Nearing the end of your lease agreement, but not ready to part ways with your trusty car just yet?
Not to worry . . . that's what lease extensions are for.
Yep, you read that right. It is in fact possible to extend a car lease.
However, finance companies normally hold all the cards in this situation, so requesting a lease extension might not work out 100% of the time.
However, if you're still eager to know all about them and want to try anyway, then read further.
Why Extend Your Lease Agreement?
We’ve mentioned liking your car as one reason why you might want to extend your lease, but there's a few other potential reasons, such as:
– Delays in the supply of new cars due to the Ukraine conflict
– Change in life circumstances
– Having no new vehicle arranged at the end of your lease contract
What Is a Car Lease Extension?
Exactly how it sounds.
It's an extension on the timeframe of your current lease agreement.
However, there's two types of lease extensions available to you: formal and informal extensions. The difference between the two mainly depends on your circumstances and how much longer you want to hold onto the vehicle.
Let's explore each of the two in more detail.
What is an Informal Extension?
If you're looking to extend your car lease by less 6 months, then an informal extension is the way to go.
As the name suggests, these are informal, 'off the record', non-binding agreements that are free from the restraints of paperwork.
That being said, you're still required to contact your lease provider first in order to seek approval for an informal extension. And if authorisation is obtained but you end up keeping the vehicle for longer than 6 months, then the lease provider has a right to recall the vehicle without notice.
What is a Formal Extension?
On the other hand, if you're after a lease contract extension of longer than 6 months and aren't simply looking to bridge a gap between deals, then you should request a formal extension.
As the name suggests, a formal extension is a formal agreement (unlike an informal extension) that's documented in writing between you and the finance house. With a formal extension, it's possible to extend your lease deal by anything from 6 to 12 months.
Upon approval, a modified agreement needs to be signed which grants the extension, and starting from the end of your existing lease contract. In addition, you'll likely also receive a revised mileage allowance and a revised monthly lease payment amount (which will usually be higher).
How Do I Request an Extension?
Requesting an informal contract extension is very simple. All you have to do is confirm with your provider whether an informal extension will be permitted and what price your lease payments will increase to. Then you keep the car and the funder will invoice you for the costs.
Requesting a formal extension is a little more complicated. Your provider will normally require some extra information from you such as your current vehicle mileage, how long you want to extend the lease for and the proposed mileage extension for the new term. They will then ask you to sign a contract extension which they'll process for you.
Here are the steps in full:
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Contact the finance provider and request a formal extension.
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They will then assess your request and your eligibility for an extension. You will be notified once a decision has been made.
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If your extension request is approved, you will be provided with an updated modifying agreement from the finance provider (usually by email to speed up the process). They will also send you the terms and conditions for the extension, including details such as monthly fees, mileage allowance and the contract end date.
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Once you have looked over the updated agreement and are happy to go ahead, then have it printed out, signed and returned to the finance provider's address.
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The signed agreement will then be reviewed by the finance provider – a process which can take up to 5 days.
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If all goes well, you'll be on an extended lease contract and will begin paying your new monthly lease payments until your extension is completed.
How Long Does a Car Lease Extension Take?
The process is more or less the same across the board. But because different finance houses have slightly different methods and ways of doing things (not to mention different speeds at which they reply to emails!), then the length of time it takes to get a lease extension largely depends on them, so it varies case by case.
However, take 3 to 4 weeks as a general estimate.
Can Anyone Get a Car Lease Extension?
Yep pretty much, except for cases where:
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You have entered into arrears or are subject to Insolvency or Default
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Your vehicle is not in its final 90 days of the contract
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A request has been submitted to remove or add maintenance, or a relief vehicle
If none of the above applies, then in theory anyone can obtain a lease extension.
However, not all funders offer them, and it's really up to the discretion of the finance house or company.
Pros and Cons of Extending Lease Agreement
Like with pretty much anything, there's both upsides and downsides when it comes to extending a car lease. Here are the main ones:
✓ More time with the car you want to keep leasing (an obvious one here)
✓ More time to consider what car you want to lease next
✓ Or maybe you're waiting for a new car to arrive, in which case a lease extension means you've still got access to a suitable pair of wheels in the meantime
✕ High processing fees
✕ Greater monthly lease payments (in most cases)
✕ If you opt for an informal lease extension, the provider can recall your lease vehicle at any time, leaving you carless
How Much Does It Cost to Extend a Car Lease?
Hard to say.
For formal extensions, expect to pay an admin fee of maybe £100 (excluding VAT) for 6-month extensions and around £150 for 12-month extensions, subject to approval by your finance provider. So several hundred pounds at least.
For informal extensions, you'll need to contact your finance provider directly to confirm the associated costs.
What are My Options if I Can't Extend My Lease?
In the event that you can't secure a lease extension, you might want to consider a (very) short-term lease car of 1-6 months. This should keep the ball rolling until you secure another long-term lease contract. Plus, it usually costs less than just renting a car from a showroom, which is another option.
Or if you have a particular soft spot for your lease car, then another option is to purchase it at the end of your lease agreement. However, this is comparatively rare and not all leasing companies give you the option to, but it's always worth asking.
Summary
So, not all extension requests are accepted by leasing companies and finance providers, but it's still good to be clued-up on them and give yourself more potential options in the run-up to your lease agreement coming to an end.
Whatever the case, and whether it's an informal or formal extension, we hope we've offered you enough information to be able to make an informed decision.
FAQs
Can I extend my car lease contract?
Yes!
How many times can I extend a lease?
This often depends on the funder, as some may only permit you to enact one extension whilst others may allow you to have multiple extensions to any one agreement. Speak to them and confirm how many times you can extend the lease.
What happens to my mileage allowance when I extend?
Your mileage allowance depends on enter into an informal or a formal lease extension. Should you be accepted for an informal extension, you will have a pro-rata mileage allowance based on your previous contractual allowance. If you opt for a formal extension on the other hand, you will probably have the freedom to amend your mileage however you like, whether that means increasing or decreasing it.