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Can You Extend a Lease on a Car?

Can You Extend a Lease on a Car?
Austin Kilham
Austin KilhamUpdated January 24, 2024
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
You may extend your car lease contract if you’re not quite ready to give up the car. In 2023, the average monthly payment for leasing a car was $516, depending on the make and model of the car.A typical leasing contract can have a 36-month term, but you may request an extension at any point. Sometimes dealers will let you extend your lease on a month-by-month basis. Other times lessees will have to sign up for a preset period of time, such as six months or a year.Below we highlight how you may extend a lease on a car.

Car Leasing Basics

Here are some car leasing basics:
  • Leasing is a form of financing that gives you the privilege to drive a vehicle under certain terms and conditions.
  • Once you settle on leasing, the first step is to decide on what type of vehicle you’d like to lease and then negotiating the terms of the lease.
  • When signing the car lease contract, beware there are likely acquisition fees that cover the administrative costs of this process.
  • A short-term car lease can be anywhere from 12 to 24 months, while a long-term lease can be up to 60 months.
That’s a basic overview on how leasing a car works. If you’re interested in extending your lease, you may request an extension to your leasing term. A leasing company has no obligation to approve you for a leasing extension, but requesting one may open the door to renegotiating an extended term.What if you extend your lease and then realize the arrangement is not right for you? Don’t panic and know that there are ways to get out of the car lease, including early termination, a lease buyout, and a lease transfer.

Types of Car Lease Extensions 

You have the option of extending your lease either formally or informally:

Informal Car Lease Extension 

An informal extension is often a temporary measure that helps smooth out the transition between one lease and another. To take this informal route, you must contact your leasing company and let them know that you want to continue using the vehicle after the lease is up. The company must grant permission for an informal extension. Monthly payments must be paid as they are laid out in the original contract. The extension can then last until the leasing company asks for the vehicle back, usually after six months at most. 

Formal Car Lease Extension 

A formal lease extension, on the other hand, requires signing a legally binding modification to the lease agreement. The agreement kicks in immediately after the initial agreement ends. A formal agreement may include revised monthly rental fees and a new mileage agreement based on the car's depreciation over the period of the extended lease. 

How to Extend a Car Lease 

Here’s a look at the steps it may take to extend a car lease agreement: 
  • The lessee contacts the lender through which the original lease agreement was made and says they want to request an extension.
  • The lender reviews the request and determines whether the lessee is eligible.
  • If the request is approved, the lessee will be sent a new contract. This contract will have terms and conditions such as a new end date, mileage allowances, and rental fees.
  • The lessee signs the modified lease document and returns it to the lender.

Exemptions to Car Lease Extensions

There is a chance that a lease extension will be denied. Here are some of the circumstances for which that may be the case:
  • The lessee is behind on lease payments and at risk of defaulting. 
  •  The leasing company decides it needs to recall the vehicle for other commercial reasons. 
  • There is a previous agreement that hasn’t yet expired. 
  • The individual did not fill out the lease extension application correctly. 

Lease Buyout 

If you want to continue driving the vehicle when the lease is up, you may also have the option of a lease buyout. Check your lease agreement to see if this is a possibility.There are some obvious advantages to a lease buyout. First, you know the car’s entire history, whether you’ve maintained it perfectly or if there have been any troubles. In comparison, individuals buying another used vehicle have much less insight into the car’s past.If your maintenance of the vehicle leaves something to be desired, or if you put too many miles on the vehicle, your lease could put you on the hook for extra fees to cover the wear and tear. However, a lease buyout could avoid those expenses. A lease buyout could also end up costing less over time than continuing a cycle of leasing new vehicles. Those who know they want to buy out their lease from the get-go should let the leasing company know before signing a contract. This can help in negotiating lease disposition fees, which are fees lessees agree to pay to the leasing company upon returning a vehicle.

Downsides of a Lease Buyout

There are also some potential downsides to a lease buyout. For one, staying in the lease cycle ensures that you are always driving a relatively new car. If this factor is important — to your sense of safety, for example — a buyout may not be a good idea. It’s also possible that a lease buyout can end up costing you more than other options. For example, buying out a lease without making a new down payment may lead to monthly payments that are higher than lease payments.Also, buying out a leased car may be more expensive than buying a similar used car on the open market that’s just a little bit older.Recommended: Leasing vs. Buying a Car: Pros & Cons of Each

Financing a Lease Buyout 

If you decide you want to buy out your lease, you can pay for the car in cash, if you have enough on hand, or you can seek financing. Some financial institutions offer lease buyout loans. It’s best to shop around for financing terms that are right for you. Shorter loan terms tend to come with higher monthly payments, though individuals may end up paying less interest over the life of the loan. A long-term car loan, meanwhile, may feature lower monthly payments and higher total interest costs.The annual percentage rate (APR), which represents the yearly cost of carrying a loan, tends to be higher for lease buyout loans than new car loans.

Refinance a Car Loan 

In the future, if auto loan payments become untenable, an individual’s financial situation improves, or interest rates drop, it may be worthwhile considering an auto loan refinance. When refinancing a loan, borrowers take out a new loan to pay off the old one. Ideally, this new loan will free up some cash by offering a lower interest rate or better terms that make monthly payments easier to manage. Individuals may use their increased cash flow to pay off the loan faster or to focus on other financial goals.Refinancing an auto loan may be easier than having someone take over your car loan, particularly if you have good credit.Recommended: How to Refinance an Auto Loan

Auto Loan Refinancing with Lantern 

If you’re curious about refinancing your auto loan, visit Lantern by SoFi, where you can compare auto refinance rates from lenders.

Frequently Asked Questions

How do I initiate a car lease takeover?
Can you extend a lease on a car?
What are my options at the end of a car lease?
Photo credit: iStock/Antonio_Diaz

About the Author

Austin Kilham

Austin Kilham

Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.
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