Should you buy out or trade in your leased car?
Every car lease comes to an end sometime. That’s when you have a decision to make: Should you buy the vehicle or return it? Here are the pros, cons, and a few other factors to consider.
Avantages of leasing
Long-term leases are common practice these days. They’re a good solution for many drivers because the monthly payments are generally lower and you get the safety net of a manufacturer’s warranty. Leasing becomes an even more enticing option for motorists who like to upgrade to the newest model every three or four years, despite certain restrictions like mileage caps and excess wear and tear charges.
Lease buyout
If you like driving your vehicle and it still has relatively low mileage and a proven track record for dependability, you’d be well advised to hang on to it, especially since you know the vehicle’s history. Of course, that’s all assuming it still meets your needs.
Vehicle market value
You should also consider the vehicle’s residual value, which is determined when you sign the lease. It’s the price you’ll pay if you decide to buy the vehicle once your lease is up. If the residual value is lower than the market value, buying the vehicle starts to look like the smart move, especially if you’re thinking about turning around and selling it. If you’re a member, CAA-Quebec’s Advisory Services can tell you the market value (list price) of the vehicle based on its condition, equipment options, and mileage.
Vehicle condition
When you hand over your keys, the dealer or an inspection firm (on behalf of the leasing company) will do a vehicle condition inspection. You may be responsible for fixing excess wear and tear such as dings and scratches, windshield damage, dented rims, and worn tires. The best thing to do is to make an appointment at least one month before the end of your lease to find out what repairs will need to be made. You can also visit an authorized CAA-Quebec Vehicle Inspection Centre to get an objective opinion on the condition of your vehicle. Remember that if the end-of-lease inspection reveals damage, you don’t have to get the repairs done at the dealership. Going elsewhere can often save you money.
Excess damage protection
Maybe you had the foresight to take out excess wear and tear coverage when you signed your lease. Many dealerships offer this type of “insurance.” For about $750 (plus taxes and interest because it’s included in the lease financing), this protection covers excess wear and tear up to approximately $3,500. This may come in handy if you live in an urban area and park on the street, since you’ll inevitably end up with bumper scratches and dents. But if you live in the suburbs and have a parking space at work, it’s probably overkill.
It’s better to return your car if…
Did your car incur substantial damage over the term of the lease? Then it’s better to return it and let the lessor (the financial arm of the manufacturer or finance company) absorb the accelerated depreciation from the accident.
A new lease on life
Taking out a new lease for a new vehicle might be an appealing option, since the dealer could very well be willing to write off any excess wear and tear charges on your current ride to keep you as a customer. Talk to your dealer to weigh your options.
Don’t forget car insurance!
No matter what you decide, remember to let your insurance agent or broker know so they can update your car insurance policy.