In a NutshellCar prices are unusually high these days due to the chip shortage. This isn't an ideal time to buy a car, so can you extend your lease? In some cases, it could be good option.
Car prices recently hit a record high, signaling it might be wise to delay buying a new car and extend your car lease instead.
The steep prices are the result of a mix of events. One is that there’s been a shortage of semiconductor chips — which are essential to modern cars. This has slowed auto production and reduced inventory.
Other factors like extreme weather, fires and energy shortages have all hurt the supply chain, as have plant shutdowns caused by COVID-19. The war in Ukraine has had an impact, too, causing prices for some car parts to rise.
If your car lease is ending, you might be wondering if you can extend it until auto purchase prices fall. Extending an auto lease may be a doable, convenient and relatively straightforward option — if your leasing company offers it for your situation.
- What are my lease extension options?
- How do you officially extend your car lease?
- Is extending your car lease a good idea?
- Can I just buy my lease instead?
- Things to consider before buying your lease
What are my lease extension options?
There are two types of car lease extensions: informal and formal.
Informal lease extension
With an informal extension, the leasing company extends the lease for a relatively short term — typically six months or less — without a new lease agreement and with the same payment schedule as in your original contract.
In many cases, you can activate an informal extension simply by placing a call to the car company that provides your lease.
Formal lease extension
A formal lease extension requires you to sign a contract that extends the lease for a set term, often running anywhere from six to 12 months. This type of lease extension may also come with a revised monthly lease payment and revised mileage limits.
You must sign a new lease contract to activate a formal extension, replacing your old contract. A formal lease extension might be a good fit if you’re OK with a longer commitment.
How do you officially extend your car lease?
If you want to extend your lease, here’s how the process may work:
- You’ll contact your leasing company and explain that you want to extend your lease formally or informally.
- Your leasing company may then review your request and decide if you’re eligible for the type of extension you want.
- The leasing company will activate the arrangement if your extension is approved. If it’s a formal extension, you’ll need to sign a new contract for the lease to become official.
Is extending your car lease a good idea?
Here are some pros and cons to think about if you’re considering extending your car lease:
- It could allow you to hold off for a bit on buying a new car, giving prices a chance to cool down.
- If you’re still deciding what car to get next — or if you have to wait for your ordered vehicle to arrive — an extension would keep you on the road without interruption in the meantime.
- If you want to delay getting a new car, you can continue driving your leased car with some peace of mind, knowing its history of upkeep and reliability.
- A lease extension can be convenient when the process is straightforward. A phone call to the lender might be all that’s needed to initiate it.
- Depending on how long you’ve been leasing it, your car could fall out of warranty with the automaker, leaving you on the hook for certain expenses. The typical manufacturer’s warranty covers three years or 36,000 miles.
- You may incur fees and penalties associated with extending the lease.
- The older the car gets, the more likely it will need repairs.
Can I just buy my lease instead?
Instead of extending your current lease, your lease agreement may allow you to buy it.
Advantages of buying out your current leased vehicle could be that it’s still in great mechanical condition, or that it’s still be under factory warranty (if you think that’s the case, be sure to double-check).
Also, if you’ve put more miles onto your leased vehicle than allowed under the terms of the lease agreement, buying the car may be a way to avoid costly penalties. On that note, buying your current lease could also cost less than continuing a cycle of exceeding mileage limits.
Things to consider before buying your lease
If you can’t or don’t want to make a down payment to buy your leased car, you might want to think twice about buying your lease. With no down payment, your monthly payments might be high or downright unaffordable for your budget — or you might end up upside down on your new loan, meaning you’d owe more on the car than it’s worth.
Some lenders offer specific lease buyout loans. Remember to shop around to find the loan that offers the best terms for your specific situation. Longer loan terms often give borrowers lower monthly payments but increase the overall interest you’ll pay throughout the duration of the loan.