Once you’ve made the decision to take the plunge into leasing, one question you may have, especially if it’s your first time, is whether you can trade the old car that you own. The answer is yes; It is common for dealers to accept a trade-in on a new car lease.
Connected: How do I calculate whether a lease is a good deal?
Lots of details and terms for the lease and the Terminology terminologyIf you’re used to buying it seems confusing – and Cars.com can help you. We’ve added coverage links below to help you sort out the leasing process.
Trade or sell yourself?
A few things are the same as when buying. First you have to negotiate your best price for the new car (the leasing calculation starts with the price, the “citalized cost ”in the rental agreement for the new car). Likewise, You can exchange your old vehicle for a down payment, taking into account the leasing costs for the new vehicle.
Note, however, that when you lease your car you are actually doing two separate transactions, said Greg McBride, chief financial analyst for the personal finance website Bank rate. The dealer is leasing You have a car owned by the leasing company (often the automaker’s finance department) and the dealer purchase your car.
“The price you trade is independent of the lease,” said McBride. Both transactions are negotiable and you need to keep them in mind separately so that you get the best deal for each transaction.
Is there a disadvantage to trade-in instead of selling the old car yourself? You could get a few more dollars selling it yourself to a private party or to a used car company like CarMax, but McBride says it must be worth your while. “The odds are in your favor of getting your best price that way, but … most people are mindful of convenience – drive in your old car, drive out in a new one – and don’t try to make every dollar possible to get out. ”
With you can get an idea of the fair value of your old car Cars.com’s Car price guide here.
What if you still owe money on that old car?
If you still owe money on your old car, you can probably still trade it on a lease – if it’s worth more than you owe. But like buying, it’s better to trade a vehicle you directly own than one you owe money for, McBride said. “You have less equity, so the value of your down payment will be much less.” You may even need to raise out of pocket cash to cover the upfront cost of the rental agreement.
If you owe more than your old car is worth, you really don’t have a trade-in. Some dealers will work with you to take your car and convert your debt into a new car loan. But you’re likely out of luck on a lease if you have negative equity, McBride said.
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Circumstances vary and there are many reasons why people may find it advantageous or just desirable to lease. You can find one wider discussion about it here.
But at the end of the lease, return the car and sign another lease or buy without a trade-in to help. “It puts you on a treadmill of payments and that’s hard to come by,” said McBride. He suggested that if the main reason for leasing is to get a lower monthly payment, you could consider swapping that old car for a cheaper, almost new, used car. Someone else will have paid for the high depreciation for the first two or three years – – maybe a person who leased it.
“You get the same payment and you end up owning a car,” said McBride.
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