Returning a Leased Car Quick Facts
- Car leases have money due at signing, and you should also have your wallet ready when you return the car at the end of the lease.
- Keeping a leased car clean and staying up-to-date with basic maintenance tasks will help you with the wear-and-tear inspection when returning it.
- An early termination fee will apply if you return a leased vehicle well before the contract ends.
The time has arrived. That short 24-, 36-, 39-, or 42-month lease period on your vehicle is ending, and you need to make some decisions. Do you turn the car back in, buy out the lease contract, or maybe just trade it for another leased car?
In most cases, leaseholders opt to turn in their vehicles. If this is you, the next question is: What charges should you expect when your lease ends, and what steps can you take to reduce your outlay? Read on to learn about what to consider at the end of your car lease and what happens if you break your lease early.
What To Do When Your Car Lease Is Up
A lessee has a few options after making the final payment to satisfy the car lease terms, which, for most drivers who lease, is 36 months.
Return the Car and Walk Away
Almost as easy as it sounds, you can return your leased car after making the last payment and settle any related fees. You are no longer responsible for — and cannot use — the vehicle when the lease terminates.
Buy the Leased Car
Some lessees choose to buy the vehicle when their car lease ends. You can pay with cash or finance the purchase with an auto loan. Look for the “residual value” in the lease paperwork to know what the pre-determined sale price is.
Lease Another Car
Leasing is an attractive option for many people, and picking out another vehicle to lease is common for those who enjoy getting a new car every few years.
Extend Your Lease
If you can’t immediately find the right car to replace the one with the expiring lease, the lessor may be willing to extend the lease by a few months.
MORE: Kelley Blue Book’s Complete Guide to Leasing
How To Return a Leased Car
The leasing company will likely send reminders as your lease expiration date approaches. Communication may blend straightforward language with a lot of jargon and legalese. In a nutshell, here’s what you need to do when it’s time to return a leased car.
- Set up an appointment to return the car at a franchise dealership. Sometimes, they might arrange for a flatbed truck to pick up your vehicle.
- Gather the original lease paperwork and everything that came with the car, like both sets of keys or key fobs. Check the glove box for the owner’s manual and ensure the spare tire and jack are secure.
- Check the odometer for mileage overage. Estimate the penalty for excess miles to avoid an unpleasant surprise when you return the car.
- Clean the vehicle, inside and out. When you return the car, it will have a thorough inspection to identify wear and tear. The technician may show some leniency if it appears that you’ve made an effort to take care of it.
What Charges Can You Expect at the End of a Lease
Disposal Charges on a Lease Vehicle
If you are not buying the vehicle when the lease ends, expect to pay about $350 for the disposition fee that’s added to the lease termination costs. This disposition fee helps offset the dealer’s costs to put the vehicle back into the inventory. You might sidestep the fee if you lease another vehicle, but the same lease termination fees noted above will again apply at the end of that lease. There is no free lunch here.
The Mileage Factor
Two key factors determine your final lease termination fees: Did you exceed the pre-determined vehicle annual mileage cap, and does the vehicle show excessive wear or damage? The annual mileage allowance is the number of miles you promised the dealer you would not go over annually at the lease signing. A typical allowance is 12,000 annual miles. The cost for exceeding the mileage cap is usually around 20 cents per mile. A car with a higher MSRP can be 25 cents per mile or 30 cents per mile. At 30 cents, it means you’ll pay $300 for every 1,000 miles over the mileage limit.
These penalties can add up quickly. If you’re over the mileage cap this time, in the future you may want to increase the annual mileage cap on your next lease. Raising this allowance will see the monthly payment increase slightly. But it might be better than incurring a big penalty when you turn in the lease car.
Beware of Wear and Tear
You’ll better understand how dealers look at your lease car if you think of a lease as a car rental. As with any rental, excessive wear or damage results in charges. Upon simple termination of the lease, dealers generally require a vehicle inspection. If you’re buying the vehicle, no inspection is necessary. Dealers will do the inspection either at the dealership or in many cases, they will come to a place you designate.
What’s Acceptable Wear and Tear for a Lease Vehicle?
Each car manufacturer sets guidelines for what is acceptable wear. Items such as dented fenders, cracked windshields, and bald tires will ultimately cost you. But some things are acceptable, and dealers often waive the first $500 of “wear.” For example, your lease wear and tear guidelines may allow for up to 15 stone chips in the hood or front bumper. Also, minor dents that don’t break the paint or chips in the windshield that are smaller than one centimeter are sometimes acceptable. Concerning wheels and tires, most manufacturers allow for minor scuffs or nicks to the wheels, wheel covers, or hubcaps.
If you were rotating your tires on schedule, they should all have about the same level of wear. With no tire rotation, you might get a charge for tire wear. You can check the tread depth with something as simple as a toothpick. Carefully place the toothpick in a rain groove within the tire and note the depth. If less than 3mm (1/8-inch) of tire tread remains, dealers will usually dock you at lease termination.
What Types of Wear and Tear Incur Charges?
Here are some general wear and tear examples that an inspector might note and charge you to repair when you turn in a car at the end of a lease.
- Scrapes to alloy wheels longer than an inch.
- Tires with less than 3mm of tread depth.
- Cracks, scrapes, or etching on the windshield or any chip that is in the driver’s line of sight regardless of the size.
- Any aftermarket upgrade to your vehicle, including custom tires and wheels, custom bodywork or seats, audio system modifications, or any underhood performance upgrade.
- Retreaded tires or those with repairs to the sidewall.
- Burn holes or tears in the upholstery. Because repairs to upholstery can be costly, a dealer may replace the entire seat and charge you for it.
- Any previously repaired bodywork that doesn’t meet the manufacturer’s standards.
The time to prepare for lease turn-in is every day you drive the vehicle. Keep the vehicle clean with regular car washes and interior vacuuming. Remove spills before the upholstery stains. Staying on top of your leased car’s appearance will pay dividends both in your personal pride for the vehicle and the cost of correcting these issues later.
Do You Need Insurance on a Leased Car?
While auto insurance doesn’t cover normal wear and tear on leased cars, it does protect you from more significant damage. You are required to maintain insurance coverage on a leased car until you return the vehicle. In addition to a typical comprehensive policy, you also may need Guaranteed Asset Protection (GAP insurance). A GAP policy pays for what the insurance doesn’t pay if the car is a total loss.
Can You Return a Leased Car Early?
For those wishing to purchase a vehicle, dealers may add a purchase option charge to any closing costs as part of the lease’s cost. However, many dealers will waive this cost if you finance with them instead of your preferred lender. All taxes and fees are also your responsibility. These charges are often as much as $200.
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Editor’s Note: This article has been updated since its initial publication. Cam Benty contributed to the report.
