Yes, you can absolutely trade in your current car when you lease a new one. The process is straightforward: the dealership will appraise your car's value, and that amount is applied as a credit toward the lease's upfront costs, reducing your capitalized cost reduction (similar to a down payment). This can significantly lower your monthly lease payments. However, the key factor is your car's equity—the difference between its trade-in value and what you owe on any existing loan. Positive equity is ideal, while negative equity (being "upside-down") can complicate the deal.
The primary advantage is convenience. You handle the entire transaction—selling your old car and acquiring the new lease—in one place. The trade-in value also typically reduces the sales tax you pay, as you're only taxed on the new vehicle's price minus the trade-in credit (in most states).
It's crucial to be strategic. Get a standalone appraisal from services like CarMax or Kelley Blue Book's Instant Cash Offer before going to the dealership. This gives you a baseline to ensure the dealer's offer is competitive. Don't assume the trade-in is your only option; sometimes selling the car privately will yield a higher price, though it requires more effort on your part.
| Scenario | Impact on Lease Deal | Recommendation |
|---|
| Substantial Positive Equity | Lowers upfront costs and monthly payments significantly. | An excellent way to start a new lease with very favorable terms. |
| Small Positive Equity / Break-Even | Provides a modest reduction in initial costs. | Convenient, but compare against a private sale to maximize value. |
| Negative Equity ("Upside-Down") | The remaining loan balance is rolled into the new lease. | Proceed with extreme caution. This increases your monthly payment and total debt on a car you won't own. |
| High-Demand Used Vehicle | May receive a very competitive trade-in offer from the dealer. | Still get outside appraisals; dealers might pay a premium to secure inventory. |
| Older Vehicle with Low Value | Small credit, but simplifies disposal of the old car. | Worth it for the convenience if the offer is fair. |
Ultimately, trading in for a lease is a practical choice if the numbers make sense and you value a hassle-free experience. The goal is to use your current car's value to get the best possible lease terms on your next one.
