How Can I Get Out of a Car Lease Early?

Did you know that the car lease termination fee may include a set dollar amount fee plus the difference between the lease balance and the vehicle’s value? However, depending on how much time remains on your lease, it may cost more to terminate your contract than it would to continue making your monthly payments until the end of the term.

How to Get Out of a Car Lease Early

A car lease gives us the luxury of making spread-out payments for our dream car. At the point of collection, we’re as happy as a swan, but after faltering on the pay, you want to get out fast.

One of the advantages of a lease is supposed to be convenience, but all of that is thrown out the window if you terminate early. Let’s take a look at your options.

How to Get Out of a Car Lease Early

Explore any of these options whenever you decide to get out of a car lease scenerio.

1. Lease Transfer or Swap

The swap consists of transferring a lease agreement, as is, to another party. This new lessee will take over the payments and become responsible for the vehicle.

Ending a lease early with this method has the lowest cost because only the administrative fees are included in the transaction.

The original lessee can then walk away from the lease agreement, avoiding a possible major financial hit, without any scratches on their credit bureau.

There is a disadvantage to this option if there was a down payment on the original agreement.

The cash down will be transferred to the second lessee, who will enjoy lower monthly payments, and the first lessee will lose that money from the original transaction.

2. Early Lease Buyout

There is always the option in a car lease to buy out the lease early from the dealership or the financial institution. The price of the purchase is an outstanding balance, the residual value, and sometimes the applicable taxes.

It is possible that the lessee did accumulate equity and the vehicle is worth more than what it cost to buy out. In that case, the lessee wins on such a transaction by selling it on the market after.

It will cover the purchase costs and the lessee may make a profit.

However, this situation rarely happens at the beginning of the term, because the vehicle depreciates too quickly in the first two years.

Gaining positive equity on the vehicle in the case of a car lease mostly happens towards the end, or doesn’t happen at all if the residual value is set too high.

You can always try to predict a gain or a loss in time if you calculate the depreciation of a vehicle vs. its outstanding balance.

3. Changing Car Lease

You can ask to terminate the lease with your present car by changing it to a new one and starting a new car lease. This option isn’t accomplished by dismissing the situation on the first car.

The amount left to pay on the first lease, i.e. the capital balance, the residual value, and the taxes, will be taken into consideration.

If the market value of the vehicle is lower than what is left to pay on the lease agreement, the difference will be transferred to the new lease, which will have the opposite effect of cash down.

This means the price of the new vehicle will be increased with the negative equity originating from the old vehicle. The lessee will end up paying the depreciation on two vehicles.

4. Returning the Vehicle

You could always bring back the vehicle to the dealership or the financial institution.

However, to fulfill your obligation and avoid damages to your credit bureau, you have to continue making your monthly payments until the end, even if you don’t possess the car, and pay the fees of excess mileage and excessive damages.

This option forces you to pay for a service you don’t take advantage of, which can be very frustrating.

5. Repossession

This approach will burn your credit file, and it will be very difficult to find another car lease with any institution.

Suppose you are accepted by another institution after the repossession. In that case, you will be considered a second-chance credit applicant (if this was the first time) and interest rates will be set very high.

The money you saved by not paying for the vehicle will reappear later with higher interest fees on a new car lease.

Why You Should End a Car Lease Early?

How to Get Out of a Car Lease Early

There are a few reasons why you may want to end your lease agreement early, including:

1. You move to a new city or state: If you move to a new city or state, you may decide that you don’t want to take your car with you.

2. Your financial situation changes: If you’re in financial trouble, terminating your lease may be the right choice. Of course, you’ll want to consider the payoff amount and any lease transfer fees.

3. You enlist in the military: If you enlist in the military and are stationed overseas, you may not have any use for your current vehicle.

4. You want to upgrade or downgrade your vehicle: If you have kids or send your teen off to college, your car needs may change.

Pros and Cons of Ending Your Car Lease Early

If you desire to get out of your car lease, it’s important to carefully weigh the pros and cons of each option to see which one is right for your situation.

ProsCons
Early TerminationCan be more convenient than other options.
Requirements are usually specified in the contract.
Typically the most expensive way to get out of a lease.
Will likely pay a higher cost if you want to end your lease early in the leasing period.
Lease TransferCan be the most cost-effective way to get out of your lease.
Less time-consuming than buying out the lease and selling the car.
Not allowed by all dealers and leasing companies.
Will likely come with fees.
Might be required to keep your name on the lease agreement.
Lease BuyoutCan be helpful if you want to keep or sell the car you’ve been driving.
Allowed by most dealers and leasing companies.
Must apply for financing if you don’t have the cash to cover the purchase.
Could come with fees or finance charges.
Lease Trade InOne of the more convenient ways to get out of a lease.
Might receive a credit if the car is worth more than the buyout amount paid by the dealer.
If the buyout amount is higher than the car’s value, you’ll have to pay the difference or roll it into your new lease or loan.
Can come with early termination fees.

What are the Steps to Follow if You Want Out of Your Car Lease?

How to Get Out of a Car Lease Early

Whatever is the cheapest for your circumstances, if you decide that you absolutely want out of your lease, whether you can’t pay or just want a new vehicle, you should take the following steps:

1. Work out what your penalties will be for early termination. Read over your lease contract and calculate what the fee might be.

2. If this fee is astronomical, work out the buyout price of your car and the current trade market value. If this is cheaper than the penalty fees, then happy days.

3. Transfer your lease to someone else using a website like Swap-A-Lease.

4. If you’re in a bad spot and are completely stuck and can’t pay the lease payments, then give the vehicle up for voluntary repossession and seek some advice on how to handle the debt.

Of course, the best option is to not need to end a car lease early at all! Make sure you take out a lease that is affordable for your budget, and that you’re not struggling to pay.

Can I Return a Leased Car within 3 Days?

With most car leases, you can return the vehicle early.

However, it is going to cost you, since canceling a car lease within 30 days is often associated with a substantial fee.

Does Cancelling a Lease Hurt Your Credit?

Breaking a lease, for whatever reason, will not automatically lead to a bad credit record on your credit history.

Potential credit problems occur when any incurred debt isn’t repaid to the landlord, prompting the landlord to turn the account over to a collections agency.

In summary, leasing a car can be a helpful option if you need access to a vehicle for a limited time and don’t want to buy one.

However, in some cases, you might want to end your lease early, for example, if you can’t afford the payments or simply don’t need the car anymore, which is a wise step to take.

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