Can One Refinance a Car Lease Loan?

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Car leases are attractive to some consumers because of lower payments. Since lease customers are only financing a portion of a car, the payments are based on the amount of depreciation that is expected to occur on the car. For example, if you lease a car worth $30,000 for 24 months, the expected depreciation is about one-third. Therefore, you'll only be making payments on about $10,000, not the full $30,000. However, since lease dealers are not required to show you the interest rate on the lease, many consumers seek refinancing before their lease is up.

Money Factor

  • The main determinant in the payment on the lease is the money factor. This is essentially the interest rate that a car dealer is charging on the lease. Dealers are not required by law to disclose this number, so many customers who end up with seemingly good deals on leases are actually paying more than necessary.

Straight Refinance

  • Instead of reworking a lease, you have the option to buy out the vehicle from the dealer. In this arrangement, you'll need to contact a new lender, get the correct payoff on the lease and get an accurate market value on the car. If the car has too many miles or is too old, this may not work. Make sure to speak with various lenders prior to making a refinance decision.

Other Refinancing

  • You must review lease paperwork very carefully before you consider paying off a lease. Sometimes dealers will put restrictions on the lease that constrain a borrower's ability to get out of an agreement. In some cases, you can refinance a home loan on your property and roll the lease into the proceeds of the new loan. Also, a home equity line of credit (HELOC) can be used to pay off a lease.

Online Auto Lease Refinancing Companies

  • LowerMyLease.com and other such companies that allow you to refinance your lease online help struggling auto customers with overwhelming lease payments. In many cases, lease agreements require huge up-front payments and buyout fees--both of which can trap a customer in a loan. LowerMyLease.com allows customers to enter their vehicle information, lease information and credit history. With this information, the company then provides different options--usually with a lower money factor--for a lease refinance.

Warning

  • While leases may seem attractive at the outset, they often trap customers. Some lease agreements have very restrictive terms, like low mileage allotments, that are not properly explained at closing. Make sure to review both buying and leasing options before making a financing decision.

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