How can I get out of a lease early?

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In a Nutshell

If you want to get out of your car lease early, you usually have a few options to consider. Terminating your lease early is one method, but it may not be the best financial move. Alternatives can include transferring your lease or a lease buyout.

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Figuring out how to get out of a car lease early can be a costly and prolonged process, but you may have multiple options to choose from.

There are times when a car lease might no longer work for your situation. Maybe you lost your job and are having trouble making payments, or the car just doesn’t fit your needs anymore. You may be considering terminating your car lease early, but doing so can come at a high price.

Thankfully, early termination isn’t your only option. Taking the extra time to investigate alternatives could put you in a better financial position. Let’s go through some options for getting out of a car lease early.


3 options to get out of a car lease early

Typically, one option to get out of your car lease early is terminating your lease. But there are other less-costly options that may be available to you, too. Let’s take a look at early termination and see how two more options compare.

1. Early lease termination

If your leasing company offers the option, ending your car lease early means you’re released from making remaining payments on your current leased vehicle. But it also means that you have to turn in the car and pay the balance due, including any costs, fees and penalties associated with early termination. The federal Consumer Leasing Act requires that details for terminating your lease early be disclosed in your lease.

So what happens if you terminate a car lease early? First, the lease company may charge an early termination fee, which is normally the difference between the remaining balance owed on the lease and the credit you receive for the current value of the car, based on the calculations detailed in your lease. You may also have to pay fees like vehicle disposal fees, transfer fees and taxes.

The easiest way to determine your total early termination amount is to call your leasing company and ask what you’d have to pay to terminate your lease early. Take note though — it could easily be thousands of dollars, depending on your lease terms and how early you’re ending the lease. And you’ll usually have to pay any late fees, past due payments, parking tickets or other charges remaining on the car.

FAST FACTS

How does terminating a lease impact my credit?

For the sake of your credit, it’s important to make all of your lease payments on time, because missing payments can harm your credit. It’s just as important to make sure you terminate your lease according to your lease agreement. If you end up defaulting on your car lease, the car might be repossessed, which could negatively impact your credit.

Due to the way lease contracts are written and the fact that cars normally depreciate more upfront, the earlier you terminate your lease, the higher the cost will usually be. In fact, the costs can be so high that early termination may cost you more than keeping the car for the full lease term.

If you end up owing more for terminating the lease, you’ll need to pay the difference between the credit you receive for the car and the amount you owe for terminating the lease. And if you don’t have the funds on hand, you may need to finance the costs.

2. Lease transfer

Terminating your car lease early may not be the cheapest way to get out of a lease. But you may have another option in transferring your lease to a new lessee, as long as it’s legal in your state, permitted under your lease, and the party you’re transferring the lease to meets your lender’s credit requirements.

And while a lease transfer may still require you to pay a lease transfer fee and other costs, you should investigate to see if it’s cheaper than early termination. If you’re having trouble finding someone to transfer your lease to, consider using a service that connects you with those looking to take over a lease, like swapalease.com or leasetrader.com. And make sure you transfer the lease to someone you know is responsible, because you can still be on the hook for the lease.

3. Lease buyout

Sometimes buying out your lease early and purchasing the vehicle outright could be your best option. There are still fees involved, but run the numbers to see if paying the early buyout amount, along with any associated fees, and then selling the car yourself would put you in a better financial position than an early termination or lease transfer. Keep in mind though, if you don’t have the funds available to pay the early buyout fees, you’ll have to factor in buyout financing into your decision.

If the market value of the car is higher than the leasing company anticipated it would be (the anticipated value should be listed as the “residual value” on your lease agreement), a lease buyout may work out favorably for you.

And if you’re leasing or purchasing another car when you terminate your car lease early, you may have yet another option. Instead of a lease buyout, you may be able to roll over the amount you owe on the car you’re returning into the amount financed for a new car purchase or the gross capitalized cost of your new lease. If you’re considering this scenario, keep in mind that this will likely result in higher monthly payments and could lead you to become upside down on your new loan.

How to sell your car: A guide

When is it a good idea to get out of a car lease early?

Sometimes, a change in circumstances might make getting out of a car lease a smart decision. If you move to a city center and can walk or take public transportation everywhere, you may no longer need a car. In this case, terminating your lease early might be smart. Just make sure the cost to terminate early is less than the remaining costs you’d have to pay if you keep your lease.

When is it a bad idea to get out of a car lease early?

Getting out of a lease early isn’t always the best idea though. If you simply don’t like your car but it still meets your needs and is affordable, you might be better off financially by dealing with any inconveniences and keeping the current lease until it expires. And while keeping the lease may not be the most desirable option, it still might be the best move for your finances.

Another instance where it may not make sense to get out of a lease early is when the costs of terminating the lease early exceed the costs of continuing to pay for the rest of the lease. In this case, it might be cheaper to just keep the car. Then, turn it in at the end of the lease.


Bottom line

You do have some options to consider if you’re looking to get out of a car lease early. While terminating your car lease might be an expensive move, it’s a straightforward process that should be defined in your lease agreement. And if the costs to terminate your lease early are less than the costs of your alternative solutions, it may make sense to just go ahead and do it.

But you may find that other options to get out of your lease early work out better, though they could take more time and effort.

If you’re in a tough financial spot, sometimes the leasing company can help. Some leasing companies ask that you to contact them if you know you’re having trouble making payments on your lease. They may be able to find a solution that works for you both you.

Ultimately, you need to decide whether getting out of your lease early at all is worth the costs and hassle. Sometimes, it’s a smarter move to stick it out and finish the lease.