Most automaker finance units and third-party financial institutions will provide a one-time extension of a car lease for a certain number of months (usually 12 or less) prior to its expiration date, or for a maximum allowance on a month-to-month basis. , although whether or not this is a good idea depends on your situation.
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You will need to call the lender to request an extension and find out its individual procedures and terms; Some leases include a provision for extension. Otherwise, the auto finance unit, bank, credit union or other lessee can set their own policies and rules – including whether they will handle the extension or refer you to a dealer, plus any associated fees. Some make it easier and more informal than others, and some require you to sign a specific agreement to detail the terms.
Being able to get an extension also signifies that you have fulfilled the terms of the original contract, including regular on-time payments. But it is in the interest of lenders to make it relatively painless to temporarily close the lease end when sorting out a new purchase or lease for good customers.
Just because you can, should?
Whether a lease extension makes sense depends on your situation. If you’ve delayed planning your next vehicle and the lease expires on you, an extension provides time to make your best deal out of buying or leasing a new vehicle. These days – with the most desirable new vehicles in short supply – it can also give you time to find the vehicle you want or wait for the one you order. And if you’re unsure (due to job or family situations, for example) whether you’ll need to replace the vehicle, it’s wise to temporarily delay the end of the lease.
But if you’re debating buying used cars in today’s hot market, you’ll be financially better off getting a loan for the paid-up value (based on the residual value in your contract). You’ll be able to capture any equity you get from its value relative to the purchase price, and you’ll have a car that you can sell or trade in when you like it. We have more information on why now is a good time to buy your leased car here.
A ‘Re-lease’ is not an extension
We’re talking about extending your current lease here, not “re-leasing” the vehicle. This is another way to return the vehicle – and promoted by some automakers – but it involves entering into a new lease contract for the vehicle for a fixed period, usually up to three years. You are committed to the new terms and a new payment to lease what is now an old car. A re-lease may include more expensive used-car financing rates and a reset of the residual value and purchase price that is not favorable to you. It also lets you know about potential repair costs, thanks to an expired or soon-to-expire warranty. A new vehicle and a new car weren’t due for the warranty you leased in the first place?
Lease Extension Pros
There are a number of reasons why a lease extension might work in your situation:
- There may be no additional charge or cost.
- You’ll have a few extra months to get your new vehicle due to placing an order or mitigating supply constraints.
- It’s a way to pause for a bit to see if the now rare lease deals and incentives or better deals on purchases come back later in the year.
- That’s a little more time to save on down payment or upfront costs for the purchase or lease of a new vehicle — or a little more time to consider whether your next vehicle is to buy or lease.
Lease Extension Cons
There are downsides and reasons to be careful:
- There may be an extension fee.
- Many lenders do not reset the residual value in the contract even though the vehicle continues to depreciate. If you buy the vehicle later, it won’t be as good a deal as you’re getting now, and the extra lease payments are wasting money.
- Some lenders don’t add an added additional benefit allowance with an extension, leaving you open to a fee.
- Any additional gap insurance or other products, such as wheel and tire damage insurance that you purchased separately through the dealer at the beginning of the lease, may expire with the expiration date of the original lease contract.
- You need to make sure that your vehicle remains in effect during the warranty extension period so that you are not on the hook for repairs.
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