Can You Trade In A Leased Car?

Author: Stat

You probably have no equity unless you paid a substantial down payment, had a desirable trade-in at the beginning of the lease, or the leasing company misjudged the residual value of your automobile.

But if you do wind up with lease equity, you may use it for your next lease or buy. You may also go to a dealer that would purchase your leased automobile and credit you for trade-in against your future purchase.

A leased automobile is traded in differently from a car that was bought. The leasing firm will need payment of certain fines and costs, and the contract must still be fulfilled, whether you are trading in a leased vehicle to a dealership or ending it early.

Let us go over the two primary scenarios of turning in a leased vehicle to a dealership:

  • Your remaining lease debt is paid off by the dealer, who then purchases the vehicle from the leasing company. Subtracting the termination fees they paid, the car's wholesale worth will subsequently be applied as a trade credit. Though frequently the payout value surpasses the trade-in value, so be ready to have that money added to your new purchase or lease rather than having any expense deducted.
  • The dealer will offer you no trade-in credit, return the automobile to the leasing company, and pay the remaining balance on your lease. You can then acquire a new car and stop worrying about your lease. It won't, however, assist pay for that new automobile, and you'll still be accountable for the typical lease-end costs like excess miles, repairs, etc.

If you have over the mileage limit or the wear and tear much surpasses the typical amount stated in your lease, trading in your rented vehicle might be a wise choice. But you need to figure out these costs and decide if exchanging would be more economical or whether paying them and turning them in would make more sense.

Understanding Lease Agreements

If you finance the purchase of a vehicle, you are really building ownership of the vehicle and will own it after the loan is paid off in full, as opposed to leasing.

You pay to use the vehicle for a limited time (often between two and four years) when you lease it. You have a few options after your lease is up: either give the car back to the leasing company, sell it for what it's worth, or take it to the dealership where you bought it or another one.

Breaking an automobile lease could be essential at times due to unforeseen circumstances. This includes situations when you may not be able to continue making the payments, such as when you move employment, lose your work, are unable to make the payment, are relocating to a place with public transportation, or if the car you are leasing no longer suits your requirements.

You should terminate the lease immediately if any of the following apply. It would be a poor financial decision to terminate a car lease or trade in a leased vehicle just because you dislike the vehicle or are tired of driving it.

Factors to Consider Before Trading In Your Lease

To help you navigate the trade-in process, here are some key points to keep in mind if you want to trade in your lease for a different car:

  • Prosecution and Sanctions. You can trade in a lease early, but canceling your lease early can result in significant financial penalties. You should expect to pay more as the duration of the contract increases. This charge will be determined by the lessor, taking into account the remaining duration of the lease as well as the current market value of the vehicle. If the vehicle shows signs of heavy wear and tear or if you've traveled more kilometers than it should, your charges will be raised.
  • The Price After Deductions. At the end of the lease term, it stands for the anticipated worth of the vehicle. Additionally, it shows the total cost of the car if you decide to buy it out after the lease is up. Along with the car's age and mileage, it takes the car's quality, durability, and brand into account.
  • The Value of a Lease. After the lease ends, this is the value of the vehicle. Having positive equity after your lease contract is possible if the vehicle is currently in high demand owing to limited inventory or the model's popularity, and the leasing firm had forecasted a low residual value.
  • Payment for the Purchase. The buyout fee is the amount of money you'll need to pay to get your leased automobile. After your lease, the amount to be paid to purchase your car is often indicative of its residual value. While some dealerships may be willing to negotiate the buyout amount, once you sign the lease contract, you're usually stuck with it.

Pros and Cons of Trading In a Leased Vehicle

So, can you trade a leased car? The answer is yes, but it has its pluses and minuses.


  • Oftentimes, trading in a leased car is a simple procedure that the dealership can manage for you.
  • You may avoid further charges by trading in your car if it has significant wear and tear or if you have driven more miles than allowed.
  • When you trade in your old car, you might get a newer model or one that fits your requirements better.
  • You may be able to use the equity you have in your leased car toward a new lease or a purchase if the vehicle's value exceeds the amount still owed.


  • It may be rather expensive to trade in a lease before the term ends since there are costs associated with early termination.
  • The term "negative equity" refers to a situation in which the value of the leased car is less than the amount still owed on the loan. This might lead to a higher payment for your next vehicle.
  • When negotiating the trade-in value, you may not have as much clout as when selling the vehicle privately.
  • Depending on the dealer's offer puts you at risk of not getting the most money for your car.

You may make a better judgment about trading in your leased car if you consider these benefits and downsides.

How to Trade In Your Leased Vehicle

After a lease buyout, some lessees sell the automobile for profit. If you can benefit by selling the automobile below its residual value, do so.

Find out the car's current value. You may check, Carvana, and Kelly Blue Book.

Assess the car's residual value against its market value. You have no equity in the car and won't get much for it if its residual value exceeds its current value. You may use equity to purchase a new car if its market value exceeds its residual value.

Car dealers will assess the market value of the vehicle you're leasing and may offer to purchase it. If a dealer offers more than the car's residual value, you may benefit. If you can get a decent deal, you can use the money to buy a car or change leases.

Any of these alternatives start with the car's residual value. Contact the leasing company or review your lease agreement for the actual fee.

Keep in mind your lease is soon up. Trading in your leased car at the end of the term saves money and avoids early termination fees. Now that you know the answer to the question can I trade in a leased car, you can take the necessary steps to take so. 

Steps to Trading In Your Lease Car

With these guidelines in mind, trading in your rented vehicle will be a breeze:

  • To learn about the penalties for early departure or excessive mileage, review your lease carefully.
  • Compare the car's market worth to the remaining lease payments to determine whether you have positive or negative equity.
  • To ensure you get the greatest offer, it is a good idea to acquire estimates of your trade-in value from many dealerships.
  • Give your vehicle a thorough once-over for any dents, dings, or signs of major wear and tear. Take care of little problems if you can.
  • If you want to trade in your vehicle, you should contact your lease company to find out what documentation or processes are necessary.
  • Use the information about the trade-in's worth and equity to bargain for a better deal with the dealership when making an offer.
  • Complete the necessary documentation to transfer the vehicle to the dealership and finalize the trade-in. Read the terms carefully and make sure you agree to them.
  • Choose between selling, leasing, or buying out your existing vehicle lease. Evaluate each choice by thinking about its advantages and disadvantages.
  • Finalize the Deal: Complete the purchase or lease of your new car by signing the paperwork and paying the balance.
  • If requested, return to the dealership all rented accessories, including keys, handbooks, and floor mats.

If you follow these procedures, trading in your leased automobile will be easier and less stressful.

Key Takeaways

Though it's thrilling to buy a car and claim it as your own, you don't have legal ownership of a loaned vehicle until the loan is paid off in full. Eventually, the car's value will drop due to wear and tear, and you'll be stuck with an older model.

In that case, why even bother leasing a car? Leasing is popular because, after each two or three-year term, the motorist gets a brand-new automobile, saving them money on maintenance that comes with driving an older vehicle.


Does trading in my lease vehicle damage my credit?

Assuming you keep up with any overdue payments, trading in your leased vehicle should not impact your credit score.

Are there any penalties or fees associated with trading in a lease car early?

Yes, there may be fines and early termination costs if you trade in your leased automobile before the end of the lease period.

Is it possible to trade in a lease car for a different brand or model?

Depending on the dealership's policy and the conditions of your lease agreement, it is possible to trade in a leased automobile for a different brand or model.