What Happens at the End of a Car Lease? Your Options Explained

What you choose to do with your car when the lease ends can impact your finances. That’s why it’s important to understand your end of auto lease options and what’s involved in each one.

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Generally, you have three choices when your lease is up: return the car, purchase the car through the auto lease buyout process, or start a new lease. Read on to learn how to determine the right choice for your situation.  

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Key takeaways

• Your lease-end options include buying out the lease, returning the vehicle, or trading it in for a new lease or a new car purchase.
• Don’t wait until the last minute to decide what you’ll do with your lease, as some leasing companies impose time limits on lease-end decisions.
• Review your lease paperwork 60–90 days before your lease ends so you know the vehicle’s residual value.
• When you have positive lease equity, a lease buyout often makes the most financial sense.
• Buying out your lease for less than the car is worth means you got a great deal on your car.

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Before your lease ends: What to review and when

As the end of your lease approaches — about 60 to 90 days out — review your lease contract to find the residual value. Residual value is the predetermined lease buyout price. 

You also need to find the current market value of your car. You can look up the estimated value of the car using online value estimators such as Kelley Blue Book®. 

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The difference between the current market value and the residual value is your lease equity. The more your car is worth compared to the residual value, the greater your lease equity. The amount of equity you have in the car will help you determine which of the end of auto lease options makes the most financial sense.

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Don’t wait too long to find these numbers, either. Some leasing companies require advance notice for end-of-lease decisions, and waiting too long could limit your options or trigger unwelcome fees.

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Option 1: Return the car at lease end

Often, what happens at the end of a vehicle lease is that you return the car to the leasing company. In a standard lease return, you’ll hand over the vehicle and all original equipment, such as manuals, key fobs, and cargo covers. Remember to check every compartment and remove your personal belongings.

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The leasing company will conduct an inspection of your vehicle to determine the condition of the car and document any damage. You may need to pay return fees, which could include a disposition fee, a fee for any excess mileage beyond what was included in the lease, and a fee for any excess wear and tear. You may also need to return your license plate, depending on the state.

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Option 2: Buy out your leased car

If you’d like to keep the car, one of your car lease end options is to buy out the lease. A lease buyout means you pay the leasing company for the value remaining in the vehicle at lease-end and take over ownership.

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The lease buyout price is already included in your lease contract. It’s called the “residual value.” To buy the vehicle, pay the residual value plus any remaining lease payments. Since you won’t be returning the vehicle, you won’t need to pay any fees for excess mileage or wear and tear. 

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Lease buyouts can be a good fit for drivers who have put a lot of miles on their car, since they won’t have to pay additional mileage charges. Similarly, it can be good for people whose leased vehicles have a lot of dings, scratches, or other wear and tear. A lease buyout can also make sense if the current market value of your car is more than the residual value, because you’ll gain positive equity from the purchase.

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You can fund a lease buyout with cash, if you have the full amount of the buyout price available. However, many people choose to finance the purchase of their lease through a lease buyout loan. Lease buyout loans work much like other auto loans: you apply for financing with a lender, submit your financial information for verification, and then use the proceeds of the loan to complete the buyout.

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Option 3: Start a new lease or finance a new car

If you don’t want to keep the leased car but still need something to drive, you can start a new lease or buy a car. 

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Starting a new lease starts the leasing process over from scratch. Choose a vehicle and mileage limit, negotiate the capitalized cost of the vehicle, and put money down. If you have positive equity in your current lease, you could roll it over to reduce your new lease payments. You may need to pay an acquisition fee and documentation fees as well. Sign your lease paperwork, and you’re all set until your lease expires.

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If you decide to buy instead of lease, you’ll choose a vehicle and negotiate the purchase price and any dealer add-ons. Then you can apply for financing, either with the dealer or a third party, such as a bank or online lender. Sign the loan papers and start paying off your new car.

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Choosing the right car lease end option

To decide which of these lease-end options is best, ask yourself some key questions:

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• Are you ready for a new car, or would you prefer to stick with a vehicle you’re already well acquainted with? 
• Have you gone over your current mileage allotment?
• Does the vehicle have excess wear and tear?
• What is your equity, or the current vehicle value compared to the residual value?
• What monthly payment fits best in your budget?
• What are your expected driving needs over the next several years?

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Use the table below to help you weigh your options and how they fit your budget and goals.

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How RefiJet helps at lease end

Figuring out what to do about your end of auto lease options can be much easier when you have support. RefiJet offers resources to guide you through the end of your lease and beyond, with tools and information to help you decide your best path forward. 

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If you’ll be purchasing your leased vehicle, use our resources to learn everything you need to know about the buyout process, including whether you can buy out a car lease early or refinance a leased car after your purchase. And when you’re ready to shop lease buyout loans, RefiJet makes it simple to compare offers to find the best deal.

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No matter what you ultimately decide, you can find the answers you need to make the best decision for your finances and long-term goals.

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FAQs

Here are some of the most common questions about auto lease end options.

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What are my options at the end of a car lease?

When your lease ends, you can return the vehicle, buy out the lease, or trade it for a new lease or car purchase. The best choice depends on the value of the car and your plans going forward.

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What happens if I just return my leased car?

You can return your car when the lease expires. The leasing company will inspect it for damage, and they may charge various return fees depending on the car’s condition and mileage.

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Is it better to buy out your lease or get a new car?

You may want to buy out your lease if you love the vehicle and would like to keep it. It can also be a good choice if you have positive lease equity, or if you want to avoid excess mileage fees and other return costs.

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What happens to lease equity at the end of a lease?

When the lease expires, you may be able to roll your positive lease equity into a new lease or a down payment on a new car, lowering your costs. If you buy out the lease, your ownership equity will instantly go up, which could help you get more for the vehicle if you decide to sell.

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Can I finance my lease buyout instead of paying cash?

Yes, absolutely. It’s common for drivers to finance a lease buyout with a lease buyout loan. This type of financing works like other types of auto loans and can help you spread out the cost of the car over time.

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