How to Return your Leased Car without Issues

Return Leased Car

Car leasing is a popular method of car financing used by millions of people around the world, but especially in the US and Europe. The process has become quite familiar, and with online platforms, dealerships and other places offering great deals on car leasing, it has never been easier to sign up, make a payment and drive off in a brand-new car lease.

Sure, getting the lease is the easy part. If you have a semblance of good credit and enough income to make the monthly payments (or not) then you can get a lease started. The somewhat trickier part that few people fully understand is what happens when the lease ends — usually after 3-4 years — and it’s time to either pay the residual value on the car and own it outright, return the car and/or trade it in for a new model on a similar deal.

In today’s blog, we are exploring in detail how to return your leased car. Let’s start at the beginning of the end.

What Happens When a Car Lease Ends?

The typical car lease lasts for 3 or 4 years, though there are options for short-term leases. You can even take over other people’s leases when for whatever reason they have decided that they can’t keep the lease going. Under most normal circumstances, however, there are three steps that you’ll have to prepare for:

  • Inspection
  • Confirming return with the dealership
  • Returning the car and any additional items

How to Return your Leased Car without Issues

1. Prepare for Inspection

Prepare Car

As your lease comes to an end, the most critical thing that happens is the car’s final inspection. The inspection can happen at your home or when you return your car to the dealership. Some people think nothing of it, returning the lease car to the dealership and washing their hands of it.

We suggest, however, that you opt for the inspection at your home if you can. It is a typical option offered in most lease agreements. The reason for this is that you can actually be with the inspector when they are looking at the car. If they flag up a problem, you might actually be able to explain what happened and put across your side. If the car is being inspected in the dealership, they could flag up any problem, not hear your side and just charge you for it.

Ordinary Wear and Tear

The inspection particularly checks for any signs of wear or damage that fall outside of what is defined as “normal wear and tear” in your lease agreement. When you own a car for three years, there will be some wear. There could be some color fading, some wearing in the upholstery, even some very minor paint damage. If your lease agreement has defined these things as part of “normal wear and tear” then you have nothing to worry about. It’s a good idea to familiarize yourself with those conditions in your agreement before the inspection comes so you can fix up any problems that would incur charges, but ignore anything that’s just “normal wear and tear.”

Specific terms and conditions will vary from lease to lease, but some examples of “excess wear and tear” (for which you can and will be charged) could include any of the following (among others):

  • Dents larger than 2 inches; scratches larger than 4 inches
  • Upholstery tears of more than half an inch
  • Tires with less than one eighth of an inch tread remaining
  • Tires with damage to sidewall
  • Check engine light is blinking
  • Bent chassis
  • Any electrical components such as the infotainment screen not working properly

Excess Mileage

Another part of the inspection is recording your current odometer reading. When you signed the lease, you also signed up for an annual mileage limit. It can be one of the drawbacks of car leasing for those who don’t have any firm idea of how many miles they cover in a year. If you agreed on 10,000 miles per year, but your odometer at the end of your lease should be 30,000 or maybe just a tiny bit over. That’s assuming your car was brand-new with a near-zero odometer reading.

If you have exceeded your mileage limit, then you will be charged per mile. That figure should also have been stipulated in your lease agreement. It could be just a few cents per mile, but if you’ve exceeded the limit by many thousands of miles then it starts to really add up.

2. Find the Point of Return

Depending on who you have signed your lease agreement with, you may have to return the car to a specific dealership — probably the one at which you signed the lease and collected the car from originally — or you may have more flexibility. There’s no doubt that returning to the original dealership is fine, but if there is another dealership that is more convenient for you, perhaps because during the course of the lease you changed address or changed your daily driving routine, then you can inquire first to confirm the drop-off location.

If you are having an inspection done at your home, then the person inspecting the car may take it away from there. That’s the ideal solution because you have the car inspected, signed off and gone without having to leave your home. If this is happening, ensure that you confirm the completion and passing of the inspection at your home and not after they take it back to the dealership. Inspecting the car behind closed doors could throw up hidden charges that you would struggle to contest.

3. Return Everything You Started with and Pay Fees

Finally, you should go through your lease agreement one more time and check the inventory of what the car came with. Ensure that any extra items that were thrown in as part of your lease. There are some things that are common to pretty much any leased vehicle, and these are the things you will need to have ready when returning the car:

  • All car keys and key fobs
  • Original wheels – reattach the originals if you swapped them out for a custom set
  • The original floor mats and/or cargo covers
  • The owner’s manual
  • Any other interior or exterior accessories that came with the vehicle — sunshades, cargo net, mud guards, rear spoiler, etc.

Your lease should have details of any additional items that came with the car all itemized in a list. Use that as a checklist and put those items in the trunk or somewhere they can easily be found.

Finally, you should be ready to pay any additional fees that come your way. Even if you avoid wear-and-tear or excess-mileage charges, there is likely to be something called the “disposition fee,” which is likely around $300 or $400. This is the fee they charge to cover at least some of the costs they will incur to store and then sell-on the returned car.

You might think the disposition fee is unfair, but it’s standard practice among dealerships and car leasing companies, so you should be prepared to pay it.

Can I End My Lease Early?

When leasing a car, the best policy will always be to see the lease through to the end and then return the car in good order. If circumstances change, however, and you need to end your current lease, then you do have a few options.

1. Go Back to Dealership for a Different Lease

If you are wanting to end the lease because you need a bigger or otherwise different car to suit changing needs, then go back to the dealership and talk to them about it. They might offer you a transfer all or part of your lease to a different vehicle. There will likely be fees involved, but these will invariably be lower than the fees they charge you for just bunking out of your lease early.

2. Terminate the Lease

This is the expensive route, especially if you terminate early. Ending the lease a long time before its conclusion can result in you being asked to pay the entire remaining balance in one payment. For many, therefore, terminating the lease is a bad option. Unless you are quite close to the end of your lease and can afford a larger final payment to complete the deal and move on, it’s not a good course of action.

3. Transfer the Lease

You can turn to some online platforms like swapalease.com or leasetrader.com to find willing “buyers” of your lease. The car dealerships are usually very happy to accept a transfer because it means they continue to receive their money and they will still, sooner or later, get that car back. As long as the person you transfer to passes the requisite credit check, it should work out fine.

Conclusion: End of the Lease – Buy or Sell?

And so, we come to the end of today’s post. There are actually two more things you can do which we haven’t yet discussed in full.

The first is to buy the car that you have leased by paying off the residual value. This will transform the car from a borrowed vehicle to your private property and you will have full equity in it. If you love the car and have the money to buy it, then it’s a neat conclusion to a lease.

The second is to sell the car for profit. There are some situations where the car’s residual value according to your lease is actually lower than its real value in the Kelley Blue Book. In this case, you can first buy the car from the leasing company, paying its residual value, and then selling it to a private buyer or maybe even a dealership who will pay you a greater sum. You finish with the car and turn a bit of profit in the process.

Whatever you decide to do, the golden rule when it comes to returning your leased car is to read and re-read the lease agreement to ensure that you fully understand all of its provisions. The more you know about the lease agreement you signed, the better prepared you will be for the return of the vehicle when the time comes.

Written by: Magnus Sellén

Founder, owner & main author of Mechanic Base. I have been repairing cars for more than 10 years, specialized in advanced diagnostics & troubleshooting. I have also been a drifting driver and mechanic for over 7 years.