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Ask Dr. Don
By
Don
Taylor,
Ph.D.,
CFA
•
Bankrate.com |
Endgame on an auto lease
Dear Dr. Don,
I currently have five payments of $513 remaining on a 53-month
car lease. The vehicle is no longer under warranty and is in need
of new tires. Is it smarter to buy or lease a new vehicle now or should
I continue through the end of my lease?
Rick Roadster
Dear Rick,
The only reason to get out of the lease now is if it will cost
you less than keeping the car through the end of the lease. Try
to evaluate what your true goal is here. You've made 48 of 53 car
payments, so it's not a budget problem. Nonwarranty repairs can
be expensive, but unless you know of a problem, I don't see why
you're skittish about it now with five months left in the lease.
Most 4-year-old cars aren't at death's door. You should know its
maintenance and repair history well enough to estimate the probability
that something major will come up over the next few months.
With most leases you're required to return the car
with matching tires and enough tread remaining to meet the leasing
company's requirements -- an eighth of an inch beyond wear bar indicators
is common. Review your lease agreement to see what it specifies
concerning the car's tires.
If you're over your mileage limit then you'll have
to pay for that when you turn in the car. The same goes for any
excess wear and tear on the vehicle.
You can try to trade out of your lease, using a service
like LeaseTrader,
but with only five months left in your lease you're not likely to
get someone to step up for those last few months, especially when
they'll be on the hook for any end-of-lease costs.
You also can look into selling the car out of
the lease. Make sure your lease agreement allows you to do it. Use
Edmunds or
Kelly Blue Book to get an idea of the car's value. Compare that
value to the car's residual value.
Even if you can't sell the car for more than
the residual value, you can avoid wear and tear issues and tire
costs by selling rather than returning the vehicle. That's one way
to make sure you get your security deposit back.
-- Posted: Aug. 28, 2003
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