How to Get Out of a Car Lease Early Without a Penalty
While it is possible to get out of your car lease, it’s often not an easy process, and could come with penalties. Remember that a lease is similar to renting a car long term. Your monthly payments will be less than a car loan, and after a few years, you will give the car back. You also have a mileage limit per year.
Whether you need to get out of a lease due to a change in your financial situation, you are moving, or you expect to exceed the mileage limit on your lease contract, there are a few options.
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Lease Swaps: Transfer Your Lease
One of the most hassle-free options is transferring your lease. But, this only applies to you if the leasing company allows for a transfer. Take note that most banks do not allow transfers. If your lender does, you can use a third-party website like Swapalease or LeaseTrader to essentially sell the lease. Or, you can do a private transfer with no middle man.
There are two caveats to this option. First, you will have to pay transfer fees, which can be a few hundred dollars. Second, some leasing companies require that you still be part of the lease. Should the new leaseholder default, you will still be held accountable for the unpaid balance.
Trading Your Lease In
Another option is to trade your lease in for another car — leasing or buying a new car through the same lender. This will not get you out of all the early termination fees, but the lender may reduce or eliminate some of the fees. If not, they will roll the fee into your new payment.
This is a convenient option as you are dealing directly with your lender. You can also simply return the car to the lender, but be prepared to pay full penalties.
Selling Your Leased Car
At any point during your lease, you can buy the car from the lender. Your lease will essentially convert to a regular auto loan, either through the lease lender, or another lender. When you’re taking this route, be sure to shop around for the best interest rate. For example, if you leased the car through an auto dealership, you could terminate the lease and convert it to a loan through a local credit union. The credit union essentially pays off the rest of your lease, and then you start paying the credit union back.
After you buy the car, however, you can sell it. With the money you earn from the sale, you can pay off the loan, and pocket whatever is left, or use it towards buying a new car.
Negotiate Your Lease
Much like negotiating a loan, you may be able to ask the leasing company for help. They could allow you to skip a few months of payment — tacking it onto the end and extending your lease. Alternatively, they could lower the payments for a few months to give you time to get your finances in order.
This, however, is unlikely to happen unless your only other option is defaulting on the loan. Since the lender doesn’t want you to default — it means you are not paying money — they would rather grant you a short reprieve so you can continue paying them.
Prepare to Pay Penalties for Breaking Your Lease
The penalties for breaking a lease early can be stiff. Types of penalties include:
- Paying the rest of the lease in a single payment;
- Paying early termination fees and costs associated with the storage;
- Transferring the lease;
- Preparing the vehicle for sale.
The fee could be a one-time fee, or it could come in the form of monthly payments. It can also work on a sliding scale, with more fees or payments depending on whether you terminate your lease earlier rather than later in the term of the lease.
If you default, prepare to take a hit to your credit score, about the same as if you defaulted on an auto loan. The lease can end up in collections, and unless you declare bankruptcy the lender could sue you for the unpaid money. The car could even get repossessed.
Getting out of a car lease early, and without penalties, is not easy. Unless you are willing to lease or take a loan on a new car from the same lender, expect to face some obstacles. There are plenty of hoops to jump through, and you will still probably have some early termination fees. However, it’s better to get out a lease early than to continue making monthly payments when your financial situation can no longer support it.
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A former newspaper journalist, Cole spends his free time reading, writing, playing video games, watching movies, and learning about every subject under the sun. He lives with his wife and daughter in Idaho. Follow Cole on Twitter: @ColeMayer42