’ve already suggested, make sure the results of the inspection are fully documented, and that you get a copy signed and dated by the inspector. If you have a disagreement with the inspector, try to politely resolve it with him, but realize he has his job to do. If you can’t resolve the dispute, document your disagreement on the inspection form so that you can take it up directly with the leasing company later.

To be on the safe side, we advise that you take your own pictures of your vehicle. Make separate close-up pictures of any scratched or damaged areas that might be causes for dispute later. Remember, after you return your vehicle, you’ll never see it again.

Minimize Your Costs

If you know you have damage, worn tires, or equipment that doesn’t work, it’s usually cheaper to get them replaced and repaired yourself before your lease-end inspection. If you return the vehicle with all these problems, the leasing company will almost always estimate the cost of repair higher. Make sure you allow yourself enough time to have the repairs completed before the car is due back to the leasing company.

In many cases, if a lease company attempts to charge you for minor damages, a simple protest letter clears it up. It would cost the lease company more to pursue the charges than to simply drop them.

If you choose to have repairs done yourself, don’t make the mistake of trying to fool the leasing company with cheap, low-quality parts and labor. They’ll likely catch it right away. It could actually cost you more in the long run. A good rule-of-thumb is to have the repairs done in a way that you would do it if the car belonged to you.

If you have repairs done after the vehicle has been inspected, ask to have it re-inspected or be prepared to provide detailed receipts that show the work was done.

Clean your vehicle, inside and out, before the inspection. Dirt can sometimes be mistaken for scratches or dents. A clean vehicle will always impress the inspector and make his job easier.

In Case of Disagreement

Unfortunately, there is no standard process for resolving disputes over lease-end inspections. Try to work things out with the lease company in a calm and professional manner. Document everything you do, even telephone calls, and keep dated copies of all correspondence.

In the best case, you’ll reach some agreeable compromise with the leasing company. In the worst case, you may have to accept their terms or take legal action against them.

Be sure to check with your state Attorney General’s office of Consumer Affairs regarding any possible assistance or advice they may be able to provide. In some states, arbitration may be available to allow a third-party to help resolve your problem. Check your lease contract to see if it discusses arbitration.

Avoiding Excess Mileage Fees

All closed-end lease contracts have excess-mileage fees that must be paid at the end of the lease term if you exceed your mileage limit. These fees are typically in the range of $.20 to $.35 per mile. There are a number of ways that you might be able to minimize these costs.

Prepay Miles Up-front

If you know at the beginning of your lease that you’ll be driving more miles than is normally allowed (about 15,000 miles per year), most leasing companies will allow you to “buy” extra miles up front — usually at a reduced rate — and simply spread the extra cost by increasing your monthly payment amount. This is good because it eliminates having to make a large payment at the end of the lease. In most cases, the lease company will refund you for any unused miles (of the purchased miles) at lease-end.

Mileage Strategies

If you’re already in your lease and you see that you are driving more miles than expected, you can try a number of “tricks” that have been used successfully by other people :

• Take public transportation to work a couple of days per week
• Temporarily swap vehicles with a spouse, relative, or friend who drives fewer miles
• Car-pool to work or simply swap rides with friends or neighbors
• Change to shorter drive routes to your most common destinations
• Consolidate multiple trips into one trip when possible
• Rent vehicles when taking long trips
• Drive backwards (just kidding)

Your Options

If you get to the end of your lease and you have exceeded your mileage limit, you have a couple of options:

1. Pay the fee. Although the fee is expressed as a kind of penalty, it really isn’t. You’re simply paying for your extra use of the vehicle — and the extra depreciation — which is fair. If you catch it early enough, you can even start saving a little money each month along the way to reduce the impact of paying the fee in one lump sum at lease-end.

2. Purchase the vehicle. When you buy a vehicle at the end of a lease, you don’t pay fees for excessive miles. Before buying, however, you have to consider all factors, not just fee avoidance, in your decision-making process (see the section, “Purchasing Your Leased Vehicle”).

Will My Dealer Waive My Mileage Charges If I Buy or Lease Another Vehicle From Him?

No. It’s the lease company to whom you owe the mileage charges, not the dealer. Even though the dealer may tell you he’ll “work it out” for you, he’s seriously misleading you for the sake of getting you into a new vehicle. These situations are not a solution to your over-mileage problem and are to be avoided.

Should I End My Lease Early If I See I’m Exceeding My Mileage Allowance?

Ending your lease early is rarely the right answer. Again, excess mileage fees are simply payment for the extra depreciation of your vehicle that was not anticipated at the beginning of your lease. If you end your lease early, you’ll likely encounter large early-termination costs that could easily exceed the cost of paying mileage fees if you wait until lease-end.

Furthermore, if you end your lease and, say, purchase a new vehicle, you’ll still be driving the same number of miles and depreciating the new vehicle’s value at the same rate. There are no free miles any way you look at it. You always pay for the miles you drive, one way or another, now or later, lease or buy.

If you want to further investigate the feasibility of buying out your lease to avoid mileage fees, see the “Early Buyout” section of the Early Termination Guide here in the Lease Kit.

What If My Leased Car is Stolen or Destroyed Before the End of My Lease?

If your leased car is stolen or wrecked beyond repair, your lease contract defines this situation as an “early termination.” All the same rules apply as if you had voluntarily decided to end your lease before its normal termination date.

The leasing company looks to you and your insurance company to settle up for the payoff (discussed elsewhere in this document). Since your insurance company is only going to pay the vehicle’s market value, and you’re nearly always going to be “upside down” during a lease, the leasing company expects you to come up with the difference — unless you have gap protection or gap coverage, sometimes called a “loss waiver.”

Most auto leasing companies provide gap insurance (they may have a different name for it, or no name at all) for free, some offer it for a small additional cost, and a few don’t offer it at all. Read your contract to find out if you have it. The contract may simply say that you’re not responsible for the extra uncovered cost if your vehicle is stolen or totaled, which means the lease company simply ignores it if it happens.

If you had made a down payment when you initially leased, you receive none of that down payment back if your car is destroyed or stolen, unless the insurance payment is greater than your lease payoff.

If gap insurance or equivalent coverage is not mentioned in your contract, contact the leasing company and ask about it, or try your own auto insurance company.

Example

Let’s say you wreck your leased car — totaled. Your lease payoff is $12,000, but the actual market value (as judged by your insurance company) is only $9000. The insurance company pays the leasing company the $9000 and your gap insurance pays the remaining $3000, less any deductible amount on your insurance. So your out-of-pocket expense is only the deductible, and your responsibility for the lease is terminated.

In the rare case in which your insurance settlement is more than your lease payoff, gap coverage is not needed and you should receive a check from the insurance company for the difference.

Other Lease-End Fees and Charges

You may have a disposition fee at the end of your lease that is usually charged only if you return your vehicle, but not if you purchase or trade. This fee compensates the leasing company for transporting and preparing the vehicle for resale, typically at wholesale auction. Your lease contract will tell you the amount of this fee, if it exists.

What Fees Should I Expect To Get Back At the End of My Lease?

If you paid a security deposit, you should expect to get it back at lease-end unless you owe excessive wear-and-tear or mileage fees. In this case, the leasing company will use your security deposit to pay off these charges and ask you to pay the difference, if any. Otherwise, you’ll get a refund check.

If you choose to lease another vehicle, your security deposit could be rolled over to the new lease. However, if your new leasing company is different than your old company, you’ll have to actually pay the new security deposit to the new company before getting a refund from the old company. It usually takes 4-6 weeks to get your refund.

Security Deposits and Down Payments Are Different

Security deposits and down payments are sometimes confused as being the same thing. They are not the same.

Security deposits are usually assessed as a way for the leasing company to hold some of your money in case there is some kind of dispute over fees or payments at the end of the lease. The amount of the fee varies between leasing companies, but is typically about equal to one month’s lease payment. It’s possible that this fee would not be charged to you if you have an excellent credit history or if you’ve leased from the company before. Security deposits are becoming less common with major car manufacturers.

A down payment is simply a way of prepaying some of your lease’s cap cost to help reduce monthly payments. It is not refunded to you at lease-end since it’s part of the cost of your lease. No part of it is refunded if you end your lease early.

Refunded Mileage Fees

Most leasing companies will refund for unused mileage if you “buy” extra miles at the beginning of your lease. Say, for example, your 2-year lease is based on 24,000 miles (12,000 miles per year) and you buy an extra 10,000 miles for a total of 34,000 miles. If you then only drive 30,000 miles, the leasing company would send you a check for the 4000 miles you didn’t use. Ask your lease company about this option or read the fine print in your lease contract to determine if you have it.

Should I Lease Again ?

Anyone who leases always comes to end of the lease having to make a decision about what to do next. Should you lease again? The answer always depends on your individual situation. Just because leasing was right for you in the past does not necessarily mean it’s the right thing to do next time.

What Has Changed Since You Lease Before?

Consider what has changed since you last leased, or what might change in the near future:

• Is your personal life and job still stable enough to enter into another lease contract and be able to stick it out to the end?
• Are your finances and your credit still in good shape?
• Will your income and debts handle a new lease?
• Will health or family problems prevent you from completing a new lease?
• Do you still expect to drive only 12,000 to 15,000 miles per year?
• Do you plan on remaining living in the U.S. for next few years?
• Will your family size not grow and need a larger or different type of vehicle before your lease ends?
• Will your car tastes and style preferences not change in the near future?

You Might Get a Better Deal

If you lease again from the same lease company, you may get what is sometimes called a “loyalty” deal, which can mean different things, depending on the lease company. With some it might mean a discount if the lease company is associated with the car manufacturer, such as Ford Motor Credit. For others, it might mean no security deposit, a higher residual, and/or a lower interest rate.

Some lease companies also have “pull ahead” programs in which they offer to make the last few payments on your old lease if you lease a new car now.

What If You’re Not Sure?

If you have any doubts about whether you should lease again, the safest thing to do is simply not to lease. As we’ve already discussed, it’s very difficult and costly to get out of a lease once you’ve entered into it.

To lease or not must always be a carefully considered decision, but having leased before, you should have considerably more ability to make a wise decision than someone who has never leased.