If you have a car that is financed with a loan, many dealerships will encourage you to come trade it in for another vehicle. However, when you lease a vehicle it comes with a different set of rules. Unlike a car loan you may face issues if you try to trade in your leased vehicle after just one year.
When a car financing company sets up a lease agreement, it estimates and expects a minimum profit from the arrangement. In order to secure that profit, the lease must continue as planned for the duration of the lease period. Many car lease agreements last for a minimum of 24 to 36 months before you have to return the car to the dealership.
With a standard trade-in, you bring your car to a dealership, pick a new car, and negotiate a payoff amount for the old car to put as a credit toward the new purchase. But to trade in a car you have to either own it outright or have a financed loan that you can pay off. With most car lease agreements, you must wait until the lease-end date to trade in the car for another model. So unless you have a 12-month car lease, which is rare, it is unlikely that you can take the car back to the dealership and get a new one after just a year. However, if a car financing company does offer a “trade-in” deal for a lease, keep in mind that this is really an early termination where you may have to pay very expensive termination fees before getting a new car.
If you find yourself in a situation where you need to trade in a leased vehicle early, your best option is to try for a lease-transfer deal. The first you have to do is find a willing potential lessee who is qualified to take over the existing lease agreement. The car financing company must approve of the new lessee. The evaluation process requires a full check of the potential lessee’s credit and income. Some online services facilitate these types of lease-transfer deals and act as a middleman to bring old and new lessees together.
Although most leased cars are new, it is possible for a new car to have factory defects. If a new car has a chronic problem related to how it was manufactured -- qualifying the car to be deemed a “lemon” -- the car financing company is usually responsible for taking care of the problem. If the car is deemed defective after a thorough evaluation, the dealership may choose to allow you to trade it in before the official end of the lease.
Louise Balle has been writing Web articles since 2004, covering everything from business promotion to topics on beauty. Her work can be found on various websites. She has a small-business background and experience as a layout and graphics designer for Web and book projects.