WHAT HAPPENS AT THE END OF AN AUTO LEASE

 

As you approach the last days of a lease, at about 90 days before the end, it's time to get your lease contract out and look it over. Odds are you haven’t looked at it in a long time. Look for the residual value, sometimes called the lease-end value. The residual value is the amount you can purchase the vehicle for at the end of a lease.

Your Options

1) You can walk away from the lease: When you return the vehicle, you’ll owe a disposition fee, extra mileage charges if applicable, and any wear and tear charges.

2) You could trade the vehicle in on a new lease or purchase: You can trade it in for any make and model you wish, you are not necessarily tied to the dealer you leased the vehicle from. By trading it in, you may avoid the immediate cost of a disposition fee, mileage charges, and wear and tear, but the “cost” of those items may be deducted from your trade-in value.

3) You could purchase your leased vehicle: You have the first right of refusal to purchase your leased vehicle for the residual value quoted to you at time of lease. If you purchase your leased car, you avoid the immediate cost of a disposition fee, mileage charges, and wear and tear costs.

4) You could request a lease extension:  Although this is not often used, you could request a lease extension. But bear in mind that if you choose to extend your lease, you may have to pay for another year of vehicle registration even if the extension is only for a short while. Your lender may elect to modify the terms of your lease during the extra time period as well.

In any case, it’s a smart move to check with the dealership you leased your vehicle from when nearing the end of your lease. Many manufacturers will offer special, personalized offers on a new lease or purchase for their loyal customers with good payment histories. These rates may be lower to much lower than your current lease payments, and the dealer may be able to offer you a better residual value than other parties can.

The Process

Although there is some variation between companies, the leasing company ("lessor") will contact you to let you know your contract will end soon. It may then contact you to set up an appointment for an inspection. Vehicle leasing companies charge for any damage to a vehicle that is more than normal wear and tear. That is, for any damage that's going to cost more than an average amount of refurbishment to correct. This is done to offset reconditioning costs that will be incurred so the vehicle can be sold as a used car. Your vehicle inspection is where the amount of wear and tear cost (if any) will be assessed.

Most manufacturers look for damage in these general categories:

• Exterior dents, dings, scratches and scrapes, including on bumpers and wheels, especially "curbed" wheels
• Cracks, stars or excessive pitting in the windshield and other windows
• Wear to the tires, including the spare, that is abnormal or excessive
• Upholstery or other interior tears or stains that can't be repaired or cleaned with normal cleaning and conditioning

Inspectors typically enter any damage information, and other problems, into a computer program that estimates the cost of repair, so that soon after the end of the inspection you’ll receive a condition report that lists any damage above the typical wear and tear and what it will costs to fix the problem.

During this time of COVID-19, some automakers might skip the pre-inspection to speed things up and reduce contact. In these cases, the inspections are done after the fact, and they may assess you excess wear and tear costs later.

 How You Can Prepare for the Car Lease Inspection

Before the inspection, remove all your personal items from the vehicle including from the trunk, glovebox, and any other storage areas. Have the vehicle washed. Having your vehicle detailed might also be a good idea if this will improve how your vehicle looks. You may also want to address light scratches and dents by polishing, using manufacturer provided touch-up paint (with a thin bristle brush) or with the help of a paintless dent removal company.

Having the inspection performed with some time left before the end of the lease increases your chances of possibly saving some money. However, if you have the initial inspection and the manufacturer's charge for the repairs seems reasonable, just paying the money is probably your best option as it will save you time and possibly money and headache in the long run.

Don’t Forget These Items

Remember to return everything that came with the vehicle and bring them to the lease turn-in. This includes all sets of keys, any manual, any cargo covers, mats, spare tires, etc. 

Other Lease-End Tips

If the excessive wear and tear costs on a lease-return condition report seem too high, you have the right to contest them with a representative from the leasing company. While it’s no guarantee that you will get any relief from the penalty fee amount, you could get some consideration if you’re going to lease your next new vehicle from the same manufacturer. This may also apply to penalties for going over mileage limits for the vehicle.