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. Can you extend a car lease?
Many leasing companies do give you the option to extend your lease, particularly on a month-to-month basis, points out Edmunds.com. This can be a very helpful option if you're not sure you want to buy a new car or continue leasing as your lease is expiring. Reviewing car lease extension options will help you make the right choice for your situation.
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.
Note that extending your lease doesn't change the residual value of the vehicle at the end of the original term. 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. Make sure you are getting the same mileage amount you originally negotiated, advises Holiday Automotive, unless you can negotiate a better deal.
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. 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
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.
On the other hand, purchasing a car after you've made years' worth of lease payments will probably cost you more than if you had purchased the car in the first place. In addition, your resale value on a used car will be less with each passing year.
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.