Rolling over lease usually a bad move

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Dear Terry,
I have a four-year lease that ends in March 2009. I have recently racked up the miles. I am not over my limit, but will be if I go to the end.

I want and need a larger vehicle, but can’t get a new vehicle because of credit issues. I want to turn in my lease early and roll over the rest to a used truck or SUV.

I know rolling over is never good, but mileage fees could be higher than the negative equity. The negative equity will be about $2,700.

I also want to keep the same payment or get it a little lower. I am looking at spending about $6,000 to $7,000 before negative equity, plus tax, title, fees and negative equity. I’m curious about your opinion.

— John

Dear John,
You’re right when you say I’m not a fan of negative equity deals. They simply put a buyer deeper in debt and greatly extend the time when the new vehicle will be worth more than what is owed.

The negative equity number you mention would equal a mileage penalty of 10,800 miles, assuming the lease penalty is 25 cents a mile. That’s a lot of miles, especially since you say you’re under the mileage cap now. So, I would think hard about whether there’s any benefit to taking the negative equity hit now or keeping the car until the lease runs out.

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