End of Lease Options
When your vehicle reaches its end of lease I’ll bet you are unaware of all your options. Because, until recently I was myself!
And some of those options can be not only convenient but even lucrative. For instance, you could wind up with thousands of dollars to put down on your next lease.
Yes, you read that right. Not always, but often when you return a leased vehicle there’s equity in it. And you are entitled to that equity.
But if you are unaware that the equity is there then some dealers will casually scoop it up in the transaction and say nothing to you about it. Whoah!
So, in this iDriveSoCal Podcast, my friend Lewis Cook, General Manager from Martin Chevrolet enlightens us with those details plus more insider info. Including, how to end your lease in the best possible position.
You’ll find lots of great end of lease insight in this post no matter what. Whether you’re returning your vehicle at the end of your lease. Or, if you’re buying the vehicle at the end of your lease. And especially if you’re leasing another vehicle at the end of your lease,
Continue reading below or click play to hear the entire podcast. This is guaranteed time well spent. Because it’s going to save you money.
Podcast: Play in new window | Download (Duration: 28:14 — 26.1MB)
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Recorded @ Martin Chevrolet in Torrance, California
End Of Lease Process
Every manufacturer handles its lease return process a little differently. And it changes.
But basically, here’s the process at the end of your lease:
- You receive a letter alerting you that the end of your lease is near.
- In that letter, the manufacturer usually makes you a special offer to get you to lease another vehicle.
- That letter will also instruct you to have your vehicle inspected. (This one came as a surprise to me upon my first lease.)
Depdepending on the manufacturer that inspection will be handled by an authorized dealer of that manufacturer or a third-party. Either way, there’s no cost to you.
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And one additional point, depending on market conditions, the manufacturer or your dealer might reach out to you prior to the end of your lease.
So if they contact you it’s almost always to try and get you to return your current lease and get into a new one from them.
Martin Chevrolet’s Lewis Cook emphasizes the most important thing is knowing the market value of your vehicle at your end of the lease.
And all that is great, but Martin Chevrolet’s Lewis Cook emphasizes the most important thing is knowing the market value of your vehicle at your end of the lease.
That, and of course, the residual value assigned to the vehicle you’re currently leasing are key factors.
Because if the market value is greater than the residual value then BINGO you have equity!
Because if the market value is greater than the residual value then BINGO you have equity!
Know Your Residual AND Market Value For End Of Lease Options
First, the easy one. Your vehicle’s residual value.
Every leased vehicle has a residual value. The residual value of a leased vehicle is what that vehicle is predicted to be worth at the end of the lease term.
We all know weather forecasters get it wrong a lot! But many people who lease vehicles don’t realize the bank analysts get it wrong a lot too.
The key thing here is that the predicted residual value is officially assigned by the bank’s analysts.
And just as weather forecasters try to predict the weather. Bank analysts try to forecast the value of a vehicle.
We all know weather forecasters get it wrong a lot! But many people who lease vehicles don’t realize the bank analysts get it wrong a lot too.
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Now, nobody cares (except the banks – but boo-hoo for them) if the market value of the vehicle you lease isn’t worth it’s residual at the end of the lease term.
Conversely, if the market value of your leased vehicle exceeds it’s residual value then shazam! You’ve got equity!
And that equity can be used as a down payment for your next vehicle.
What’s the Real Market Value Of Your Car or Truck
So, here’s the big to-do on your end of lease checklist. And that is to figure out the market value of your leased truck or car.
But what’s market value… really? Well, it’s the value you can get for the vehicle if you were to sell it. And we all know that market values change.
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There are tons of factors that go into market value. The geographic area plays a role. Obviously the year, make, model, trim level and features on your car or truck are factors.
Also, a big one is demand. Are there buyers out there for my vehicle at my end of lease?
How To Determine The Real Market Value At Your End of Lease
Savvy shoppers and or car-gals/guys will immediately think KBB.com or Edmunds.com to figure out what their car is worth.
And Lewis from Martin Chevrolet suggests using those only as references. Because he says, “there’s a lot of play in those numbers based on value and mileage.”
But Lewis really threw me off when he made this next suggestion. Although it makes perfect sense once he explained it. He says go to your nearest CarMax. Yep, a new car dealer being so brutally honest that he’s telling you to go somewhere else.
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Of course, there’s more to it. Here’s the rest of what Lewis suggests, “you go to CarMax, you’re not obligated to sell it to them. Because you’re not obligated to sell it to them, they’re going to put their best foot forward, because if they don’t, you’re not coming back.”
“Because you’re not obligated to sell it to them, they’re going to put their best foot forward, because if they don’t, you’re not coming back.”
And he continued, “that will give you a really, really good idea about what that car is worth with no obligation, it’ll take a couple of hours of your day.”
Additionally, Lewis says, “then worst-case scenario, if their offer is higher than the residual and nobody else wants to do that for you, you can sell it to CarMax, too.”
But Lewis doesn’t suggest you actually sell to CarMax. There’s another step.
New Car Dealers Want Their Brand On Their Pre-Owned Lot
So, that next step is to take the offer CarMax gives you to the new car dealership you leased from. (Or any new car dealership that sells your leased vehicle’s brand.)
And my friend Lewis at Martin Chevrolet says, “Acquiring vehicles for sale is a chore, it really is. It’s not an easy thing to do. If it’s a Chevy, I’m going to give you more than CarMax because I want the car.”
“I’m going to give you more than CarMax because I want the car. I don’t need them having my product out there and selling it. I need the car, so I’m going to give you more.”
He continues rationalizing his philosophy by stating, “I don’t need them having my product out there and selling it. I need the car, so I’m going to give you more.”
So, because new car dealers want their own brand well represented in their used car inventory. And with that in mind, the new car dealer will likely give you a higher market value than CarMax. Again, simply because they want to sell their own brand – new and used.
Beyond a new car dealer wanting their own brand in their pre-owned car inventory, Lewis pointed out something else. And it’s something that I know I forget and you probably do too.
What’s I’m referring to is a simple fact that a new car dealer has to spend time, energy and overall resources to keep his pre-owned inventory flush. So, yet another reason Lewis at Martin Chevrolet is likely to give you a higher market value for your vehicle.
Lease Extension – The Little Known Option
So the end of your lease term has arrived. It’s time to decide. Or, is it?
When your lease has come to an end do you really have to make a final decision? Nope! Well, not always, you have another option.
Oftentimes, when you’re at the end of your lease you can simply extend it!
Oftentimes, when you’re at the end of your lease you can simply extend it!
This is yet another option that I’ve only recently learned. And of course, it comes with caveats.
First, not all manufacturers (their financial arms that lease their vehicles) will always agree to extend a lease. Although I’ve never heard of a lease extension request being denied.
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Different manufacturers offer different types of lease extensions. Some longer and others shorter. And this too changes.
And Lewis from Martin Chevy had another suggestion here. He said, “if you’re making more payments on the car, really, that residual value should drop.” And to make sure that’s happening when you speak with the financial institution you leased from.
End of Lease Options – Return, Buy Or Lease Again
So this brings us to your typical end of lease options. And those are either return the leased vehicle. Buy the leased vehicle. Or trade the leased vehicle in on another lease.
And with any of these options, Lewis reiterates, “that’s why it’s so important to know what your equity position is at the end of the lease.”
The Martin Chevrolet General Manager continues, “if you have equity, the car’s worth ten-grand, and the residual’s eight-grand. You can utilize that. Because $2K goes to your next purchase.”
Your SoCal Chevrolet Dealer – Martin Chevy
As always, my sincere thanks to my friend and Lewis Cook at Martin Chevrolet.
Lewis generously shares details of the car business few are willing to divulge and we seriously appreciate his doing so.
Martin Chevrolet is on Hawthorne Boulevard in Torrance, California and at MartinChevrolet.com. Chevrolet, Find New Roads!
