Is it possible to extend a car lease when you are coming to the end of your current contract? It is a question many people struggle with each time, and it never gets easy.
If you are thinking of buying your next car instead of leasing, you will need extra time. Making the right choice in a vehicle takes time as there are many specifics and preferences you must check. You may also need time to put together the hefty car deposit payments.
Types of Car Lease Extensions
A lease extension is universal. Most people enter such a contract by either a formal extension or an informal extension.
It will take effect when you continue to use the car after the contract period is over. It will last until the leasing firm requests for the collection. Within this period, you will pay the monthly rental as per the agreement of the original contract.
You will pay the monthly sum in arrears, and this will give you more time with the car if you still have use for it.
In an informal lease extension, the agreement is usually a temporary solution. It will provide a smooth transition between lease agreements. The extension can last for a month or up to six months. After this period, the leasing company can recall their vehicle.
In this kind of extension, the customer has an opportunity to extend the lease for a specified term. It is usually between six months and one year, and you can negotiate new terms of the contract. The agreement may border on the extended-term date, revised monthly arrears, and mileage.
The new contract should start immediately after the initial lease agreement ends.
In all formal extensions, the modifying agreement must be binding. You must sign a new contract. As for an informal extension, you can extend the lease by placing a phone call to your leasing company.
Who qualifies for a lease extension?
Not everyone can get an extension on their lease when they ask for it. The leasing company must make some assessments. It will determine if you qualify for an extension. You may be eligible, but the leasing company may deny you a lease extension application.
The following are the reasons why you may not get a lease extension.
- If your existing account is in arrears
- If there is a current request to remove or add a relief vehicle
- If the initial agreement is still running
- When the leasing company recalls the vehicle back for commercial purposes
What are my options if my leasing company denies my extension?
If you fail to get an extension, you can opt for a new car lease agreement. You can achieve this by getting a new quotation or changing your leasing company. Reconsider the offers and find a better deal for a new car.
You can also settle for a short term car lease, which should last between one to six months. It is for people who are looking for a reliable transport solution within a specific time. The costs must be less as well. A short term lease contract is more affordable than the daily rental fee of hiring a car.
Comparing lease extension against Re-leasing
There is a slight difference in meaning. A lease extension can be both formal or informal. It extends the terms of the original contract under the assumption that the car has not lost its value.
Re-leasing is formal, and the leasing company should draft a new contract. Re-leasing refers to getting the same vehicle after the residual deal is over. It may also mean getting a new car of the same model as you have been using.
Before re-leasing a vehicle, you must consider if the agreement will remain the same. If so, then you should opt for a new car lease. It will ensure you get a better deal for a more modern car.
Re-leasing will give you better terms because the value of the car will go down. The leasing company does valuations. They factor the market trends and depreciation of the vehicle.
An extension for a lease can be costly than re-leasing the same car. It is convenient for the leasing company to offer you the same vehicle at lower rates than give it to a new customer. It is because a new valuation will consider the wear and tear you have put on the car. The torn fabric, stains, and holes will lower the leasing rates to a new customer.
Leasing companies avoid repair costs by giving back the car in its current condition.
Factors to consider when getting a new car lease extension
If you stay with one car for so long, you may get attached to it. It is common for people who take long term leases. It is also why you may decide to extend the contract when it expires.
One reason to extend the lease on your car is the sentimental worth with regards to the user experience. You may find a particular model reliable, attractive, or within your maintenance budget.
A car lease extension does not give you additional mileage to the previous contract. If the original contract is 15,000 miles in two years, it will remain the same for the extension period. Within this period, you stand to benefit if you do not surpass your mileage allocation.
If you go beyond the limit, you will be liable to pay for the extra mileage you incur during the contract extension. It can be costly, and it is why you must always check your mileage before making an extension. It might be cheaper to get a new lease agreement.
Service and maintenance
The status of the car before the end of the residual contract matters a lot. Servicing a vehicle that is not yours is not cost-effective. It is a fact that the motor vehicle you are leasing is no longer new. Hence, it is prone to regular breakdowns and maintenance.
If you feel that you can enjoy the car without bearing high repair costs, a lease extension will benefit you.
A way to know if the car lease extension will be a benefit is by checking the mileage and the next service dates. Practice preventative maintenance to ensure your car is always in good condition.
If your car has a warranty for repair and maintenance, then it is an advantage. Check that you do not extend the car lease when the warranty period is over. The warranty is critical for high price breakdowns and repair costs.
It is a risk running with a car that has no warranty. Check that you have roadside assistance. It should not expire with your residual car lease agreement.
What are the prices of a new lease against an extension? Getting an extension for a car at the same monthly remittance hardly seems viable. Because of the wear and tear, you should ask for new charges.
Steps for getting a car lease extension
Get a good quote
By the end of your residual agreement, the value of your car will depreciate. Leasing companies follow a standard extension program to do valuations. Your credit score and financial disposition may determine the new estimate. To get a good quote, leasing companies may have to look at your financial records.
There are many car leasing companies, and some have better offers than others. When comparing quotes, look for a car with the same mileage as yours. Pick the leasing company with the most competitive prices.
It will give you bargaining power even if you do not plan to part ways with your current leasing company.
New lease or an extension
An extension is pointless if you know you did not take care of the car you have. If you let service dates and oil change get past due, you should get a new car lease. However, a new lease is most likely to be more costly than an extension.
Negotiate new terms
It is advisable to go for an extension since you know the car already. You will know if the vehicle can serve you diligently for another year or two. A shorter lease is safe but more costly to pay monthly than the longterm.
A car lease can be costly only if you are not cautious about your circumstances. You must ensure your deals has perks like repairs and warranty. Getting an accident when you are on an informal extension may set you back financially. You will have to cover the costs by yourself.
Remember that you never build equity by making lease payments for your car. Therefore, you should lease with the aim of buying a car. Some leasing companies give the option of buying the vehicle.