Leasing Information and Essential Tips
Trading a lease is confusing for many people. Most of the time you realize that there is a new car model and you want to trade in your current leased car for it. Whether you’re in the middle of your lease or quickly approaching the end, trading in could be an option.
However, trading in your lease might not be the option especially f your car isn’t in the best condition. Sure it is possible but is it the best deal for you. Read on for more on trading in your leased car.
What you need to know about trading in a lease
Depending on the stage of your lease, trading in could be more convenient or not. Trading in might have a lot more out-of-pocket expenses when compared to when the lease is up.
If your lease pay off amount is much higher than your trade-in values, then the trade-out process will be more expensive. You will need you current lease pay-off amount because the dealership pays off the lease, which then goes against the trade-in value of your vehicle.
Preparing your car for a trade in
You must do some things before taking your leased vehicle to the dealership for the trade. Take a look at how to prepare your car for a trade-in.
- Gather all your documents
These include your preventative maintenance documents and other records that prove you keep your vehicle in top condition. With all your service records, you can easily prove that you’ve taken care of your vehicle.
You might not need to present the repair paperwork as evidence, but providing the documents during the appraisal might put you in a better place than just relying on your word.
TIP: if your vehicle has been in an accident, you must prove to the vehicle appraisal expert that repairs were performed.
- Clean up
Before you return your leased car or trade in a vehicle, you want it in top condition. It doesn’t have to be sparkling new, but at least cleaned up. Some penalties come with wear and tear on a leased vehicle.
You may save yourself some extra hundred dollars by checking the vehicle for any scratches, damages, or anything else. Because the dealership appraisal will thoroughly inspect the vehicle, it will do you good to reduce the number of issues that decrease the value.
Apart from the vehicle condition, there are a bunch of other factors vehicle appraisers at the dealership look at to determine the value.
- Do some research
Before you get the deal of the day from the salesperson from the dealership, you must first understand the value of your vehicle. You can easily find out the vehicle trade-in values from websites available on the internet.
With this value in mind, you can ascertain whether the deal you’re getting for trading in your leased car is in fact a deal.
- Know your cars value
It is important to understand your vehicle's market value before walking to a dealership. You can self-appraise your vehicle so you can make the best decisions at your trade-in. if you decide to use websites to determine the vehicle's worth, be honest about your vehicle's condition.
This way, these systems generate a more accurate value. The value will be based on the make, model, features, and condition.
Is it worth it?
Trading in your leased vehicle is best when if the trade In value of your vehicle is higher than the buyout price of your car. This is usually the case when your mileage coverage is lower than what the contract allows, the vehicle is in good condition and the model is still popular.
What happens at the dealership?
When you present your leased car at the dealership for trade in, the used car department evaluates your vehicle and assigns the trade in value.
This is where your equity is established. It is the positive difference between the vehicles value and what you actually owe. If your vehicle is appraised at negative equity, then you owe more than what the vehicle is worth.
TIP: Having equity is important especially if you plan of getting a car. you can apply it as part of your down payment for your vehicle, if you’re in the process of purchasing one. You could also take the equity in the form of cash.
How to turn in a leased car to a different dealer
Returning a leased car early is not as simple as you’d think. Walking away from a lease is usually an expensive affair that may have major financial implications.
There are some ways you can terminate quickly without having to empty out your bank accounts. Trading in your vehicle is a good option even if you do so at a different dealership.
What happens when you trade in a leased car?
When your lease ends, you have the option of returning the car of purchasing it. However, you might not be willing to stick it out that long and want out of your new lease for a different car, IN A DIFFERENT DEALERSHIP even. Yes, it is possible to make this transition but it will cost you in fees and penalties.
First off, you must consider the implications that come with terminating your lease early. Depending on the dealer and your agreement, you will encounter some penalties.
However, there are some ways you can get around these penalties and still get out of your lease early. Some include transferring, buying, and then selling the car and other ways that will remove you from your current lease without paying as much as you would if you would in early termination fees.
In as much as this means decreasing the amount you are to pay, the two have some fees attached to them.
While returning a leased car to a different dealer is possible, there are some requirements that must be met. First off, the dealership has to be authorized for the vehicle manufacturer.
Obviously you can’t just turn in your vehicle brand to any dealership, however, any dealership. Secondly, all your contract obligations must be met before you attempt to trade in a lease at any dealership.
Turning in the leased car early
Turning in a leased car early might get complicated and expensive if not done correctly. First, you must remember that the dealership makes money on a lease when the payments are completed.
You will also face some penalty fees for early termination. You may also have to pay the remaining amount for your payments upon trade in. Do not be put off by the penalties you might have to face.
Many companies offer incentives for an early lease turn-in if you are planning to purchase or lease again from that dealership.
Can I return leased car in a different state
Similarly to returning a leased car to a different dealer, there are requirements that must be met when returning your leased car in a different state.
Obviously, you will have to find a dealership approved for the vehicle manufacturer and you must meet your lease requirements. You will have to contact your lease company to inform them that you intend to return the vehicle I different location.
Then you must call the dealership where you intend to return the vehicle and make sure they are compliant with the conditions.
TIP: If you can’t a dealership authorized by the vehicles manufacturer, you may ask the lease company to direct you to an authorized dealership.
Why equity is important
At the end of your lease, you could have equity or negative equity. Equity is important as it can be put in as payment for another car.
Negative equity occurs when the value of the car is less than the amount you owe. This usually comes about when you maintain your vehicle in poor conditions or go past some conditions of your lease.
Exceeding the miles coverage, wear and tear, or damage will greatly decrease the value of your vehicle and thus lead to negative equity.
Zero percent financing car loans– Pros and cons
New cars come with all sorts of incentives to boost their sale; each with its own upsides and downsides. One of the popular incentives is the zero percent financing deal that most people have heard of but might not completely understand.
We are going to break down what it means to buy a vehicle on zero percent financing, if there is any catch to it, and if it is worth it. Read on for more on zero percent financing car loans.
What is Zero percent financing?
This is a zero percent APR deal, meaning you won’t get charged interest on the amount you borrow. You need only pay the deposit and the subsequent monthly payments.
This is unlike other loans where when you borrow money the APR is added to the amount of money you borrow. Paying no interest on your loan sounds very appealing; however, it is unavailable to everyone.
Do you qualify for zero percent financing?
The first criterion used to select qualifiers for this type of financing is credit scores. You may have to forget about it if your credit score isn’t very good. This interest rate is exclusive for well qualified borrowers, I.e. individuals with excellent credit.
You might even have good credit and still get turned down for a no interest auto loan option. It would go without saying that anyone with bad credit has little to no chance of qualifying for zero percent financing.
TIP: Typically, you are required to have a credit score of 700 and above to qualify for this sort of loan. The range however may vary from one dealer to another so you could call up different potential dealerships to find out more.
Is there a catch to Zero percent financing?
Like all other types of deals, there is a catch to zero percent financing. First off, if you choose to go with zero percent APR, then you exclude yourself from any form of rebate.
Dealers use both of these incentives to promote sales on some vehicle models. However, you can only have one or the other. Choosing the zero percent financing option excludes you from selecting another type of incentive.
What’s the difference? Well while zero percent financing is restricted to the well-qualified customer, rebates are open to virtually anyone. New care rebates are one of the more popular forms of rebate incentives. They are a diverse type of incentive that can suit virtually any kind of customer.
Furthermore, this type of zero percent financing deal restricts the loan term, making the monthly payments higher. In contrast, rebates allow the customer to have a wider spread loan term with lower monthly payments.
The dos and don’ts of zero percent financing
Even if you’re going for a zero percent financing option on your vehicle, get yourself pre-approved for a car loan beforehand. Having secure financing when walking into a dealership is always a good idea. This preapproved loan will serve as your backup just in case you don’t make it with the zero percent APR option
Do make sure you like the car and its features. if you’re going to purchase a vehicle, try not to base your decision on a financing deal. Make sure to test drive, feel it out and confirm that you actually like it before purchasing it.
The biggest downside of zero percent financing is not to skimp on the payments.
Additionally, don’t go for loans that are longer than 60 months. First off, the longer the loan draws out, the longer you will be in debt and secondly, the value of the vehicle will have diminished by the time you finish paying for it.
You might already be tired of the vehicle by the time you clear all your payments.
Where you can get offers for 0% finance
Typically, zero percent car finance is available for new cars. This is because the dealers tend to offer these finance deals on cars that are about to be replaced so they can make space in the show room for other deliveries. Sometimes, these deals extend to vehicles with unpopular parts or colors that aren’t very big with the customers.
Pros and cons of a zero percent deal
If you’re not completely sold on the idea of a zero percent financing deal, take a look at the pros and cons of it.
Pros
- You could get a great deal if you’re not too specific about some details like color or unpopular parts
- The main pro is the savings from escaped interest payments. You only need to pay back what you borrowed
Cons
- It is limited to individuals with excellent credit, excluding many buyers from the deal
- You will need to pay a large deposit as compared to atypical payment scheme
- This deal is often offered for non-popular vehicles or cars struggling to sell
Returning a leased car at lease end
As your car leasing end approaches, there are several things you may start to think about. What are you going to drive next? Is it a good option to buy the vehicle once the lease is complete?
Are there any potential charges that you may encounter at lease end? We will help you answer these important questions and guide you through. Remember, the lease end process isn’t just about turning in the vehicle. It is a delicate process that could be expensive if not done correctly.
Charges that you should be expecting at lease end
Some of the charges worth discussing are excess wear, mileage overage, disposition fees and late charges. Read on as we tackle each of these individually.
Excess wear
Before you hand in your vehicle, it might do you good to conduct your own inspection and examine it for any dents or scratches. If you find any present, get a professional to repair the damage before you hand in the vehicle.
Your tires must form part of this inspection. Treads that are less than 1/8 inch will attract even costlier tire replacement charges at the dealership.
Mileage coverage
To avoid excess wear and tear, many companies set mileage limitations. Because these limits vary, there isn’t a standard to the limit. Exceeding the mileage coverage limit will attract penalties that vary from dealer to another.
Mileage allowances on lease cars are typically set to several thousand per year or for the entirety of the lease. For example you might have a mileage allowance of 12500 miles yearly or 37500 miles for a 3 year lease.
Likewise, the charges for the penalties for exceeding the limit vary depending on the dealer. The charge is set at a certain amount for every additional mile beyond the limit. The more luxurious your vehicle, the more expensive the penalties and fees applied. This ensures luxury vehicles maintain their value.
Disposition fees
Most people forget about this charge or don’t even know about it to begin with. This fee is charged to anyone whose lease is over but who doesn’t buy the car.
You can expect to pay up to about 400$. Make sure to go over your contract and take down what you will be charged in disposition fees, to avoid being overcharged at the end.
Nowadays the fee is indicated on the front page of the contract so it should be easy to find.
Lease end and your credit
Depending on your lease terms, the dealership notifies credit bureaus every time you make lease payments. Such payments with each of your creditors influence about 35% of your score.
An unexpected change to your current situation like an early buy out, or early lease termination has the potential to impact your credit score.
If you decide to make such changes, you must make all your payments on time as late payments have the capacity to influence your score by up to 110 points.
Returning a lease is relatively safe to your credit score unless you fail to pay the lender any remaining monies.
Returning a lease may influence your credit
Check your Credit reports for reporting errors once you pay off your car lease. Sometimes, a lender might take too long to process your final payments, or make a mistake with the credit reports.
This could reflect late payment on your credit reports and damage your credit scores. If you have inaccurate late payments reflecting on your credit report, you must remedy the problem immediately.
Thanks to the Fair Credit Reporting Act, you can check credit bureau reports for free once a year for any credit reporting errors. This way, your credit is safe from unjust penalties due to lender errors.
Some of the expenses at lease end can be avoided by paying attention to your vehicle. Here are some tips to help you survive the inspection before you officially hand in the car.
Repair beforehand
Instead of waiting for the excess wear charges, you can touch up some parts of the vehicle to lower or eliminate the charge. Tires, glass, or bumpers are easily replaced.
If your tires have less than an inch of tread left or have spider cracks on your windshield, it would probably serve you best to fix them before the inspection. You don’t have to sweat about minor scratches, but take care of major stains and evidently out-of-shape vehicles.
Consider wear and tear insurance
Yes, it is actually a thing. If you know, you will inevitably wind up with stains, scratches or dents, then wear and tear insurance might do you well. You might find such insurance where you lease your vehicle or elsewhere.
Be careful with the price set for such insurance at the dealership, or you might end up paying an unreasonable amount as a premium.
Try and keep your mileage in check: If you know you will be spending a lot of time of the road, you could purchase extra miles from the lessor beforehand. They cost less than what the lessor charges as penalty per ever exceeded mile.
What are some ways to pay off your car loans faster?
Being in debt over a car loan doesn’t sit well with many people. In fact, many people prefer to pay the loan early and be done with it. Not only to improve their cash flow, but also benefit has their credit scores.
Is it possible to pay off your car loans early, yes. However, not everyone has the freedom to do so. The first step in paying off a car loan early is to confirm that you are allowed to make an early pay off without penalties.
Otherwise, you might subject your bank account to. Penalties are an important concern especially if you have bad credit or you are subjected to high interest rates.
Round up
There are different ways you can make an early pay off including, rounding up your payment. This way, you could knock off some months from your car payment. Rounding off is as simple as paying the rounded up number of the monthly scheduled payment.
Say you are supposed to make a $478 payment bust instead, make a $500 payment; you could effectively reduce the number of moths you are to make your payments.
BI weekly payments
Making bi weekly payments is another great way to clear your car loan early. The basic requirement for car loan payments is every month; however, you could talk to your auto lender for a biweekly payment plan.
If you pay half your monthly payment every two weeks, you wind up repaying the loan in a much shorter time than anticipated.
Extra pay periods
Not everyone has the capacity to make bi weekly payments. Making your payments in your extra pay period has the same effect as a bi weekly payment. Money from your bonuses, or savings could help you make this payment and decrease your loan payment period.
Do not take the skip payment option
Some lenders give you the choice to skip your payments once a year. Given that you are trying to clear your car loan as fast as possible, you will only be extending your loan period if you take the skip payment option. You’re not only adding more time to the loan but skipping the payment by a month tracks on additional interest.
Snowball payments
Snowball debt payment is an excellent strategy to pay off any of your debt, car loan included. If you are not familiar with the concept, snowball debt payments involve gathering your extra money and scrimp to pay your smallest debt.
If your car loan isn’t the smallest debt, you can pay the smallest debt you have to free up some money to pay your car loan, using the same strategy of course.
Transferring your car lease easily – How to reduce penalties
You might not be aware, but getting out of your lease early is not as expensive as you might think. There several ways to do so, without incurring the expenses or penalties that come with breaking it. Transferring your lease for example is one of the easier ways to escape the payments.
Transferring your lease for another car
Choosing to trade in your vehicle for a different one as a way of getting out of your lease is possible. However, it is not the ideal option if your reasons for getting out in the first place are due to financial trouble.
This option is best suited for anyone who is tired o f their current vehicle and wants to swap it out for a more desirable car. Choosing to trade in your leased vehicle for another one will cost you an early exit fee but excuse you from paying any more payments on your current lease.
Swapping your car lease
Transferring your lease to someone else is possible but it comes with its own. First off, you must find an individual who has the potential to take over the lease. It is possible to transfer your lease to someone else.
However, every automaker has its own rules about transferring leases. Some of them do not allow transfers while others hold the original lease holder accountable; say if the new lessee stops making payments.
Even after jumping through these hoops, you may incur several hundred dollars worth of charges in lease transfer fees. Doesn’t sound like the most cost effective way to get out of a lease, does it?
Conclusion
Trading in your leased vehicle could turn expensive or complicated depending on several factors. Before you decide to trade in your vehicle, you must weigh out the pay off, is it going to be more expensive or cheaper based on your trade in value and pay off amount? If you choose to go with the trade in, it advisable that you prepare your vehicle properly.
FAQ
Can I upgrade my car lease?
At times the car model that you got gets outdated as new models come in. At this time you can choose to confront your dealer to see whether they have a program where you can upgrade your car lease.
This often happens at the end of the lease. Most of the dealerships make a lot of money from leases and upgrading your lease to another car means they make more profit.
One of the first things you need to do is consult your bank to see if they have some incentives or “pull ahead programs”. Take a closer look at how the new lease will affect your new payments before signing in.
Do I need to pay for oil changes on a lease?
It will depend on the lease terms and conditions. Most of the time the leased car will be covered by the manufacturer’s warranty, meaning they take care of hefty repairs. However, you maybe responsible for some minor car repairs like oil changes, tire puncture repairs and small dents.
The manufacturer’s warranty will cover gearbox damage, engine repairs and electronics. If you plan to use the car longer than expected you can opt for an extended warranty.
Who services a leased car?
Once you have established what kind of repairs you need for your car, you next need to know whether they are covered by the manufacturer’s warranty. Each car under the lease is mandated to be taken for servicing within stipulated intervals.
It could be 6 months or once every 2 years. Failure to comply would invalidate the warranty. The servicing is often carried from a list of approved dealerships. If you want to avoid penalties and any issues with the car, ensure you take your car for servicing during the stipulated time frames.