When it’s over, as Sugar Ray’s Mark McGrath said, that’s when you’ll fall in love again. That’s how automakers want you to feel very gracious in the last few months of your lease, when their dealers pick up your car and push you toward that hot new thing. As with most major decisions in life, it’s best to plan ahead and explore all options before your lease ends. But that’s not always the case now. As the pandemic disrupts the auto supply chain, some lease terms have changed, benefiting car dealers and counterproductive to consumers. Here’s what you need to know.
Some automakers don’t want you to transfer your lease to another brand
Car leases add more clauses to the contract, which can make it harder for you to trade your lease or sell it to another dealer. The current shortage of new car supply has made used cars, especially the most coveted three-year-old non-lease cars, a rampant drain on profits for auto dealers who can’t order enough new cars. Most non-lease cars become Certified Pre-Owned (CPO), which usually means dealers can make money by selling the same vehicle twice. Business as usual.
A growing problem is if you decide to trade your rental car to a non-franchised or used car dealer. For the past few years, you were free to go wherever you wanted. The interest in your leased car makes it attractive to buy from a dealer who wants to make money by resale of the car.Now, according to car newsAt least five automakers prohibit tenant Sell the car to a dealer other than their brand.
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This includes Acura, Honda, Chevrolet, Buick, GMC, Cadillac, BMW, Mercedes-Benz, Nissan and Infiniti. This list may not be exhaustive, and the automaker is reportedly revising these lease terms for customers still on current leases. With used cars in high demand and resale values up by double digits from a few years ago, automakers want their dealers and only their dealers to resell cars. They enforce this policy through their financial banks, which own your rental car and may refuse to accept payment from any dealer outside their franchise network. That means if you lease a new Cadillac, it’s from a GM dealership, not a BMW dealership or CarMax. It has never been in place before.Of course there is one Ongoing lawsuits in California Oppose Mercedes-Benz and BMW on this issue.
Inspection, Disposal and Repair
No matter where your rental vehicle is, you didn’t complete the payment. All automaker leases are subject to a disposal fee at the time of termination, usually around $400. It’s like the acquisition fee you paid at the start of the lease, only it comes back to give you a goodbye kiss you can’t refuse. Hopefully you haven’t done anything illegal during your lease as you will be responsible for any unpaid violations (parking fees, tolls, property taxes) related to your state registration.
When you return the car to the same brand dealer, you will usually need to arrange a free vehicle inspection before returning the car. This is where the automaker can alert you to your problems and any improper modifications or maintenance you promise not to make during the lease. Most automakers allow reasonable wear and tear, so some wheel wear, some light carpet stains, some paint scratches, and a weird smell or two don’t matter if they’re easy to fix. But for anything obvious and disturbing, you’ll either have to pay for the repairs before returning the car, or get a separate invoice in the mail a few weeks later.
Option A: Buy out your lease
If you don’t want to lease or buy another new car right away and can afford it, consider buying out your lease. This is an especially advantageous strategy if you signed a lease before the 2020 pandemic began. End of lease – is fixed in the contract.
With used car values surging in 2021 and remaining high in 2022, many leases originating in 2019 and 2020 have residual value that may be significantly undervalued in today’s market. That’s why some automakers have banned the acquisition of unbranded dealerships. But anyone can still enjoy the benefits of a rental car, especially if the car is in high demand and has below-average mileage. You will need to pay sales tax and some DMV fees. Calculate the upside in profits and it might be worth it. After all, don’t you want to make a profit from the sale instead of giving the profit to the car dealer?
Option B: Replace the lease
This is the most complicated way to end a lease, but if successful, you’ll be leaving the car months or even years earlier than expected. Third-party companies do lease assignments and they will pay your lease and assume your contract. This is not possible for every lease. Some leases only allow lease transfers while the original lessee (you) is still in the lease, so you are still liable even if someone else owns the car. Others don’t even allow lease transfers. We have covered this practice in detail. Generally, this is not a good idea unless your inability to pay or the cost of terminating the lease early outweighs the risk of the lease assignment.
Option C: Continue to rent
This is the easiest option. Dealers love loyal customers who keep pushing the game, and in their thirst for used cars, dealers are more eager to get their lessees out early with impunity. If the dealership knows you have an ideal car they can sell and want to continue the lease, you’re more likely to buy a new car sooner, and possibly for the same price or better. This attitude also explains why more and more automakers (especially Kia and Ford) are offering 24-month leases instead of the usual 36 months.