Can I Trade In My Car For A Lease?
If you want a new vehicle, one of the first things you need to figure out is what you want to do with your current car. Your first option is selling your car to a private party and using the cash to pay for your new vehicle. But many people choose the second option: trading it in.
The term “trading in” means offering your car to a dealership in exchange for credit, which will be applied to the price of the vehicle you purchase. So if your current car’s trade-in value is $6,000 and you want to purchase a car that is $10,000, you would only owe $4,000 on your new car.
Trading in your current car simplifies the process of buying a new car. You don’t need to worry about finding someone to buy your current car. All you need to do is drive to the dealership and complete the paperwork.
But what if you aren’t interested in buying a new car? You might be wondering, “Can I trade in my car for a lease?” Here’s what you need to know about trade-ins and leasing:
How Can You Trade In Your Car For A Lease?
Many people assume that you can only trade in your vehicle if you plan on purchasing a new car, but that’s not the case. It’s also possible to trade in your vehicle in exchange for a lease on a new car.
To understand how this type of trade-in works, you must know the basics about leasing a car. If you buy a new car, you are agreeing to pay the entire price of the vehicle. However, if you lease a car, you are agreeing to pay for the depreciation that occurs during the course of the lease in addition to interest and other fees. You won’t have to pay this upfront. Instead, the amount you owe is broken down into equal monthly payments that usually last for two to three years. When your lease is over, you are typically required to return the vehicle to the dealership where it was originally leased.
So how does it work if you trade in your vehicle for a lease? Say you currently own a car that has a trade-in value of $8,000. You want to trade this car in to a dealership in exchange for a lease on a SUV. After negotiations, the dealership has agreed to lease the SUV to you for a total of $15,000 plus interest and fees.
In this example, the $8,000 from your trade-in would be applied to the total cost of your lease. This means you would only need to pay $7,000 over the course of your lease, plus interest and fees. By trading in your vehicle, you have drastically lowered your monthly payments and reduced the total cost of your lease.
Trading in a car can make your lease far more affordable. However, it’s important to note that once your lease is over, you won’t have any equity to use as a down payment on your next vehicle.
Can You Trade In A Leased Vehicle?
Another misconception is that you must own the vehicle you want to trade in, but that’s not true. It’s also possible to trade in a vehicle you are currently leasing.
Every lease agreement contains a buyout price, which is the amount you can pay at the end of your lease to purchase the car rather than return it to the dealership. The buyout price is usually close to or the same as the car’s residual value, which is what the dealership estimates the car will be worth at the end of your lease.
Trading in a leased vehicle is only a good idea if the trade-in value is higher than the buyout price. For example, if the buyout price is $8,000 and the trade-in value is $12,000, you may want to consider trading in your leased vehicle. Trading in your leased vehicle for $12,000 would allow you to pay the buyout price of the leased vehicle and use the remaining $4,000 toward the purchase of a new vehicle.
If the buyout price is greater than the trade-in value, you are responsible for making up the difference. For instance, if the buyout price is $10,000 and the trade-in value is $8,000, you would still owe the leasing company $2,000 after trading in your leased vehicle.
How to Prepare Your Car For A Trade In
You don’t need to spend a lot of time getting your car ready to trade in. But there are certain things you can do to prepare for the transaction. Follow these tips:
- Gather relevant paperwork. If you have paperwork that proves you kept up with the vehicle’s maintenance, now is the time to find it. Showing the dealership that you’ve been a responsible owner could increase your car’s trade-in value.
- Clean it. Your car doesn’t need to be in perfect condition, but it should be fairly clean. Remove your personal belongings, throw away trash, and vacuum the inside. First impressions count, so wash the exterior, too.
- Remove personal information. If your car has an infotainment system, make sure you remove any personal information stored in it. For example, your home address might be stored in the navigation system. Your phone might also be paired via Bluetooth.
- Find out how much your car is worth. It’s a good idea to find out how much your car is worth before you go to a dealership to trade it in. This way, you will know whether the dealership’s trade-in offer is fair. Remember, the trade-in value will always be lower than the market value. This is because the dealer needs to make a profit when they resell your trade-in vehicle.
- Estimate the cost of repairs. If your car needs repairs, you don’t need to take care of them before trading it in. However, you should take your vehicle to an auto shop to get an estimate of how much the repairs will cost. This ensures you know how much the dealer should deduct in repair costs from your car’s trade-in value.
When is the Best Time to Trade Your Car In?
If you want to get as much as possible for your vehicle, it’s important to know the right time to trade it in. Follow these tips:
- Keep an eye on the market. Trade-in values increase whenever used car inventory is tight. This is what’s currently happening in the market, which means trade-in values are higher than usual right now.
- Be mindful of mileage. In general, the greater the number of miles on your vehicle, the less it is worth. If possible, try to trade in your vehicle before you reach certain mileage milestones. If you’re inching closer to 70,000 miles, for example, try to trade it in before you reach this milestone.
- Consider the age of your car. The newer the car, the more it will be worth when you trade it in. A vehicle’s value declines steadily as it gets older. There may be a significant dropoff in value once the vehicle is about five years old, so aim to trade it in before then.
Trading in your vehicle is a big decision. Now, you should understand more about your options when it comes to trading in your vehicle.