The Advantages of Having Trade-Ins When Leasing Cars


Depending on the value of your trade-in vehicle, you might decrease your lease down payment amount and still obtain low monthly payments. However, if your trade-in is worth more than the amount of the lease's taxes and fees, consider selling it privately to avoid financial risk if the car becomes declared a loss by your insurance company.

Less Down Payment Required

If you plan to pursue a lease advertisement, it likely calls for a down payment in addition to taxes and fees. This amount is often thousands of dollars. You can minimize or decrease your money out-of-pocket with your trade-in. If you owe money on your vehicle, the dealer must pay off your vehicle's loan before taking ownership of the car. If you owe less the vehicle's value, the excess amount goes toward your vehicle lease as a down payment.

Lower Monthly Payment Amount and Tax Deduction

If your car's trade-in value exceeds the down payment amount needed to obtain a certain monthly lease payment, you'll pay a lower monthly payment. For every thousand dollars you put toward a lease, your monthly payment decreases by about $30 per month. Most states allow a sales tax deduction when a trade-in exists, since you've already paid taxes on the vehicle you own. Many states only tax leased vehicles on the monthly payment amount, not the entire price of the car. If the tax deduction applies to your purchase, you might eliminate any out-of-pocket down payment requirements and still obtain a lower monthly payment amount.

Getting Rid of the Vehicle Without Hassle

To sell your vehicle privately, you'd have to advertise your vehicle for sale, answer and meet with potential buyers and arrange the paperwork for your sale. When trading your vehicle to a dealer, you only need to sign over your vehicle's title. If you still owe money on the car, the dealer arranges to satisfy the loan. If you sell privately, you must arrange to pay off your loan and acquire a lien release to sell your vehicle, which can take weeks.


When you lease a vehicle, it belongs to the leasing bank, not you. Leasing banks require lessees to purchase a full-coverage insurance policy that names the bank as the loss-payee. If your vehicle becomes a loss because of damages or theft, your insurance pay off goes directly to the leasing bank. You will not receive any of your money back from the bank, even if you paid the entire lease cost upfront. If your vehicle's value exceeds the cost of taxes and fees, consider selling it on your own to provide a down payment. Keep the rest of the money to pay your lease payments instead.

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