Trade Your Leased Car? Not Likely

Readers of LeaseGuide.com often have difficulty deciding if they should trade their leased car, as they might if the car had been purchased.

Trading a leased car is not quite the same thing as trading a purchased car. The primary difference is that a leased car is owned by the lease company, not the lessee (you, the customer). Since the lessee doesn't own the car, he doesn't have the right to trade it -- with the following exception.

Most lease contracts allow the lessee to "buyout" or purchase their leased vehicle at or near the end of the lease. If the buyout price is less than the vehicle's trade-in value, there is "trade equity" that can be used as credit toward the purchase or lease of a new vehicle. In this case, the dealer agrees to the trade-in value, purchases the vehicle from the lease company for the amount of the buyout price, and gives you credit for the difference.

This is very similar to the situation in which a puchased car still has a loan balance that is less than the trade-in value of the vehicle.

Unfortunately, the situation in which trade-in value is higher than the buyout price is pretty rare. Any case in which the trade-in value is less than the lease buyout price dictates that the car simply be returned to the lease company at lease-end, not traded.