By: Rita Cunha | December 4, 2020
So you’re driving a leased vehicle but something came up and you need to drop your current lease. Maybe you’ll need to move to another country or you won’t be able to meet the monthly payments on time. It’s okay, it happens. Even though car leases are known to be tricky and quite rigid, there is always a way out. Let’s look at how to get out of a car lease early—and what your best options are moving forward. Buckle up.
Can You Get Out of a Car Lease?
The short answer is yes, but it likely won’t be easy. When you got your leased car, you signed a lease agreement (or lease term). When you look into the fine print, you’ll see there are consequences to getting out of a car lease early.
What Are the Consequences?
Your leasing company won’t lose money on their deal. When you sign the contract, you’re expected to make all monthly payments. If you don’t, you’ll be on the hook to cover the potential losses.
Simply put: the dealership will take the original car’s market price, take depreciation into account, and calculate the car’s residual value. In other words, how much it’s worth when you want out. The difference between those numbers is the negative equity, and that’s what early buyout prices are based on.
Every lease agreement is different. Generally speaking, though, you are expected to pay one (or more!) of the following.
- Making the remaining payments on your lease
- Paying an early termination fee
- Coughing up other fees so the leasing company can sell the car
How to Get Out of a Car Lease When You Need To
All that said, let’s look into ways you can exit your lease contract early.
Option 1: Give It Back to the Leasing Agency
The first thing you can do is drive to the car dealership you got the lease agreement from. There, you will learn what your remaining lease payments (and possible fees) are. You could also choose to do a trade-in for another lease—but beware, the amount you still have to pay off on your current lease will roll over, putting you “upside down” on your new lease.
By far, it’s the most hassle-free lease termination option out there. But it’s also often expensive.
Option 2: Swap Your Lease with Someone Else
Secondly, you can look into doing a lease transfer. Essentially, you can look for a new lessee to take over your lease. Fortunately, there are lease trader platforms to help you find a new leaseholder. Swapalease.com and Leasetrader.com are worth checking out and have low upfront costs.
The downside to lease-trading is that you may be charged a transfer fee. Additionally, you will be the co-signer on another person’s lease payments. Thus, if they default, you’ll be on the hook.
Option 3: Buy the Car, Then Sell It
Lastly, think about resale options. If the buyout amount your leasing company is demanding is higher than your car’s current value, go for it! Buy it from the dealership and sell it to a private party. It may be harder to sell a used car than a new car, but it’s not impossible (and you don’t need a broker). Websites such as Kelley Blue Book let you find out the market value of your vehicle.
What NOT to Do: Default on Your Payments (Unless You Must)
Avoid defaulting on your monthly payments. Missing lease payments will badly affect your credit score. It’s as bad as defaulting on auto loans.
Is It a Good Idea? The Biggest Con
As a disclaimer, there are several downsides to getting out of a car lease early. The first of which is the hefty down payment (or early payoff amount) you’ll have to put down. Secondly, getting a new car from the same car lender or lease company may be more expensive in the long run. Your new lease on a new vehicle may be “adjustable,” meaning you might end up with higher payments in the future.
So, before taking the plunge, do the math for yourself and think about it long and hard.
Is It Even Worth It Getting a Car Lease?
After all that is said and done, you may be wondering if it’s ever beneficial to rent a new car instead of buying one. After all, a car loan gives you more flexibility. On the other hand, you will have to worry about depreciation, whereas with a new lease you don’t. Not to mention the bar is higher (and so is the down payment) for buying a new car.
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