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What Is The Best Way To End A Car Lease Early?

What Is The Best Way To End A Car Lease Early?

For some drivers, leasing a car is more convenient than buying. After all, you get to drive a nice car without the hassle of long-term maintenance or trying to find a buyer once you’re done with the vehicle. Although leasing offers several advantages when your circumstances change you might start to feel as if you’re stuck in a contract that no longer benefits you. 

Auto Repairs Are EXPENSIVE


 

Life is unpredictable, therefore there are instances in which your car lease may no longer work for your situation. If you’ve just lost your job or you're experiencing other financial woes you may have trouble keeping up with your payments. When this happens getting out of your car lease early may be your only option. Ending a car lease early isn’t as easy as it sounds. In fact, terminating a lease early can be a long and costly process. What are your options?

 

What Is An Auto Lease Agreement?

Whether to lease or to own is one of the biggest debates amongst financial experts. When you undertake an auto lease you are paying to drive a new car not own it. Leasing is a type of auto financing that essentially allows you to rent a car from a dealership for a specified length of time and a certain amount of miles. In exchange, you’ll make monthly payments. At the end of the leasing contract, you’ll have the option to return the vehicle to the dealership or you may be able to buy out your lease if you are interested in keeping the vehicle. 

 

Leasing may not always be the best financial decision for drivers but they are often tempting if you don’t have the money to purchase a brand new car. The initial costs of buying a new car are typically much higher since you’ll have to put down a sizable amount for a downpayment and then you’ll have to make high monthly payments to keep the vehicle. On the other hand, when you lease a car the monthly payments that are usually much smaller than an auto loan.

 

Put simply, a car lease agreement is between the buyer and the dealership. As the temporary car owner, you are agreeing to make regular payments and sticking to a routine maintenance schedule throughout the duration of the contract. 

 

How Long Does The Average Car Lease Last?

Leasing is like a long-term vehicle rental. A leasing term refers to how much time you’ll get to drive the vehicle or the contract length. Usually, drivers have the option to take out a long-term or short-term car lease. The average length of a short-term car lease is about 12-24 months while a long-term leasing contract is around 24-36 months and sometimes up to 60 months. Most buyers opt for a long-term lease up to about 36 months. 

Leasing contracts are also accompanied by mileage limits. For instance, a leasing contract may specify that the driver is only able to accumulate over 40,000 miles. If you drive anything over that cap you can be penalized. Typically, long-term leasing contracts have higher mileage caps. 

 

How To Get Out A Car Lease Early – Is An Early Lease Termination The Best Solution?

If you’re itching to get out of your auto lease before the end of the contract term you only have a few options. The first option is an early lease termination. 

What Happens When You Terminate Your Lease Early?

 Perhaps the fastest and easiest way to get out of an auto lease early is to terminate your lease agreement. Depending on your contract, this may be an option offered by the leasing company. When you terminate your lease agreement before the contract is over you are returning the vehicle to the dealership and forfeiting any future payments. The Federal Consumer Leasing Act requires that leasing companies disclose their policies regarding early lease terminations before the customer signs an agreement.

 

Terminating your car lease early may seem like the ideal option when you can no longer afford the payments but you’ll likely be charged a hefty fee. When you return a leased car early the company won’t get all of their payments and because the car has depreciated in value they can’t easily lease the vehicle to someone else.

 

Early Lease Termination Fees

 Before you decide to terminate your car lease early you should take a look at the lease agreement you signed to get an idea of how much money you’ll be expected to pay. The early termination fee is usually determined based on the difference between the remaining balance owed on the vehicle and the current value of your car. 

 

Additional taxes and fees such as the vehicle disposal fee and transfer fees may be calculated into the final early termination fee. Sometimes early termination fees are calculated using a sliding scale which is based on how long you have been driving the vehicle or how many monthly payments you've made thus far. 

 

Depending on how many months you have left in the contract, the leasing company might still require that you pay the remaining balance on your lease. For instance, if you have a 36-month leasing contract and you decide at 20 months that you want to terminate the lease, the company can force you to make the remaining 16 monthly payments. 

 

Early lease termination fees can cost you an arm and a leg. In some instances, it may cost you more money to break your contract than to keep the vehicle until the end of the lease agreement. If you don’t have the funds on hand to pay such hefty penalties and you don’t want to go into debt you’ll have to consider other options to end your car lease early.

 

End Your Car Lease Early By Transferring It To Someone Else

The next option you have for getting out of your car lease early is to transfer the lease to another lessee preferably someone you trust. If it’s legal in your state and the lessor (leasing company) permits you to do so you can have a family member, a friend, or another interested party take over your auto lease. This is a great way to end a car lease early without having to worry about being penalized. 

 

Depending on the terms specified in the lease agreement that you signed and the leasing company you may still have to pay a lease transfer fee but it’s often much cheaper than early lease termination fees. Also, the person that takes over the remainder of your car lease will have to meet the lessor’s credit requirements. 

 

How To Find Someone To Takeover Your Lease

Individuals who need to get into a car fast and are interested in a short-term arrangement can benefit from taking over the remaining term of a lease. This type of agreement doesn’t require any large upfront costs, it's cheaper than regularly renting a car and it can help them save money. 

 

Sometimes finding a good candidate to take over your lease can be a challenge. Fortunately, there are online marketplaces for lease transfers. Services like LeaseTrader.com and Swapalease.com can help you find an eligible candidate to take over your lease in no time. 

 

When you transfer a remaining lease agreement to another party you might be listed as a cosigner. As a co-signer, you could be held responsible for any damages incurred or if the new lessee decides to default on the lease agreement. 

 

Consider A Lease Buyout If You Need To End A Car Lease Early

In some cases, buying out your lease is the best way to end a car lease early without being forced to pay heavy fees and ruining your credit. One of the benefits of leasing a car is that if you decide at any time that you want to own it you can make arrangements to purchase it. 

 

Most leasing companies offer customers an early buyout option in which the approximate value of the car you’re leasing is calculated along with how much money you’ve paid into the lease. The more payments you have made the less the buyout amount will be. So if you’re ending your car lease a few months ahead of the contract, it may be in your best interests to opt for an early buyout and make plans to purchase the vehicle. If you decide to buy the vehicle, you can always sell the car if you need the extra cash. 

 

Can You End A Car Lease Early To Get Into A New Vehicle?

If you need to end your car lease early because the vehicle you’re driving no longer fits your needs you can opt to buy or lease a new car from the same dealer. Perhaps you’re relocating to another area where the climate requires that you invest in an SUV with all-wheel drive or you’re expecting to add to your family in the near future and you need a vehicle that will accommodate everyone. 

 

Whatever the case may be if you’re interested in getting into a new vehicle it's best to talk to the leasing company or the dealership. Most of the time, since you're still planning on spending money with them they will allow you to transfer the lease agreement to another vehicle for a small fee or they may waive some of the fees or penalties in exchange for repeated business. 

 

Whenever you are striking a deal with the dealership you need to get the terms in writing. This is especially so if you entered an agreement to roll over any remaining fees from your old lease into the lease agreement or auto loan on the new vehicle. 

What Is The Worst Way To End A Car Lease Early?

The worst way to end a car lease early is to default on the lease agreement or contract. People usually do this as a last resort when they have no other way out. If you are dealing with an extreme financial hardship you may have no other choice but to default on your lease which is similar to an auto loan default. Although this method may get you out of having to make your monthly payments it will create some big issues for you in the future. 

 

With this option, your credit will take a big hit. More than likely the dealership or the leasing company will repossess the vehicle and they will take a collection or judgment out for the early termination fee or the remaining unpaid lease payments and taxes. If the judgment isn’t paid in a timely fashion a portion of your paycheck can be garnished. 

 

How To End Your Car Lease Early – Common Questions

Q: Can you end a car lease early due to Covid?

During this COVID-19 pandemic, many people are out of work while others are no longer in need of their vehicles since they are working from home. Fortunately, most financial institutions and automakers are being flexible with customers during these hard times. Some are offering lease extensions, deferring payments, and offering penalty forgiveness. You may be able to end your lease early without having to pay any significant fees. 

 

Q: How can I break my lease agreement without any penalties?

As discussed in this article, the only way you can end a car lease early without incurring any penalties is by transferring the lease to someone else who needs a car and is interested in a short-term arrangement. Or you can trade it in for another vehicle or buy out the vehicle and sell it off. If you’re considering breaking your lease you should read your lease agreement carefully to see what options you have available.

 

Q: Can I lower my monthly lease payments?

Once you sign the leasing agreement or contract you agree to the terms that have been specified which include the monthly payment amounts. No, you cannot lower your monthly payment amount. However, the dealership or the leasing company might be willing to work with you if you can prove that you are dealing with a financial hardship such as if you recently lost your job.