Here’s a scenario: for the last few years you’ve enjoyed a brand new car with lower payments because you leased instead of purchased. Now that the lease is coming to an end, you have a few options to consider, but you will want to do some planning ahead of time.

Many first time lessees think that when the lease is up, think that they just give the car back and move on. It’s usually not so simple.

Here are a few questions I’ve gotten from readers -

“The lease on my Mercedes doesn’t end for another three months, but I’m already getting calls from the dealership asking if I want to lease another car. They tell me they will cover my remaining payments. Is this a good move?

Luxury car brands, especially Mercedes, are known for what is called a “pull ahead” program for leasing. Usually they’ll offer you an early out in order to put you into another vehicle. This is one of the tactics automakers use to maintain brand loyalty. A dealer will probably make you an offer something like this: “Turn in your 2013 C-class three months early for a 2016 C-class and keep your same payments!”

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This can be very tempting if you were considering upgrading to the current model anyway. You will want to investigate the price and equipment on the new car compared to your own. Often the MSRP will creep up every few years, and sometimes the price can jump quite a bit if a new model comes. So if you were paying $400 a month on a 2013 C300 4matic with the premium package, sport package, and navigation, check to make sure your $400 a month on the next lease will get you the same stuff. Also, pay close attention to whatever down-payment the dealer is requiring as it may be more than you had anticipated.

However, before you commit to another lease with the same brand, do some research and see what else is out there. You might find a better value with a different car.

“What do I do if I want to lease (or purchase) something else? Are their incentives to change brands? Will the other dealer take my car?

Sometimes other luxury brands will make you the same offer and cover your last few payments. Whatever the offer is, know that those “covered payments” aren’t free. The lease company still wants that money, so the dealership is deducting the cost of those payments in the car. If you are paying $400 a month on that C300 and are three months from the end of your term, the dealer is going pull $1,200 of your next car to cover you balance.

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Another thing to remember is most leases have a “disposition fee” that they hit you with at the end. You probably forgot all about it when you signed your contract! It’s usually a few hundred bucks to give the car back. I know that sounds ridiculous; you have to pay them to take your car.

Of course if you lease another car with the same brand they might magically waive that fee, which is precisely the reason the put in in there to begin with — to keep you loyal. If you do not want another Mercedes, BMW, Honda, whatever... it’s not worth saving on your disposition fee to stay with the same brand.

As for turning in your ride, some dealers will handle the changeover with the lease company while others will not. Usually luxury car companies are pretty good about this as they are always looking to poach customers from other brands. However, I have had customers that tried to do this with mainstream brands, such as giving a leased Jeep to a Honda store, only to be told that they have to take the car back to the other brand.

If you are turning in your lease and buying something from another automaker, call the dealer where you are getting your new car from and ask if they will handle your lease turn-in. This is really important if you are driving far to get your next car. If the dealer says they can’t do it, find the closest dealership for the brand you have now and have someone from the other dealer pick you up.

If all that sounds confusing, here is how one scenario played out. I had a customer who was leasing an Accord coupe when she decided to purchase a Mustang convertible. The best deal on the Ford was two hours away. If she gave her Honda back to her local dealership she would have had no transportation to the Ford store, and that dealer did not want to handle her Honda lease turnover.

So she found a Honda dealer about 10 miles from the Ford dealer and arranged to turn in her car with them. Her Ford salesman was more than happy to take a short trip down the road to pick up his customer.

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Instead of getting into another lease, perhaps you really like that car you have and decide you don’t want to give it back.

“I leased a Jetta TDI Sportwagen and ended up being way over the allotted miles. I love the car and I’m thinking of buying it out instead of paying the mileage penalties. How does this work?”

While leasing with the intention of purchasing is not the best financial move, sometimes there are good reasons to hold on to your car rather than turn it in. The key thing to remember is you are essentially buying a used car, but one that you know the history of. If you go this route contact your lease company for the buyout number, keep in mind you will have to pay taxes and DMV fees as well.

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In the case of the reader above, he is most likely going to face a sizable penalty given his mileage overage. If the car has treated him well and he doesn’t mind keeping it for awhile, the buyout might be the way to go.

Another instance where someone may consider an end-of-lease purchase is when the car you have has been discontinued. A friend of mine had leased a Lexus IS250 convertible with the intention of getting another one once the lease was over. Three years later, Lexus discontinued the car and she found the alternatives to be too pricey. She bought the Lexus and even ended up rolling in an inexpensive Lexus backed warranty into her payments.

What a lot of people don’t know is if you decide to buy out your lease, you can bypass the dealership all together and save a few hundred bucks on those documentation fees. All you need to do is secure some third party financing and have the bank send the payment to the lease company. Just make sure you shop around for the best rates.

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If you have a question, a tip, or something you would like to to share about car-buying, drop me a line at AutomatchConsulting@gmail.com and be sure to include your Kinja handle.

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