Can You Trade in a Leased Vehicle?

Can You Trade in a Leased Vehicle? 

Yes, you can trade in a leased vehicle, whether financed, new, or used. Any money you get from the trade can be put towards the cost of a new vehicle. Even if you have several months left on your lease, you can still choose to trade in your current vehicle, but you may lose money.

What to know before trading in your lease 

Leasing a car is one of the more simple ways you can get your hands on a new vehicle without buying it outright. Make a down payment at the start and then agree to a fixed monthly rate that is paid over time, usually from 24 to 96 months.

It’s important to note that at the end of your lease, you have to return the vehicle unless you have made arrangements to purchase it outright from the dealership.

Below are some key factors you should consider before deciding to trade in your leased vehicle:

Residual value – The residual value of a vehicle is an estimation of its value after the end of the lease period. Before signing a lease agreement, it is worthwhile to conduct some independent research to determine the projected residual value of your car because this figure will be included in your monthly lease payments.

Equity – The difference between the car's value at the end of the lease and the balance still owed on the financing is your equity in the vehicle. The term "equity in the car" refers to the situation where the car is worth more than the final "balloon" payment on your financing that is still owed. 'Negative equity' is a term you’ll encounter if your finance balance exceeds the car's current value.

Buyout options – There are two car lease buyout choices available: an early lease buyout enables you to purchase your vehicle before your lease contract expires, whereas a lease-end buyout requires you to pay or finance what the vehicle is worth at the end of your lease period. You should study the fine print before signing the lease because not all agreements allow for an early lease buyout. 

Transfer the lease – Some leases allow you to transfer ownership to a third party; this could be a private buyer. You can use websites like LeaseTrader and SwapALease to find a suitable person. Check through your documents or contact the dealership to see if this is an option within your documentation.

Buy and sell – You might be able to buy out the car and make some money from it if the residual value is greater than that of the buyout cost. It’s quite unlikely, but do some research about the value of the car and pit it against the buyout amount to see if you can make some valuable profit.

Should you trade in your vehicle? 

Whether you should trade in your vehicle is dependent most notably on the financial implications. If it’s going to cost you money that you cannot afford to lose, then it’s not a wise decision. On the flip side, if the value of the car is higher than the buyout amount, then you could use that profit to put it towards a new vehicle.

To make an informed decision, consider the following factors when deciding whether you should trade your vehicle in:

Financial implications – If the residual value is lower than the buyout option, then trading your car in will cost you money. If money isn’t tight and you want to proceed anyway to get a new car, then that’s fine – but if things are tight, there’s no point in losing money for the sake of a new car, so you should just wait until the lease ends and start a new then.

Lifestyle needs – Things in life change. Maybe you’ve just started a family and your two-door sports car needs to be swapped for a family vehicle. Whatever it is, sometimes trading in your old car is simply a necessity. 

Market conditions – The car market is constantly fluctuating, with prices for new vehicles currently on the rise. It’s wise to asses the market before making any steps to upgrade or change your vehicle, as it may cost you some money. If you simply just want to get rid of the car, be sure to look at the buyout cost and the residual value of the vehicle, as in some cases you might be able to turn a profit.

Timing – Trading in your car is likely to be a much smoother and quicker process than looking to sell it privately. Make sure you do research on the current value of your car to ensure you’re getting a good deal. But if you’re in a hurry, then trading it in will most likely always be quicker, but you may not get as much money as a private sale.

Popularity – The amount you get for your car will differ massively depending on your make and model. Some cars hold their value much better than others, so it's important to consider that before committing. If your car is a popular or well-loved model, then you might be able to get some profit from a private sale should you choose to buy it outright.

Condition – Much like with popularity, the overall condition of your car will alter the price significantly. If it’s in good shape, then you could trade it in for a good fee should the buyout option be lower than the residual amount.

How to trade in a leased vehicle 

Trading in your car can be a little complex. Here are key steps and factors outlined so you can make sure the process runs as smoothly as possible.

Step 1 – Understanding the value of your car

Before you do anything, make sure to do your research on how much your car is worth. Dealers will usually try and secure the best deal for themselves, not the seller, so understanding how much your car is worth leaves you in a better position to negotiate.

There are tons of useful websites out there where you can find out the value of your car by simply entering your registration number. For example, try using Kelley Blue Book. Or, you can simply look at other cars of the same make and model and see how much they’re listed for or their previous sale prices.

Step 2 – Work out your budget

If you decide to go ahead with a trade-in, then you need to assess your finances and work out whether this is a commitment you want to make. If the residual value of the car is higher than the buyout clause option, then you can proceed and put that money towards to cost of a new car. If you already own the car outright, then compare quotes from multiple dealers to secure the maximum discount on the new car's cost or look to sell privately.

Step 3 – Make it presentable

To ensure you get the best value for your car, go through the effort of making it look good. Make sure there aren’t any bumps and scratches, and have the interior and exterior cleaned, as a new-looking car will always bring you a higher price. It’s also wise to have any previous services or maintenance documented and present when trading it in.

Step 4 – Go to the dealership

Once you’ve settled on a dealership that has given you the best offer, head there with the car to proceed with the trade-in. It’s also wise to book an appointment before heading to the dealer, as they can often be busy – so planning in advance can save time.

Other options for trading in a leased vehicle 

If you decide that trading in your leased vehicle is not the right option for you, then below are some other options you can consider:

Let the lease end – The easiest option is to just keep leasing the vehicle until the fixed term comes to an end. Hand the car back over to the dealership and you’re then free to start a new lease or buy a car.

Try a car subscription – If your lease ends and you just want to give the car back and try something new, then consider a car subscription service like FINN. We make it easy to get your hands on a new car, with tons of new models available to choose from, all covered by one monthly payment that includes the cost of the car, plus insurance and maintenance.

Final thoughts

You should now be in a better position to decide whether trading in your leased vehicle is a good idea or not. If the residual value is higher than the buyout cost, then this is a great way to make a profit that can be put toward a new car.

If it's not for you, then you can just let the lease run its course,  hand the car back to the dealership and explore alternative ways to get a new vehicle, including a FINN car subscription.