June 28, 2022
When it comes to the end of your lease there are a few options available to you, you can simply hand the vehicle back and arrange alternative transport, you may be able to purchase the car from the funder or you may want to extend your lease agreement so that you can keep it for a little longer.
What is a Lease Extension?
In both cases you will keep the car for longer than the contracted time so you should be aware there will likely be a change to the monthly payments.
With the current difficulties in the automotive supply chain, and the delays they are causing to new vehicles we are seeing a lot of drivers who are deciding to keep their current lease car for longer until their new one arrives. There are other reasons that you might choose to keep your car for a little longer including: liking it and not wanting to choose a new model, no new vehicle yet arranged, and not wanting to be tied to a longer-term financial commitment.
An informal extension is what happens when you do not return the lease car at the end of the contract but have not signed additional paperwork to formally extend the agreement.
If you want to go into an informal extension, then you won’t need to do anything as you will simply enter the informal extension when your contract expires. You can then return the vehicle when you are ready to, provided that the company does not ask for it back. This is something you should be mindful of – the funder can ask for the vehicle to be returned at any point as you are no longer in a formal agreement with a fixed end date.
As you have not formally agreed to extend the contract or make any amendments to the existing agreement the mileage allowance will be pro-rata based on the previous allowance and the time you have the vehicle for. You will not be able to amend the mileage allowance.
There are two financial considerations to be aware of when you are considering a formal extension. The first is that once you are out of the original contract period is that the amount you pay monthly will no longer take into account the initial rental payment. This means that if you paid a larger initial amount to reduce the monthly payments you can expect to see a jump in the monthly amount you’ll pay.
The second is that the payment date will change. Once you are no longer in the contract period payment you will be invoiced in arrears which means that the monthly payments will be moved to the end of the month rather than your previous payment date.
This type of extension is best used when you only need the vehicle for a short time, a few days or weeks until your new vehicle arrives.
The other type of extension you can choose is a formal extension, which is where you sign additional documentation that confirms the length of the extension, the mileage allowance and the monthly cost of it.
There could still be a change to the cost of the agreement as the vehicle age, resale value, maintenance and mileage will be taken into account when the funder quotes your extension price.
This type of extension is best suited for drivers who want to keep the vehicle for a longer, set period of time.
How to Get a Lease Extension
How to get a lease extension will depend on the type of extension you need. If you want an informal extension then there is nothing you need to do, simply keep the car and the funder will invoice you at the end of the billing period for the vehicle.
If you are after a formal extension then you will need to arrange this about six weeks before the end of your lease agreement as most funders require at least a month and one remaining payment on the lease in order to approve a formal extension.
You should get in touch with your funder to arrange the lease extension, and they will then provide you with a quote for the agreement. You will sign this if you would like to proceed with the extension, please note that if it is not signed and accepted by the funder the extension will not go ahead.
If you have a lease with Wessex Fleet then our Customer Services Team would be happy to help you arrange an extension. You can reach them on 01722 322 888 or email@example.com.
Lease Extension FAQs
What’s the maximum I can extend a lease by?
Most funders will typically offer a six months or one year formal extension at a time but they will have a maximum lease length or total mileage that the vehicle can have and so you won’t be allowed a formal extension that exceeds this.
Additionally, not all funders allow multiple extensions and so you may be only allowed to formally extend the lease for once.
What’s the minimum I can extend a lease by?
With a formal extension the minimum you can extend the lease by is six months. However, if you are in an informal extension then this can be as little as a day.
How many times can I extend my lease?
This will depend on the funder of your lease as some will only allow you to make contract amendments, including an extension, once during your vehicle’s lifetime.
Others may allow you to extend multiple times provided you do not exceed their maximum length.
What happens to the mileage allowance when you extend a lease?
If you are in an informal extension then this will be based on your contracted mileage allowance and be pro-rata for the time you have the vehicle.
In a formal lease extension you will be able to amend the mileage allowance as well so you can increase or decrease this based on your expected mileage for the upcoming year.
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