What Are Your Options When Your Car Lease Ends?

Plus: The lease-end options dealers don't want you to know about & important tips for changing you car insurance coverage

leasing a car
Trading in? Upgrade your car insurance along with the vehicle it protects. Compare rates now! →

Of course there are many reasons you might want to lease your car. Perhaps you like the idea of driving a new vehicle every three to four years. Or maybe you always prefer to drive under a manufacturer’s warranty. Leasing also usually results in lower down and monthly payments, as well as lower repair costs.

Whatever your reasons, every lease must eventually come to end — the question is: how? If you’re currently leasing a car, do you have a plan for when your lease is up? You have options, including a few that dealers don’t want you to know. We’ll explore all these options to help you figure out which one is right for you. And, as always, it’s best to start preparing for these things well in advance of your lease actually ending. So let’s dive in.

Option 1: Extend Your Lease

If you’ve been enjoying the car you’re driving but don’t want to own it outright, you can always ask your dealership for an extension. This won’t work indefinitely, but if you’ve been making your payments on time and taking good care of your vehicle, dealers are often more than willing to extend your lease for an additional timeframe.

Sometimes a dealer will offer a special or discount that seems too good to be true. Spoiler alert: those deals usually are too good to be true. But to double check, you can use the true market value calculator from Edmunds. That’ll give an expected payment for a car, which you can compare to the deal in front of you.

Even if you’re not getting a deal straight from the dealership, there are several leasing options that can help you save some cash:

  • Multiple security deposits: MSDs are added in certain contracts, with the deposit equal to one month’s payment and rounded up to the nearest $50. If you pay two or more of these in a row, the leasing company reduces the interest rate.
  • Pay your lease all at once: If you have excess cash, you can pay your lease all at once, calculated without any interest. This can help you save more than $1,000. However, if the car is totaled or stolen during the lease, your insurance would only pay the current market value of the car, not what you paid for it. That could be a huge difference in price.  
  • Keep paying month-to-month: Haven’t decided on what car you’ll get next? Many companies will allow you to keep your current car on a month-to-month basis. This isn’t wise to do for too many months, since if you decide to buy the car you’ll likely be stuck with the original residual fee, which might be higher than you’d like to pay. Still, in a pinch, this is a solid option.
  • Ask for a re-written lease: Most leases are billed as 12,000 to 15,000 miles per year, but that doesn’t mean you’re stuck with those terms. If you found yourself regularly exceeding the allotted mileage limit during your lease, ask the dealership if you can increase the annual mileage. It’ll also increase your monthly payment, but it’ll likely be by a smaller amount than the extra mileage fees, which can be as high as 25 cents for every mile over your agreement.     

couple driving together

Option 2: Buy Your Vehicle

Love your ride and want to step your relationship up to the next level? Good news – you can buy the vehicle you’ve been leasing. There are several occasions where buying makes sense, like if your car is in great shape and you’ve been enjoying using it, or if you’ve gone way over the mileage rates of your lease and want to avoid penalties on extra miles.

Another reason to buy the car you’ve been leasing is if the price to buy is lower than the market price. If you’re a fan of the car, leasing it for a year or two before purchasing just may end up saving you money in the long run.

If you go this route, be aware of some of the pitfalls of financing your car. It’s usually a better idea to finance with your bank instead of the dealer itself. Know what you can afford for a down payment and how much your monthly payment will be. A few good rules to follow:

  • Don’t exceed 20% of your monthly take-home pay (the money you receive after taxes) for a car payment.
  • The ideal down payment is 20% for a new car and 10% for a used car.
  • At most, finance a new car for five years and a used one for three years.

You’ll be cruising around town in your very own car in no time. Just make sure you’re not putting yourself in a difficult spot financially.  

Option 3: Trade in Your Vehicle

You might decide the vehicle you’re leasing isn’t the right one for you, but you still need a ride around town. Dealerships are more than happy to offer another vehicle as a trade-in, and it could perhaps even save you money as you near the end of your lease agreement. A few tips to consider:

  • Larger vehicles usually have a higher cost for leasing – if you downgrade from, say, an SUV to a sedan, your monthly payment will likely be lower. Dealerships may also offer a buyout if you lease or buy another vehicle from them, but double-check your contract to make sure you’re not transferring your lease instead, which will come with extra fees and liabilities.
  • Certain auto manufacturers offer lease pull-aheads. These are special deals that allow you to forego your final few payments if you immediately lease another vehicle. Not every dealership will offer this, and it may only be available at certain times of year, but it’s worth asking to see if it’s possible.
  • Get your car detailed before bringing it back to the dealership. You want to present the absolute best vehicle to the dealer, and making sure it looks sleek can help do just that. Though you’re saying goodbye to your “old” car, you still want it to seem as new as possible.

Consider the differences between the two rides and read all paperwork carefully to ensure you’re not getting trapped into a deal you weren’t expecting. (More basics on how to lease a car here.)

handing over car keys after you donate a car

Option 4: Walk Away

Have you ever watched a game show where the contestant has to choose between taking home a guaranteed amount of money or risking it all by playing one final game or making one last decision? Maybe you’ve even screamed at the TV when they chose the path you think they shouldn’t have. Hopefully nobody is screaming at you when you’re mulling through your leasing options, but that doesn’t mean you shouldn’t do your homework and consider if walking away from the dealer at the end of your lease is the best choice.

If you decide you don’t need a car for the time being, you can sell your leased car and potentially make some extra money.

  • You can bring your leased car to any dealer – yep, any dealer, not necessarily the one you leased from – and they’ll buy it at the trade-in price. However, different dealers will offer varying prices, so it’s worth shopping around a bit to find the best deal. You might have more luck with a “brand-to-brand” sale – for example, selling a Ford to a Ford dealership – but that’s not always the case.
  • Dealers will want to see the vehicle in person, check the mileage, and examine for any damage, even it’s just wear and tear. Try to present your vehicle in tip-top shape, making sure it’s clean and removing any personal items.
  • The dealer pays the leasing company what you owe and sends you a check for the equity. However, you should know that check can sometimes take weeks or even months to arrive, since the dealer has to wait until they get clear title. After all, they don’t want to be on the hook for parking tickets or other driving infractions.
  • Make sure you have a deal in writing with the amount that’s owed to you so the dealership doesn’t try to play any tricks with your money.

Plus: What to Know about Insurance When Your Car Lease Ends

Leasing usually has different insurance options compared to buying. The Zebra’s own licensed insurance agent and adviser Neil Richardson shares his expertise.

Your insurance coverage options when your car lease ends

1. If you’re extending your lease:

Nothing should change. However, it’s always a good idea to compare rates every six months or every year to ensure you’re getting the best rates and any discounts you might qualify for.

2. If you’re buying your vehicle:

The only difference between financing to own instead of lease is in the minimum limits your lender requires. You may no longer be required to carry high limits of liability coverage so you might consider decreasing them to lower your premium (though that may be risky). However, if you are financing the car instead of buying it outright, you will still have to carry full coverage (comprehensive and collision).

3. If you’re trading it in:

First, don’t cancel your current policy until you have a new one in place. When shopping around at new makes and models, it’s a good time to compare car insurance companies to make sure you’re getting the right coverage at the best rate. If you want to stick with your current insurer, great! Just make sure you inform your agent and change your policy with no lapse in coverage vehicle-to-vehicle. If you want to switch insurers, make sure you have a new policy active before your previous policy has been canceled, otherwise you’ll have a lapse in coverage (read on — it’s very costly).

4. If you’re walking away:

If you no longer need a vehicle, it might stand to reason that you no longer need car insurance coverage, right? Well, yes, but there is still a pretty big factor at play: continuous coverage. Insurance companies see a history of insurance coverage with no lapses as an indicator of financial stability and low-risk behavior. If you have a gap in coverage (even if you had no car to insure), you could pay much higher rates if/when you do want to purchase car insurance again in the future. (Fortunately, those rates would begin drop after six months, and as you continue to maintain coverage in the future). We’re not saying you should keep car insurance when you don’t have a car to insure, but if you’re only going carless for a few weeks or months, it might be cheaper in the long term to maintain a policy with no car.

Leasing a car is the right move for plenty of drivers, and as long as you know your options and have a well-informed plan, you’ll be in good shape when your lease is up.