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Bad financial habits (or bad luck) can put any consumer in a rut that’s hard to break out of. And it’s easy to find yourself in a situation where you owe more on your car than it’s worth. If you need a new car, but are so financially stuck that you can’t get rid of your old one, there aren’t many options available to you that won’t ruin your credit — other than keeping your old car or going without a car at all.

However, there is a way to get out and start fresh that you might not have thought of — and that’s to lease a new car. There are some obvious flaws with this idea — namely, that at the end of the lease you’ll be without a car again. That’s why this strategy goes against some often-repeated conventional wisdom, but if done carefully, it can work. Here’s how to get out from under your old car and get into a safer and more reliable new car, in a way that won’t break the budget. 

What It Means to Be Upside Down

When you’re upside down on your car loan (also known as “underwater”) it means you owe more on the car than it’s worth, either as a trade-in or sold privately. If you want to sell or trade in the car, whoever loaned you the money for the car needs to be paid back in full before they’ll release the title, effectively holding the car hostage (legally speaking, anyway) until the loan is paid off.

In most cases, this isn’t such a big deal — just drive the car until it’s paid down enough to sell it, or, better yet, until it’s paid off completely. But there are a number of scenarios that could leave a person stuck — if the car is broken and can’t be fixed, if you drive a sports coupe and have a new baby on the way — and with few options but to consider a new lease.

How Leases Work

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A lease is an agreement in which the lessee (you) agrees to pay a car dealership a certain amount of money to use a new car for a certain number of months. (Three- and five-year terms are common, but there are others) When the lease is up the lessee returns the car, or they can opt to buy the car for an amount that was predetermined by the car’s manufacturer at the time of the lease. Many financial experts condemn leasing — you’re paying a lot of money for something you don’t get to keep. Although it can be a smart move for people who like to get a new car every few years, since the monthly payments are usually less than they would be to purchase the same car.

How A Lease Will Help

So, how does a lease benefit the owner of an underwater car? Well, auto manufacturers often come up with crazy lease deals to move old stock or models that aren’t selling well. They might be from last year or they might be equipped with unpopular packages — the point is, they’re cheap. It’s not uncommon to see a base trim compact sedan or hatchback leasing for less than $200 a month. If you can find a deal like that — or better — you can probably figure out a budget that enables you to drive a new car for a few years while also paying off your old debt. 

Your best bet, other than rolling your upside-down car into your lease, is to find out how much you owe and how much you can sell or trade in the car for. Then, visit your bank or credit union and ask for a personal loan to cover the amount you’ll owe. You’ll have to send this check to the financial institution that holds the loan on your car, and make monthly payments until it’s paid off. If this is not an option, you can trade in your old car at the dealership and roll the old debt into your new lease — it’s likely to be more expensive, but it’s doable.

So when it’s time to go car shopping, first, temper your expectations. It’s true that a lot of people lease new cars so they can get something super fancy and luxurious without a long-term commitment, but that’s the exact opposite of what you want. You’ll want a lease deal with no money down (if you had money to put down, you could have put it toward paying off your old car) and very low monthly payments. These deals can be hard to find, but they’re out there. The idea is to get a safe, reliable (and fuel-efficient, if possible) new car for the lowest monthly payment possible. Don’t forget to pay your lease payment and your personal loan payment on time either. 

Moving Forward

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Your affordable new lease might not be glamorous, but it’s new, so enjoy it. Keep in mind that the point of this lease is to save money. Unless you’re planning to buy out the car at the end of the lease (which sort of defeats the purpose of this plan) anything extra you pay for (such as aftermarket accessories) is just money thrown away.

Another point to keep in mind — your monthly car budget from this point forward should include savings. At the end of your lease, you’ll have to turn in your car and you’ll need a new car again — you have a strong advantage in knowing exactly when this will happen. Take this opportunity to get ahead a bit, so you have some money set aside for a down payment when it’s time to lease or get a loan for your next new ride. That’ll be tough if you’re still paying off the old loan, but it’ll be worth it. If your personal loan is paid off before your lease ends, add the amount you were paying monthly to your savings. You’ll have the benefit of a fresh start with no old car loans following you around. You may actually be able to find a car you want, instead of just getting the best lease deal you can find.