How to Extend a Car Leaseby Neil Kokemuller
A primary reason people get a car lease is to have flexibility to move on to another vehicle after a few years. However, lessees sometimes find they aren't ready for a new car at the end of a lease term. Many leasing companies do give you the option to extend your lease, according to Edmunds.com, particularly on a month-to-month basis.
Reasons to Extend a Lease
Extending your lease buys you more time to make your next move. In some cases, people want to shop around for a while to find the right vehicle. If you opt to purchase rather than lease the next car, it might take you some time to find the right vehicle and gather funds for a down payment.
Extending your lease doesn't change the residual value of the vehicle at the end of the original term, according to Edmunds.com. Thus, if you opt to pay for the car a few months into a lease extension -- even if the vehicle's value has declined -- your price is still based on the residual value at the point when the original lease ended.
How It Works
You have a number of options aside from returning the vehicle at the end of a lease term. If your preference is to extend the lease, discuss that with your agent or contact at the leasing company. Normally, you continue to make the same monthly payments until you decide not to renew the month-to-month extension, according to Auto Trader.
Re-leasing the Vehicle
If you fall in love with a car during your lease, another option is to re-lease it at the end of the contract term. The primary difference is that if you leased a new vehicle initially, the new lease is for a used vehicle. Auto Trader notes that leasing a used vehicle has some pros and cons compared to leasing a new car. Your monthly payments are typically lower because of the depreciated value of the car. Familiarity with the car and how it works are psychological benefits. The leasing fee or interest charge on a used car is usually higher because of the lessor's perception of greater risk with used vehicles. Thus, despite your good faith in the car, re-leasing your vehicle will not lower your costs compared to leasing another similar used vehicle.
Buying the vehicle is an option at the end of some lease contracts. When the leasing company sets the residual value too low relative to the rate of depreciation, you can get a great deal by purchasing the car for below-market value, according to AutoTrader.