So you leased a car and for one reason or another the miles you’ve driven are significantly higher than the lease allows. You’re looking at a big bill just to turn in the car, and that takes all the joy out of that awesome car you’ve been driving for the past few years.
Don’t panic. You may have more options than you think. Here are some strategies that can save you from this predicament:
- “Pre-sell” the car before the end of your lease
This is a great strategy, but it’s rarely used because many people don’t realize it is possible. Since you are not turning the car back in, you won’t have to pay the over-mileage penalty. The key to success with this option is knowing the “total payoff” amount. This includes the total of any unpaid lease payments and fees, as well as the residual value (the amount the car is estimated to be worth at the end of the lease). The first step is to request a “total payoff” cost from the lease company.
Using this knowledge you can set an acceptable price to sell the car that could limit your loss, or even in some cases let you come away with a bit of money left over. You then advertise the car for sale. When you find a buyer, call your lease company and tell them that you have a person who wants to buy the car. They will walk you through having the buyer send in the check, and completing the paperwork. If you sell the car for more than you owe, you will need to have the buyer give you a check for the balance. If you sold the car for less than the payoff, you will need to pay the lease company the difference. As long as the balance is less than your over-mileage penalty, you still win!
- Trade the car in and use available incentives
Car manufacturers want your business, and they will often offer rebates that are only available to people who are coming off of a lease. It may be the same brand of car that you own, or another brand that is looking to “take” business from other manufacturers. These incentives can be substantial – hundreds or even thousands of dollars in some cases. Do a web search for “new car rebates” or “new car incentives” to find current offers. The incentives don’t necessarily have to be limited to “end of lease” situations. Any rebate that is large enough, can help you to eliminate the over-mileage penalty you owe. The key here is to find a rebate that is attached to a new car that you like. Once you find that combination, you can simply trade-in your current leased vehicle the same way you would trade any other car.
- Buy it
Most auto leases today are “closed-end” lease contracts. That means that there is a fixed purchase amount (the residual value) which is determined at the start of your lease. This is a good option if you really love your car, or if you are in a situation where you need more time to pay. The dealer you leased the car from can help you to finance the car and include the penalty you owe in the new loan.
Bottom line: don’t let that odometer reading scare you. With a little bit of time and research, there are a few ways to deal with being over the allotted miles on your lease. In most cases, the leg work you put in will be well worth the effort. Need some guidance? I’ve been through all types of lease scenarios both personally and on behalf of clients and I’m here to help, so feel free to give me a call with your questions.