Leasing a car can be a good option for people craving flexibility. They want to drive a relatively new vehicle. And at the end of the lease, many lessees simply return their vehicle to the dealership. But there are other options. If the lessee isn’t quite ready to give up the car, they can extend their expiring lease. Sometimes dealers will let them extend the lease on a month-by-month basis. Other times lessees will have to sign up for a preset period of time, such as six months or a year.
Here’s a look at some of how leasing a car works and what individuals should understand if they’re considering extending their lease.
Related: How do I get the best rate on a loan?
Car Leasing Basics
Before deciding to lease a vehicle, it’s worth mulling over the pros and cons of buying versus leasing. Once you settle on leasing, the first step is to decide on what type of vehicle you’d like to lease and then negotiating the terms of the lease. With a satisfactory lease in hand — one with monthly payments and terms that match the individual’s need — it’s time for you to sign the contract.
Be aware that there are likely acquisition fees that cover the administrative costs of this process. A short-term car lease can be anywhere from 12 to 24 months, while a long-term lease can be up to 60 months. During this period, if the lease no longer serves the lessee, there are ways to get out of the car lease, including early termination, a lease buyout and a lease transfer. If you hang on to the car until the end of the lease, you may consider extending the lease or pursuing a handful of other options.
Types of Car Lease Extensions
You have the option of extending your lease either formally or informally.
1. Informal Car Lease Extension
An informal extension is often a temporary measure that helps smooth out the transition between one lease and another. To take this informal route, you must contact your leasing company and let them know that you want to continue using the vehicle after the lease is up. The company must grant permission for an informal extension. Monthly payments must be paid as they are laid out in the original contract. The extension can then last until the leasing company asks for the vehicle back, usually after six months at most.
2. Formal Car Lease Extension
A formal lease extension, on the other hand, requires signing a legally binding modification to the lease agreement. The agreement kicks in immediately after the initial agreement ends. A formal agreement may include revised monthly rental fees and a new mileage agreement based on the car’s depreciation over the period of the extended lease.
How to Extend a Car Lease
Here’s a look at the steps it takes to extend a lease agreement:
- First, the lessee contacts the lender through which the original lease agreement was made and says they want to request an extension.
- The lender reviews the request and determines whether the lessee is eligible.
- If the request is approved, the lessee will be sent a new contract. This contract will have terms and conditions such as a new end date, mileage allowances and rental fees.
- The lessee signs the modified lease document and returns it to the lender.
Exemptions to Car Lease Extensions
There is a chance that a lease extension will be denied. Here are some of the circumstances for which they may be the case:
- The lessee is behind on lease payments and at risk of defaulting.
- The leasing company decides it needs to recall the vehicle for other commercial reasons.
- There is a previous agreement that hasn’t yet expired.
- The individual did not fill out the lease extension application correctly.
Lease Buyout
If you want to continue driving the vehicle when the lease is up, you may also have the option of a lease buyout. Check the lease agreement to see if this is a possibility.
There are some obvious advantages to a lease buyout. First, you know the car’s entire history, whether you’ve maintained it perfectly or if there have been any troubles. In comparison, individuals buying another used vehicle have much less insight into the car’s past. If your maintenance of the vehicle leaves something to be desired, or if you put too many miles on the vehicle, your lease could put you on the hook for extra fees to cover the wear and tear.
However, a lease buyout could avoid those expenses. A lease buyout could also end up costing less over time than continuing a cycle of leasing new vehicles. Those who know they want to buy out their lease from the get-go should let the leasing company know before signing a contract. This can help in negotiating lease disposition fees, which are fees lessees agree to pay to the leasing company upon returning a vehicle.
Downsides of a Lease Buyout
There are also some potential downsides to a lease buyout. For one, staying in the lease cycle ensures that you are always driving a relatively new car. If this factor is important — to your sense of safety, for example — a buyout may not be a good idea. It’s also possible that a lease buyout can end up costing you more than other options. For example, buying out a lease without making a new down payment may lead to monthly payments that are higher than lease payments.
Also, buying out a leased car may be more expensive than buying a similar used car on the open market that’s just a little bit older.
Financing a Lease Buyout
If you decide you want to buy out your lease, you can pay for the car in cash if you have enough on hand or you can seek financing. Some financial institutions offer lease buyout loans. It’s best to shop around to different lenders to find the loan that offers the lowest interest rates and most manageable terms. Shorter loan terms tend to come with higher monthly payments, though individuals may end up paying less interest over the life of the loan.
The annual percentage rate (APR), which represents the yearly cost of carrying a loan, tends to be higher for lease buyouts than new cars.
Refinance a Car Loan
In the future, if auto loan payments become untenable, an individual’s financial situation improves, or interest rates drop, it may be worthwhile considering an auto loan refinance. When refinancing a loan, borrowers take out a new loan to pay off the old one. Ideally, this new loan will free up some cash by offering a lower interest rate or better terms that make monthly payments easier to manage. Individuals may use their increased cash flow to pay off the loan faster or to focus on other financial goals.
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This article
originally appeared on LanternCredit.com and was
syndicated by MediaFeed.org.
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Lantern by SoFi:
This Lantern website is owned by SoFi Lending Corp., a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636. (www.nmlsconsumeraccess.org)
All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each provider’s discretion. There is no guarantee you will be approved or qualify for the advertised rates, fees, or terms presented. The actual terms you may receive depends on the things like benefits requested, your credit score, usage, history and other factors.
*Check your rate: To check the rates and terms you qualify for, Lantern conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender(s) you choose will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
All loan terms, including interest rate, and Annual Percentage Rate (APR), and monthly payments shown on this website are from lenders and are estimates based upon the limited information you provided and are for information purposes only. Estimated APR includes all applicable fees as required under the Truth in Lending Act. The actual loan terms you receive, including APR, will depend on the lender you select, their underwriting criteria, and your personal financial factors. The loan terms and rates presented are provided by the lenders and not by SoFi Lending Corp. or Lantern. Please review each lender’s Terms and Conditions for additional details.
Personal Loan:
SoFi Lending Corp. (“SoFi”) operates this Personal Loan product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lenders/partners receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Personal loan offers provided to customers on Lantern do not exceed 35.99% APR. An example of total amount paid on a personal loan of $10,000 for a term of 36 months at a rate of 10% would be equivalent to $11,616.12 over the 36 month life of the loan.
Student Loan Refinance:
SoFi Lending Corp. (“SoFi”) operates this Student Loan Refinance product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lender’s receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Student loan refinance loans offered through Lantern are private loans and do not have the debt forgiveness or repayment options that the federal loan program offers, or that may become available, including Income Based Repayment or Income Contingent Repayment or Pay as you Earn (PAYE).
Notice: Recent legislative changes have suspended all federal student loan payments and waived interest charges on federally held loans until 05/01/22. Please carefully consider these changes before refinancing federally held loans, as in doing so you will no longer qualify for these changes or other future benefits applicable to federally held loans.
Auto Loan Refinance:
Automobile refinancing loan information presented on this Lantern website is from Caribou. Auto loan refinance information presented on this Lantern site is indicative and subject to you fulfilling the lender’s requirements, including: you must meet the lender’s credit standards, the loan amount must be at least $10,000, and the vehicle is no more than 10 years old with odometer reading of no more than 125,000 miles. Loan rates and terms as presented on this Lantern site are subject to change when you reach the lender and may depend on your creditworthiness. Additional terms and conditions may apply and all terms may vary by your state of residence.
Secured Lending Disclosure:
Terms, conditions, state restrictions, and minimum loan amounts apply. Before you apply for a secured loan, we encourage you to carefully consider whether this loan type is the right choice for you. If you can’t make your payments on a secured personal loan, you could end up losing the assets you provided for collateral. Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on the ability to meet underwriting requirements (including, but not limited to, a responsible credit history, sufficient income after monthly expenses, and availability of collateral) that will vary by lender.
Life Insurance:
Information about insurance is provided on Lantern by SoFi Life Insurance Agency, LLC. Click here to view our licenses.
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8 tips for negotiating a car lease
When someone leases a car, typically, they can make a lower monthly payment than if they’d purchased the vehicle. That’s a key reason why leasing can be so appealing for many consumers. The lease lasts for a predetermined number of months and miles. At the end of the time period, the vehicle is usually returned to the dealership.
Alternatively, if there’s a purchase option, the person leasing it might decide to buy the vehicle outright. If, after mulling over whether to buy or lease a car, you decide to lease, you’ll have to negotiate with a dealer to get the vehicle and lease terms you want.
To help, here are eight tips on how to negotiate a car lease. (If you’re brand new to this process, it may also help to read about the basics of car leasing first.)
Related: Car leasing basics
gpointstudio / istockphoto
Car leasing lingo has some different terms than the language used in buying or selling a car. For example, instead of a buyer and seller, there’s a lessor (the company leasing the vehicle) and a lessee (the person taking out the lease).
Typically, lessees prefer a closed-end lease, meaning one in which the two parties agree (from the start of the contract) on an estimate of what the future value of the vehicle will be. So, if the lease ends and the lessee returns the vehicle, they won’t owe more money because of depreciation, even if the vehicle is worth less than estimated in the original contract.
Residual value/future value is an estimate given by the lessor to share how well a car is likely to maintain its value during the lease period.
Other terms you will likely hear include:
- Lease acquisition fee: This is like an origination fee on a home loan. It’s an upfront fee that covers the cost of checking your credit scores, setting up the lease, and so forth.
- Disposition fee: This may be charged if you return the vehicle, and it’s intended to cover the costs of getting the vehicle in shape for resale.
- Rent charge: This is similar to the interest paid on a car loan.
If you’re ever uncertain about what a term means, ask or investigate. You can’t negotiate without understanding the terms of the discussion.
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Lease terms can vary by dealership and by contract and it’s important to be clear about what you’re agreeing to in yours.
Overall, a lease resembles a car rental but for a longer amount of time, typically two to four years. You’ll pay to use that car for the agreed-upon time period and then, at the end, either buy or return the vehicle.
A typical lease allows you to put 10,000 to 15,000 miles on the vehicle each year. If you go beyond those limits, there is often a per-mile fee charged.
All of that information should be listed in the agreement, along with the car’s value (both the current one and its end-of-lease projections), the rent charge, amount of money that needs to be put down, penalties for late payments, and other fees, including for excessive wear and tear or damage.
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“Cap cost” is short for the vehicle’s “capitalized cost” and, as the lessee, you’d want this number to be as small as possible. Why? Because it’s the price of the vehicle.
It’s important to know that, with a leasing deal, when a consumer negotiates for a lower payment, the dealer may agree. But the catch is that, rather than lowering the price, they would probably extend the payment period, which doesn’t necessarily benefit the lessee.
Here’s an example. Let’s say a dealer offers a 36-month lease with a monthly payment of $400 (36 x 400 = $14,400). You want to reduce the payment a bit and so the dealership lowers it to $375. But the lease is now 42 months long (42 x $375 = $15,750).
So, rather than negotiating the payment, negotiate to lower the price of the vehicle. To reduce this figure, you may be able to apply to put money towards the lease or trade in another vehicle. Doing so is called a “capital cost reduction.”
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Search online for the vehicle you want and contact dealerships to get specifics about rent charges, APRs and special offers. Then pick the dealership where you want to start negotiations. During a car lease negotiation, don’t hesitate to bring up what you’ve learned about other dealerships and what they’re offering.
Some dealers may tell you that rent charges aren’t negotiable, but others might be more willing. What’s important: Know what dealerships, in general, are offering, and make sure that the contract you sign is reasonable.
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Take an honest look at your mileage needs and compare that to what’s offered in the lease. If you don’t put lots of miles on your car, then you could ask for a lower monthly payment in exchange for a lower annual mileage limit. If, on the other hand, you put plenty of miles on the odometer, you can request a higher limit without an extra charge. Dealers don’t have to agree, but that’s all part of the negotiating process.
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This is different from the model year. The older the manufacture date, the longer the vehicle has been sitting on a lot somewhere. For example, a car can be a 2021 model but have been manufactured in 2020. To get this information, look at the vehicle identification number (VIN).
The tenth digit will indicate the date of manufacture with different manufacturers using different systems to indicate what that means. This may take a bit of investigative work, but the information is there. Searching for sites with VIN decoders like MyCarHelpline.com may help.
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If you plan to purchase the vehicle once the lease period expires (known as a lease buyout), you may be able to negotiate the buyout price, lowering it beyond what the market value is expected to be. That will save you money when you’re refinancing the vehicle in your own name.
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When determining how to negotiate your car leases, consider the vehicle that you may turn in as part of the deal. The dealer will let you know the value of your trade-in (a number you can negotiate so come armed with info from Kelley Blue Book or another trusted industry source) and those funds can be applied to the lease to reduce your monthly payments.
tommaso79/istockphoto
If leasing sounds appealing because of the lower payments, you could also consider auto loan refinancing before making your final decision. Refinancing involves taking out a new loan on your vehicle to pay off the current one, ideally at a better interest rate. This in turn can often lower your monthly payments.
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If you were wondering, “Can you negotiate a car lease?” the answer is definitely “yes.” These eight tips can help you get the vehicle you want at more favorable terms.
If the goal of the lease is to get a car at a lower monthly payment, then refinancing a vehicle is another time-tested method to consider.
Learn more:
This article originally appeared on LanternCredit.com and was syndicated by MediaFeed.org.
Lantern by SoFi:
This Lantern website is owned by SoFi Lending Corp., a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636. (www.nmlsconsumeraccess.org)
All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each provider’s discretion. There is no guarantee you will be approved or qualify for the advertised rates, fees, or terms presented. The actual terms you may receive depends on the things like benefits requested, your credit score, usage, history and other factors.
*Check your rate: To check the rates and terms you qualify for, Lantern conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender(s) you choose will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
All loan terms, including interest rate, and Annual Percentage Rate (APR), and monthly payments shown on this website are from lenders and are estimates based upon the limited information you provided and are for information purposes only. Estimated APR includes all applicable fees as required under the Truth in Lending Act. The actual loan terms you receive, including APR, will depend on the lender you select, their underwriting criteria, and your personal financial factors. The loan terms and rates presented are provided by the lenders and not by SoFi Lending Corp. or Lantern. Please review each lender’s Terms and Conditions for additional details.
Personal Loan:
SoFi Lending Corp. (“SoFi”) operates this Personal Loan product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lenders/partners receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Student Loan Refinance:
SoFi Lending Corp. (“SoFi”) operates this Student Loan Refinance product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lender’s receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website. More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Student loan refinance loans offered through Lantern are private loans and do not have the debt forgiveness or repayment options that the federal loan program offers, or that may become available, including Income Based Repayment or Income Contingent Repayment or Pay as you Earn (PAYE).
Notice: Recent legislative changes have suspended all federal student loan payments and waived interest charges on federally held loans until 01/31/22. Please carefully consider these changes before refinancing federally held loans, as in doing so you will no longer qualify for these changes or other future benefits applicable to federally held loans.
Auto Loan Refinance:
Automobile refinancing loan information presented on this Lantern website is from Caribou. Auto loan refinance information presented on this Lantern site is indicative and subject to you fulfilling the lender’s requirements, including: you must meet the lender’s credit standards, the loan amount must be at least $10,000, and the vehicle is no more than 10 years old with odometer reading of no more than 125,000 miles. Loan rates and terms as presented on this Lantern site are subject to change when you reach the lender and may depend on your creditworthiness. Additional terms and conditions may apply and all terms may vary by your state of residence.
Secured Lending Disclosure:
Terms, conditions, state restrictions, and minimum loan amounts apply. Before you apply for a secured loan, we encourage you to carefully consider whether this loan type is the right choice for you. If you can’t make your payments on a secured personal loan, you could end up losing the assets you provided for collateral. Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on the ability to meet underwriting requirements (including, but not limited to, a responsible credit history, sufficient income after monthly expenses, and availability of collateral) that will vary by lender.
Life Insurance:
Information about insurance is provided on Lantern by SoFi Life Insurance Agency, LLC. Click here to view our licenses.
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