Can you trade in a lease car early and do I need to pay?

There may be several reasons why you want to trade in your lease car early. It could be that your financial circumstances have changed, your car no longer fits your requirements or that you simply want to upgrade. 

However, before you do so, it’s important to understand what your options are, as some may end up costing you quite a large sum of money. 

But before we get into that, we must first understand what we mean by leasing. 

What do we mean by a lease car? 

Leasing is used to describe many forms of car finance. And in some ways, it’s correct. If you get a car on finance – such as PCP or hire purchase – the car isn’t legally yours until you make the final payment. So you’re technically leasing it during that time. 

Man with car keys

However, the more traditional description of leasing is a vehicle with a personal contract hire agreement; or PCH. 

This is where you never own the car. Your monthly payments cover the depreciation of the vehicle while you drive it, and then you hand it back at the end with no other options available. It’s essentially a long-term rental. 

When can I trade in my leased car?

You don’t really ever “trade in” a leased car. Instead, at the end of your lease agreement, you hand the vehicle back to the finance company and then you’re free to start another contract if you wish. 

That’s because the vehicle is never yours to trade in. With a lease, there’s no option to ever own the car, you’re simply paying to drive it for a set period. 

Also, a lease agreement is designed to last in its entirety. For example, if you take out a three-year lease, you’re not meant to hand the car back – or trade it in – before the end of your three-year contract. 

Can I trade in my leased car early?

A lease agreement is designed to last. However, with most lenders, you can hand the car back early. 

Before you do, though, it’s important to check your lender’s terms, as often you won’t be able to hand the vehicle back unless you’re a certain way through your agreement or still have a certain amount of payments to make. 

Handing back car keys

Also, it’s likely that you’ll face charges for ending the contract early. This could mean having to repay the remaining lease balance in its entirety before you hand the vehicle back – which could end up being a large lump sum. 

Can I trade in two leased cars for one?

As you don’t own either leased car, you can’t trade them in for one. 

However, if your needs have changed and you now only need one vehicle, there’s nothing stopping you taking out only one new lease contract when you return both vehicles.

There’s no obligation for you to take out another lease when yours ends. You simply hand the vehicle back, walk away, and are free to then find another contract if you wish. 

Can you trade in a financed car for a lease?

If you currently have a vehicle on finance – through PCP or hire purchase, for example – you can still trade it in for a lease. 

At that point, your vehicle will be valued against how much you still owe on finance. 

If you owe less than what your car is worth, the extra money will be used as a deposit on your lease agreement to make your monthly payments lower. 

If you still owe more on finance than what your car is worth, with some lease deals you can add it to your new balance – meaning you pay more each month but don’t have to come up with a deposit to clear the debt. 

However, with others, you’ll need to do exactly that and clear the outstanding balance before starting a new agreement. 

Can I trade in a vehicle that’s damaged?

No matter what type of vehicle finance you’re on, you can trade in or return a vehicle with damage. 

However, it’s worth noting that this isn’t advised. 

If you’re on a personal contract hire agreement  – or lease – and you hand the vehicle back with damage, you’ll face penalty charges – often amounting to more than if you’d paid to have the car professionally repaired before the end of your contract.

If you’re not on a personal contract hire agreement; for example, if you’re on PCP, hire purchase or you own the vehicle outright, then there’ll be no penalty charge to pay when you trade your car in.

However, if you trade the vehicle in with damage, the buyer – often a dealership – will knock money off their valuation of your car to factor in repair costs. This can sometimes be less than if you were to get it fixed yourself, although that’s not always the case – so it’s worth checking first. 

Can you trade in a leased car after six months?

With some lenders, you can return your leased vehicle at any time – which includes after having it for six months. 

Lady in car

However, depending on their terms and conditions, you may face early termination fees, which could be as much as repaying the entire remaining balance on the lease agreement in full. 

What happens when you trade in a leased car?

When you trade in a leased car – which is when you hand it back at the end of your contract – the finance company will send someone to inspect the vehicle before they take it away. 

This will either be at your home – if they’re collecting the vehicle from you – or at a designated spot, such as a dealership or garage, which they’ll have pre-arranged with you. 

The inspection is to ensure that you’ve kept to your terms of the contract by maintaining the vehicle properly – had it serviced and MOT’d where applicable – and that there’s no damage to the exterior or interior outside of the fair wear and tear guidelines. 

If all is well, you’ll face no excess charges and you can walk away from the vehicle. At that point, you’re free to start another contract on another car if you wish. 

You can read more about what happens at the end of your lease agreement here. 

Can I trade my car in for a lease?

If you’re coming to the end of your current lease agreement, have a vehicle already on finance, or own a car outright, then yes, you can trade in your vehicle for a lease. 

Car keys and money

And if you choose a reputable dealer, like Zero Deposit Car Leasing, we’ll make the process simple and seamless and do all the hard work for you. 

From helping you choose your perfect car, to finding you the lender with the best deal for your circumstances, our team ensure leasing your next vehicle is easy. 

And it all starts by a quick online application that won’t appear or affect your credit score. Just click Apply Now.

Should I trade my car in for a lease?

Leasing is a low-cost, low-commitment way to drive the car you want. Because you never own the vehicle, you never have to pay the full cost. 

That means monthly payments are usually cheaper than other forms of car finance on a lease, and you can drive a car you may not otherwise be able to afford to buy outright. 

However, it’s important to work out whether leasing is right for you before going ahead. And like all financial decisions, leasing a car has both advantages and disadvantages. 

Advantages of leasing

  • Fixed low monthly payments
  • Drive a car you may not otherwise be able to afford
  • Change your vehicle more frequently
  • No big upfront cost – including £0 initial rental
  • Road tax usually included in payments
  • Can include maintenance packages to avoid servicing and MOT costs – if applicable
  • Own the car in its best years
  • Usually new or nearly-new vehicles, so come with a manufacturer’s guarantee

Disadvantages of leasing

  • You never own the vehicle
  • The contract is meant to last its entirety
  • Not as flexible as some other car finance options
  • If you choose to end the contract early, you may face penalty charges
  • Mileage limit
  • Have to maintain the vehicle properly

If you’re still unsure whether car leasing is right for you, you can read our complete guide Car Leasing Explained: What is Car Leasing & How Does It Work?

Or, speak to an expert member of our team today over the phone, via email, or through live chat.