Trade In’s and Payoffs: Find the Financially Smart Way to End a Lease Early

Signing onto a car lease is a big commitment, but it’s not quite carved in stone.

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For those looking to trade in their lease car for a different vehicle or take the buyout option before the end of the lease, it’s important to understand a few key financial concepts, namely trade-in value and payoff amount.

Does lease jargon sound like a foreign language? No worries, here’s an easy-to-follow guide to the nuts and bolts of trading in or buying out.

Is it possible to trade in your leased car?

Had a baby during your lease contract and need a bigger vehicle? Kids moved out of the house and finally, you can drive something more compact? Monthly payments are getting too heavy and you want to drive something more affordable?

There are many reasons why you might want to trade for a different vehicle in the middle of your lease period.

The good news is, there are more options for this than if you were in the middle of paying off a purchase, though early termination fees and other costs can make it a very expensive option compared to just waiting to the end of the lease to get a different car.

There are a few possible scenarios in which a trade happen.

1. Pull Ahead.

new mercedes benz in lot

Pull ahead programs are a sort of incentive offered by manufacturers to car lessees to build brand loyalty and encourage return customers.

In a pull ahead, the car company will waive early termination fees for a customer who wants to change cars, if they’re towards the end of the lease and they sign onto a lease for another car from that same company.

This is an ideal way to trade into a new lease if you like the brand of car you drive but your vehicle no longer suits your needs.

Provided you were planning to lease again, rather than wait until the end of the contract you can get a head start with pull ahead.

Different brands offer different terms with pull ahead, allowing it anywhere from one to six months from the end of the original contract.

2. Trading in the car at the end of the lease.

In certain situations, trading in a vehicle at the end of the lease contract can provide you with positive trade equity that can be used as a credit against the down payment for a new lease or purchase.

This works only if the trade value of your car is higher than the lease-end residual value.

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However, this is unusual. Most car leases are structured so that the opposite is the case, making it more worthwhile to just return the car and start your next contract from scratch.

3. Trading in your car before the end of the lease.

car keys in hand

If you are near the end of your lease, and you’re not interested in pull ahead, depending on the dealership you still may have some options to trade in for a different car.

Usually, the dealer will pay off your remaining lease balance and either buy the car from the lease company, giving you trade-in credit or simply return the car to the company.

Be aware though that you may not get away so easy: many dealers will add this payment to the cost of your new lease! And if the car is returned to the company, you will still be on the hook for normal lease-end conditions, such as fines for damage, extra mileage or excessive wear and tear.

What is the payoff amount for a lease car?

The payoff amount is similar to the car’s residual value, but not exactly the same.

It’s the amount you would have to pay to buy the car at any given point during the lease. You can calculate it by adding the car’s residual value plus the amount you still owe on it, including interest.

This number may or may not be specified in your lease contract, so if you’re considering taking the buyout option, contact your leaseholder to get an exact quote.

Whenever you’re considering a buyout, the most important factor is whether the payoff amount is higher or lower than the car’s current market value.

Remember that your car’s residual value, as specified in your original lease contract, is just an expert prediction of how much it will depreciate (lose value over time) by the end of your lease period. But the reality of the car market is about as predictable as the weather. There’s a fair chance that at the time when you’re thinking to terminate your lease, your vehicle’s market value is actually quite different than the residual value calculated at time of signing.

If the payoff amount is less than the car’s market value, you’re looking at a good financial decision. You will get the better end of the deal and if you want, you may be able to sell the car at a gain.

Buying out vs. trading in

The payoff amount is an important number whether you want to buy your way out of the lease or trade into a different car.
If you buy out, the payoff amount is just what you have to pay.

If you want to trade, as I mentioned earlier, the dealer will pay off what remains on the lease and this sum comes out of the trade-in value of your leased vehicle.

Buying out means you will have to cover the payoff amount itself, rather than the difference between the payoff and the trade value of your car. However, you will then own the car outright, rather than just slide into another lease.

This decision rides mostly on the payoff amount. If it’s much higher than the trade-in value, better to take the buy out.

When is it worth it to trade or buy out of a lease?

calculator and cash

When you’re in the middle of a lease contract, it’s usually not so simple or easy to get out before the end, at least not without losing a big chunk of cash and taking a hit to your credit score.

However, there are a few situations when it makes financial sense to get out by trading in or buying out. For example:

Over mileage

Car leases come with mileage limitations, typically 10,000 to 20,000 miles over the contract period. If you exceed your limit, you’ll have to pay a fee, which could be anywhere from $0.15 to $.30 per mile over the limit. So if you’re halfway through your contract and you’ve already exceeded your allowed miles, you could be looking at some pretty hefty fines at the end. Trading in or buying out might end up cheaper than swallowing the fees.

Damage to car.

In a similar vein, damage to the vehicle or improper maintenance may incur hundreds or even thousands of dollars of fines at the end of a lease. Taking the payoff allows you to avoid those fines.

Can’t afford the lease anymore

Sometimes people want to get out of lease contracts simply because they can’t afford the lease anymore, whether from losing a job or other unforeseen financial hardship. Lease swapping (finding someone else to take over your lease contract) is often the simplest option in these cases, but another route is to buy the car and then immediately sell it. You’ll break even on the vehicle while dodging early termination fees.


Trading in or buying out a car lease is a complicated financial decision. It takes a cool eye, a firm grasp of the financial mechanics of leasing and a solid stance against manipulative dealers to make sure you end up on top. You’ll also need to be familiar with the relevant terms offered by the car company you lease from.
For this reason, it’s strongly recommended to consult an expert auto consultant to get a full picture before making a decision.


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