There are times when a car lease may no longer work for your situation. You may have lost your job and have trouble making payments, or the car just doesn't suit your needs anymore. You can consider ending your car lease early, but you can do so at a high price.
Luckily, early termination is not your only choice. Taking extra time to explore alternatives could put you in a better financial position. Let's go through some options to get out of the car lease early.
3 Ways To Get Out Of A Car Lease Early
Usually, one way to get out of your car lease early is to terminate your lease But there are other less expensive options open to you, too. Let's take a look at early termination and see how two more choices are compared.
Early Lease Termination
If the option is offered by your leasing company, the early termination of your car lease means that you will be released from making the remaining payments on your current leased vehicle. However, this 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 of the early termination of your lease be disclosed in your lease.
So what happens if you end your car lease early? First, the lease company may charge an early termination fee, which is usually the difference between the remaining balance due on the lease and the credit you earn for the actual value of the vehicle, depending on the calculations detailed in your contract. You may also have to pay taxes, such as vehicle disposal fees, transfer fees and taxes.
The best way to determine the maximum early termination amount is to contact the leasing company and ask what you would have to pay to end your lease early. Take note, though— it could potentially be thousands of dollars, depending on your lease terms and how early you're going to end the lease And you're usually going to have to pay any late fees, past due fines, parking tickets or other penalties left on your vehicle.
Due to the way in which the lease contracts are written and the fact that the cars normally depreciate earlier, the earlier you terminate the lease, the higher the cost will usually be. In fact, the cost may be so high that early termination may cost you more than keeping the car for the full lease term.
When you end up paying more for the termination of the lease, you will have to pay the difference between the credit you get for the vehicle and the sum you owe for the termination of the lease. And if you don't have the funds at your fingertips, you may need to cover the costs.
Terminating your car early might not be the cheapest way to get out of the lease. But you may have another option to transfer your lease to a new tenant, as long as it is legal in your state, allowed under your lease, and the party you are transferring the lease to meet the credit requirements of your lender.
And while a lease transfer may still allow you to pay a lease transfer fee and other expenses, you can examine whether it is cheaper than early termination. If you're having trouble finding someone to move your lease to, consider using a site that links you to those looking to take over the lease, such as swapalease.com or leasetrader.com. And make sure you transfer the lease to someone you know is responsible for, because you can still be on the lease hook.
Sometimes buying your lease early and buying the vehicle completely could be your best option. There are still fees involved, but run the numbers to see if paying the early purchase amount, along with any associated fees, and then selling the car yourself would put you in a better financial position than early termination or lease transfer. Keep in mind, however, that if you don't have the funds available to pay early payment charges, you're going to have to factor in the cost of financing in your decision.
If the market value of the car is higher than expected by the leasing company (the expected value should be shown as the "residual value" of your lease agreement), a lease purchase will work well for you.
And if you're leasing or purchasing another car early when you terminate your car lease, you may have another choice. Instead of a lease purchase you may be able to repay the amount you owe to the vehicle you are repaying in the amount paid for the purchase of a new car or the total capitalized value of your new lease. If you're considering this situation, keep in mind that this is likely to result in higher monthly payments and could bring you upside down on your new loan.
You have some options to consider if you're looking to get out of the car lease early. While the termination of your car lease may be an expensive move, it is a simple process that should be defined in your lease agreement. And if the cost of terminating your lease early is less than the cost of your alternative solutions, it might make sense to just go ahead and do it.
But you might find that other options to get out of your lease early work out better, though they might take more time and effort.
If you're in a difficult financial position, sometimes the leasing company can help. Some leasing companies ask you to contact them if you know you're having trouble paying for your lease. They might be able to find a solution that works for you both.
At the end of the day, you need to determine if getting out of your lease early is worth the expense and hassle. It's a smarter move sometimes to stick it out and finish the lease.