Yes, you can absolutely trade in your old car when you are leasing a new one. The process, often called a lease trade-in, works by applying the equity from your current vehicle—the difference between its value and what you still owe on it—as a capitalized cost reduction toward your new lease. This can significantly lower your monthly payments. However, this is most beneficial if you have positive equity. If you owe more than the car is worth (negative equity), rolling that debt into a lease is generally not advisable due to the lease's terms and mileage restrictions.
The first step is to determine your car's actual cash value (ACV). Get quotes from multiple sources like Kelley Blue Book (KBB), Edmunds, and online buyers such as CarMax or Carvana. Compare these to the payoff amount from your current lender to see if you have equity.
When you negotiate with the dealership, the trade-in value becomes a key point of discussion. They might offer a lower price for your trade-in to increase their profit, which is why having independent quotes is powerful leverage. This trade-in value is deducted from the new vehicle's Gross Capitalized Cost (the lease's equivalent of a selling price), effectively reducing the amount you're financing.
Here’s a simplified example with estimated data:
| Scenario | Old Car Owed | Old Car Trade-In Value | Equity | Impact on New Lease |
|---|
| Positive Equity | $12,000 | $15,000 | +$3,000 | $3,000 down payment, lower monthly payment. |
| Break-Even | $14,000 | $14,000 | $0 | No impact on new lease terms. |
| Negative Equity | $16,000 | $13,000 | -$3,000 | $3,000 added to lease cost, higher monthly payment. |
Before proceeding, consider the alternatives. Selling your car privately will almost always net you more money than a trade-in, but it requires more effort. If your goal is simply the lowest possible monthly lease payment, using a trade-in with positive equity is a very effective strategy. Just ensure you understand all the numbers before signing.
