Can I Trade in a Leased Vehicle After a Year?

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.