If you want to buy a new car or are tired of making monthly payments, you may be interested in finding ways to get out of your lease early.
Extended car leases can make it feel like you’re paying forever. You have a few options available if you want to get out of your lease altogether.
What Does It Mean to End a Lease Early?
When you sign a new car lease, you agree to make a certain number of monthly payments. You also agree to keep up with routine maintenance and repairs of the leased vehicle.
Lease contracts clearly state the terms of the agreement, including how long you have to pay and the cost of your monthly payment. If you decide that you no longer want to make these payments, you may try to give the leased vehicle back to the dealership.
However, ending a car lease early isn’t always easy. While you may have options to get out of a lease early, including an early buyout or finding a new lessee, you can’t just drop the car off at the dealer and stop making your monthly payments.
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How to End a Car Lease Early
You have a few options available to end a car lease early, including:
Ask About Early Lease Termination Options
Most car leasing companies offer early lease termination options. Some car leasing companies may allow you to turn in your lease early without a termination fee. However, you’ll still likely be responsible for any remaining payments. The Federal Consumer Leasing Act requires that all leasing companies outline this information in your lease agreement. Check your lease contract to find out what options you have.
An early lease termination is the most expensive way to get out of a car lease. You should reserve this option as a last resort when you don’t have the money to make your payments any longer or you can no longer fulfill the requirements of the contract.
Transfer Your Lease
If the early termination fees are too high, you may be able to transfer your lease instead. Lease transfer requirements and eligibility vary among states and are dependent on your car lease agreement. It’s also likely that the leasing company will charge you a lease transfer fee, but this is often much cheaper than the cost of terminating your lease early.
You may transfer your current car lease to a family member, friend, or private buyer. Some online companies also offer services that help you find a buyer for your leased car. Whoever decides to buy out your lease will be subject to credit checks and down payment requirements, just as you were when you signed the initial lease agreement. Once the lease transfer is complete, the new lessee will start making the payments.
Buy Out Your Lease and Sell Your Car
Depending on the value of your vehicle, you may also decide to buy out your lease. A lease buyout involves paying off the remainder of your monthly payments plus any early termination fees in cash. Many people choose to buy out their leases at the end of their term. Then, you can sell the car to recoup your costs. Before choosing a lease buyout, you’ll want to evaluate the payoff amount and the value of the vehicle to find out if it’s worth it.
This includes comparing the market value of your vehicle with the leftover cost. The market value, or current value, refers to how much the vehicle is worth. You can use tools like Kelley Blue Book to calculate the value of your car. This option also requires you to sell your car on your own after you buy it from the leasing dealer. Selling cars through a private sale can sometimes be more difficult because lenders are less likely to issue money to buyers who don’t work with a dealer.
It’s possible that you could make money with this option too. If your car is worth more than what you owe the leasing company, you could actually profit by selling your vehicle. This can give you a little extra money to purchase a new car, either through a new lease contract or as a down payment.
Trade In Your Vehicle
Your dealership may allow you to trade in your vehicle for a new lease. The dealership typically rolls your existing monthly payment and transfer fees into the new car payments. However, it’s important to note that this option often leads to much higher monthly car payments. A trade-in is also usually only an option when you buy or lease your new car from the same dealership as your current car lease.
Most of the options available to terminate your lease early come at a cost. This cost may be minimal, especially if you only have a short lease period left. However, it could also cost you a few thousand dollars to terminate your lease early. Any of these options, however, are better than defaulting on your car payments. If you stop paying, the leasing dealer will likely repossess the car. Then, they’ll sell it at auction for pennies on the dollar, leaving you responsible for the difference.
Reasons to End a Car Lease Early
There are a few reasons why you may want to end your lease agreement early, including:
- 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. It may cost too much to transport the vehicle, or the type of vehicle you have may not be appropriate for the weather or driving conditions in your new hometown.
- 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.
- 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.
- You want to upgrade or downgrade your vehicle: If you have kids or send your teen off to college, your car needs may change. If buying from the same car dealership, you may be able to roll the remaining lease payments into the cost of a new or used car.
Ending a car lease early often comes with an early termination fee, meaning it’s important to consider the pros and cons first. For example, if you’re moving to a new city with public transportation, you may no longer need your vehicle. So, while you’ll pay a fee to terminate your lease, this may be less than continuing to pay your current lease payments each month.
Tips for Getting Out of a Lease Early
There are a few things to keep in mind as you consider your options for getting rid of a leased car early, including:
- Gather information about your lease before you stop paying: Once you have information about your lease, you can make the best decision for your situation. This includes how much is left to pay, the car’s residual value, and how much the leasing company charges for lease transfers.
- Take your vehicle to a third-party mechanic: The leasing company may also charge you additional fees if they rule that there’s excess wear on your vehicle. Take your vehicle to a private party first to document any necessary maintenance or repairs.
- Wait a few months to trade in your vehicle: If your vehicle’s residual value is low, waiting a few months to trade it in can help bridge the gap. This can lead to you owing less out of pocket to get out of the lease early.
- Ask about hardship options: If you want to get out of your lease early because of financial difficulties, you may be eligible for other hardship programs available through your leasing company. For example, some leasing companies may waive fees to transfer the lease or temporarily suspend payments for a few months.
- Give your leased car a deep clean before selling it: Cleaner cars tend to sell for more money. Schedule an auto detail before listing if you want someone to purchase your car at the best price.
Before you end your lease, be sure to compare all your options and decide if it’s the right choice for you. Everyone’s lease contract is different, so it’s important to choose the option that works best for your situation.
Finance & Insurance Editor
Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia, Reviews.com, Forbes, and Bankrate.
Source: www.caranddriver.com