Breaking Car Lease Early? Here’s How To Do It With Minimal Cost
Leasing a car offers the advantage of lower monthly payments and the thrill of driving a new car every few years. However, life doesn’t always go as planned, and unexpected changes may leave you needing to exit your car lease ahead of schedule. The good news is, there are several ways to break a lease without racking up costly penalties.
Why You Might Need to Get Out of Your Car Lease Early
Before diving into the steps of how to break a car lease, it’s important to understand why you may need to exit the agreement early. Common reasons people seek early termination include:
- If your income changes or you can no longer afford the monthly payments, breaking the lease may be necessary.
- If you’re relocating to a place with great public transit or simply find that you no longer need a car, returning your leased vehicle early could be the most practical choice.
- Perhaps the vehicle you leased no longer fits your needs (e.g., needing a larger vehicle, or a car that’s better on fuel efficiency).
Are There Fees Associated with Early Lease Termination?
Yes, most leasing companies will charge fees if you break your lease early. Common charges include:
- Early termination fees
- Excess mileage and wear-and-tear
- Disposition fee
Is It Possible to Get Out of a Car Lease Early?
It is possible to exit a car lease early, though it may involve some fees. Leasing companies typically impose penalties for early termination, so the trick is to minimize these penalties and make the transition as smooth as possible. While it’s rarely completely free, there are strategies to reduce the financial burden.
Key Steps for Exiting Your Car Lease Early
1. Review Your Lease Agreement
Before deciding how to break a car lease, start by reviewing the lease agreement. This document should outline the conditions for early termination, penalties, and options for getting out of the lease. Knowing the details in your lease agreement is the first step in planning how to exit the lease without facing a major financial hit.
2. Contact the Leasing Company
Once you understand your lease terms, the next step is to contact the leasing company to discuss your options. Leasing companies are sometimes willing to work with lessees facing financial hardships or life changes. If you need to get out of the lease due to a job loss, a move, or other serious reasons, it’s worth discussing your situation directly with them.
They may be able to offer you:
- A payment grace period
- Lease transfer or takeover
3. Explore Lease Transfer or Swap Options
If you’re looking to avoid early termination fees, one of the most effective options is a lease transfer or swap. This allows you to transfer your car lease to another individual who takes over the remaining payments.
Not all leasing companies allow full lease transfers, so check your lease agreement or contact the company to see if this is a viable option for you. If they allow it, here’s how it works:
Full transfer: The new lessee takes over the lease entirely, and you’re no longer responsible for the car or payments.
Limited transfer: In some cases, you may still be on the hook if the new lessee fails to make payments, which can be risky.
If your lease company allows it, you can use services like LeaseTrader or Swapalease to find someone willing to take over your lease. These services connect people who want to get out of a car lease early with those who are looking to take on a lease.
4. Consider a Lease Buyout
Another option for exiting your car lease early without facing penalties is the lease buyout. A lease buyout gives you the option to purchase the car at the end of the lease term, and while this doesn’t immediately end your lease early, it could be a long-term solution if you’re looking to keep the vehicle or potentially sell it for a profit.
If the residual value of the car (the buyout price) is lower than its current market value, you might be able to sell it for a profit, which can help offset the costs of buying out the lease.
In some cases, people also choose to trade in the leased vehicle to purchase a new car, either through the leasing company or a dealership. If you’re already planning to lease another vehicle, some leasing companies may waive certain early termination fees when you commit to a new lease.
5. Service Members Civil Relief Act (SCRA)
If you are an active-duty service member, you may be able to get out of your car lease early without penalty under the Service Members Civil Relief Act (SCRA). The SCRA provides protections for military members who are called to active duty, allowing them to terminate leases without facing early termination fees.
Make sure to check with your leasing company to confirm whether you qualify for these protections and how to proceed under the SCRA.
Alternative Strategies for Breaking Your Car Lease Early
Consider a Voluntary Repossession
If none of the above options are viable, and you’re unable to continue payments, a voluntary repossession may be an option. However, this should be a last resort as it can severely damage your credit score and may result in additional fees.
In this case, you voluntarily return the vehicle to the leasing company, and they will sell it. The proceeds from the sale will be applied to your remaining balance, but you may still owe the difference, including any associated fees.
While voluntary repossession is an option, it’s typically better to try the other methods first to avoid the lasting consequences.
Navigating Your Way Out of a Car Lease
Breaking a car lease early doesn’t have to be financially painful. If you’re facing a difficult situation, contacting your leasing company to inquire about possible temporary relief or flexibility could be a good idea. Exploring options like lease transfers can be an easy way to pass on your responsibility to someone else, while a lease buyout could allow you to buy the car outright and potentially sell it for a profit. With the right strategy, you can exit your lease with less stress and avoid hefty penalties.