How to Keep a Leased Car After the Lease Expires

Just like a favorite t-shirt or old pair of tennis shoes, a leased car can be difficult to get rid of. After all, they are comfortable, worn in and contain memories. But there is no requirement you discard the car. Options exist to keep a leased car after the lease expires. Rather than break in a new car, explore these options to keep your leased car.

Instructions

1

Read your lease contract. Find the clause that contains the residual payment if you decide to keep the car. Write down the amount due.

2

Learn the true value of the car. Navigate to the Kellybluebook or Edmunds website to find the car's value. Click on "used cars," and find your make, model and year. Input mileage and condition to get the current value.

3

Compare the car's value to the residual amount. Prepare to negotiate the residual value if the true value is less. Print the copies of vehicle's value from the website and have them on hand as needed.

4

Contact your lender. Inform him you are interested in purchasing the car once the lease expires. Ask for the purchase price.

5

Negotiate the price downward if he quotes you the residual price. Advise the lender that the residual price is inflated compared to the current retail value. Explain you would like to finance the new purchase through the lender, but the price will need to be reduced. Accept the new price if offered.

6

Go to the dealership where you purchased the vehicle. Ask for the person in charge of purchasing expired leases. Ask the representative about a discount on the residual price and show him the computer printouts of the current retail value. Request a lower price on the car.

7

Stand firm. Be prepared to walk away if the residual value is substantially higher than the current value. Purchase the car at any time in the negotiations when it reaches your price point.

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How to Buy a Car as a Married Couple

Buying a car as a married couple and putting both names on the auto loan can increase purchasing power. This is because lenders factor in both incomes when determining an affordable amount. But before you can obtain a joint auto loan, you must provide your lender with specific information to determine if you qualify for financing.

Instructions

1

Include both names on the auto loan application. Listing one person's name makes this individual solely responsible for the car loan. If applying as a married couple, submit both legal names. With a joint auto loan, both parties are equally liable for the financial debt.

2

Give the lender copies of both income statements. Lenders vary in how they verify your income. Some will ask for copies of your most recent paycheck, while others may contact employers to verify income and employment record.

3

List your Social Security numbers and give lenders permission to check both credit reports. Both credit scores and histories play a role in the approval process. Lenders check both reports for delinquencies or other problems, such as charge-offs and collection accounts. Lenders also use the average of both credit scores to determine the interest rate on the auto loan, if approved.

4

Sign the auto loan and title information at the dealership. The joint auto loan purchase is complete once both married parties sign their names to the loan documentations and title documents. The title outlines ownership of the vehicle. The lender keeps the title until borrowers pay off the debt.

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No Money Down in Car Buying

People who buy new cars without making a down payment can get themselves into financial problems as the value of their vehicles drops. Car shoppers usually consider whether they can afford the monthly payments on an auto loan. However, they also should consider whether the lack of a down payment will leave them owing more on their cars than they're worth.

Costly Deal

It may seem ironic, but no-money-down deals can be the worst car deals for people on tight budgets to make. Consumers' monthly payments are automatically higher when they don't make a down payment on a vehicle. People who make the traditional 20 percent down payment essentially are paying off the immediate decline in value that's expected for most new cars the first year after they're purchased.

The Edmunds auto information website says that a down payment also helps keep buyers from being "upside down" in their loans. People are upside down in a loan when they owe more to their auto lenders than their cars are worth.

Interest Charges

Some people stretch out their loan payments over several years to make a no-money-down car deal affordable. Auto loans are usually in effect for four or five years. However, some lenders will extend auto loans to as long as seven years to give borrowers lower monthly payments, which they can afford. Yet longer loan periods raise the cost of the vehicle because the borrower ends up paying interest charges over seven years instead of four or five years.

Trade-in Value

Consumers who owe more on their vehicles than they're worth because of a previous no-money-down deal can't use the trade-in value for their cars solely as a down payment on a new car. Instead they have to pay off the loan on their old vehicle as well as finance the purchase of the new vehicle.

Rolling the remaining balance on the old loan into a new loan to pay for a new vehicle can be another bad deal that leads to an upside down loan situation. That's because the borrower will be paying more in interest on a larger loan amount and still paying for a vehicle he no longer owns.

Considerations

A Bankrate.com article, "In a Hole With an Upside-Down Auto Loan" recommends that car buyers avoid no-money-down offers and put at least 20 percent down on any vehicle they purchase. Furthermore, the article says consumers should take on the highest monthly payment and shortest financing terms for their vehicles that they can afford. That means car buyers should limit the life of their auto loans to four years or fewer if they can afford to make the monthly payments under the loan terms.

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How to Do Name Changes on Car Titles

When cars are bought from dealers, each dealer must prepare the titles and forward this information to the finance company. The finance company retains the title until the borrower pays off the balance. Upon selling the car to a new owner, the original owner must change the name on the title to transfer ownership to the buyer.

Instructions

1

Refer to the back of the car title and look for the section that pertains to ownership transfers.

2

Sign your name as the seller. Doing so indicates your willingness to transfer the title. Include the date and list the odometer reading.

3

List the sale price of the car. If selling the vehicle, include the purchase price on the back of the car title. Use a Bill of Sale or a Supplemental Information for Procurement of Title if there isn't adequate space on the title.

4

Ask the buyer to sign his name to the back of the car title indicating he is the new owner.

5

Submit the new title to your state's department of motor vehicles, DMV. Once you and the new car owner sign and date the title, the new owner must present the document to DMV, register the vehicle in his name and pay sales tax.

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How to Calculate Your Car Note

Before you go car shopping, you should determine how much car you can afford. Achieving a monthly payment that works in your budget is a car-shopper's goal, and understanding your spending limits before shopping will save you from falling in love with an automobile you can't afford. The basic principle of calculating interest on loans is to multiply the principle amount of the loan times interest rate times the number of months financed, but in reality, all sort of nuances come into play with an actual loan calculation.

Instructions

1

Pull your credit score to determine if you will qualify for the best interest rates.

2

Check interest rates online to determine what the going rate is for new and used cars, depending on which you are interested in buying. If you have narrowed your car selection down to a brand model, then see if the dealership is offering special financing rates for which you qualify.

3

Perform an Internet search for "car loan calculator." The search will return several selections of free online calculators that will convert loan information into monthly payments.

4

Enter the estimated cost of the car and any other costs you intend to roll into the loan.

5

Enter the interest rate you expect to gain on the loan.

6

Enter a term for the loan based on how long you wish to finance the car.

7

Submit the information and the calculator will return a monthly estimated car payment to you.

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Do Repossessed Cars Affect Credit?

Your payment history and lines of credit, such as car loans or credit cards, are reported to the credit bureaus and affect your credit score. Late payments occurring before repossession are reported to the credit bureaus and reduce your credit score. A repossession, once reported to the credit bureaus, quickly decreases your credit score and increases your lending risk.

Late Payments and Repossession

Your credit report shows the amount you owe toward your car loan, the number of payments you've made and the number of days your payment was late. After repossession, your credit score decreases by at least 100 points or more. Repossession affects each individual's credit score differently, as length of accounts, past payment history or other unpaid accounts also affect your score. Regardless of the change in your score, future lenders can see that you didn't make your payments on time and your vehicle was taken back by your lender.

Past Due Amounts and Collections

Your past due loan balance remains on your credit report, which is the amount you still owe after the vehicle repossession. Your bank will resell the car after seizing it, but you're still responsible for paying the loan balance if the car was sold for less than you owe. If you don't pay the bank, it may transfer your debt to a collection company. The unpaid balance from the repossession still remains on your credit report, and a collection company can also report your debt to the credit bureaus, resulting in two negative accounts.

Judgments

If your lender sues you for non-payment, it can issue a judgment against you to garnish your wages. The judgment is reported to credit bureaus, appearing on your credit and on background checks for at least seven years. Even if you pay the loan balance, the repossession, judgment and previously past due balance still remain on your report. A judgment further damages your credit, even if the judgment is reported years after your repossession.

Settlements

If you decide to settle the account balance with your original lender or with a collection company, your credit won't immediately improve. The previously reported information does not disappear from your credit report and your account will read as "settled" rather than "paid." Expect to pay taxes on the unpaid portion of your loan balance. The Internal Revenue Service views the unpaid amount of a loan settlement as income, which you must report on your taxes.

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Early Termination of Car Lease

Leasing a new car can give you the opportunity to get the car you want for a payment that you can afford. In some cases, after taking out a lease on a car, you may want to get out of the contract early. This can cost you money and it could hurt your credit.

Walking Away from the Lease

Some people in this situation simply walk away from the lease. They drive the car back to the dealership, hand over the keys and then stop making lease payments. While this will work, it also can damage your credit significantly. When this happens, it is reported on your credit report as a repossession. The auto lease is a financial contract, and when you do not continue making payments, you are breaking this contract with the auto dealer.

Paying the Difference

Another approach that can help salvage your credit is to take the car back and pay what you still owe on the contract. In this situation, the company will make you pay the difference between what the car is worth and what you still owe on the lease. Depending on what type of car you have and when you break the lease, this could be a sum of thousands of dollars. Most consumers who want out of their lease do not have enough money to pay this fee.

Transfer the Lease

Another approach that you could take when you want to get out of a lease is to transfer it to someone else. This is a much less expensive proposition for you as the original lessee. This process will also not damage your credit history. With this approach, you find someone who is willing to take over the lease payments and the car for you. You typically have to pay some fees and transfer charges, but it is a much more attractive option.

Selling the Car

When you have a lease that you no longer want, another option that you could pursue is selling the car. Every lease has a buyout amount that you can pay the dealer and then get out of the contract. If the resale value of the car is somewhat close to this buyout amount, you could sell the car and then pay the difference between the two. When you take this approach, you must have enough to pay the difference or the payments will continue even though you do not have the car.

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