- Options to Terminate a Car Lease Early
- Return a Leased Car
- Lease a Different Car
- Car Repossession
- Lease Buyout
- Car Lease Swaps
- Looking for help for getting out of your lease?
When leasing a car, you enter into a contract with the leasing company to take possession of the car for a predetermined period of time. But things may turn so that you may unexpectedly want to have your car lease termination. So what options do you have when it comes to terminating a car lease? What should you consider before the lease comes to an end?
Getting out of a car lease early can be costly. At times, the financial penalties can almost be equal to the remaining payments themselves. Choosing the right option can save you a lot of money. If you think you can just drop off the car and walk away then you need to understand the implications of that approach and the long-term affect it can have on your credit report.
Options to Terminate a Car Lease Early
If you’re thinking about terminating a car lease early, you need to be careful because unless you do it correctly you can make a rather costly mistake in terms of money and future creditworthiness. Essentially, you have five options when it comes to ending a car lease before the expiration date. You can:
• Return your vehicle to the dealership
• Lease another car
• Have the car repossessed
• Buy out the lease or do a lease transfer / lease swap.
Each of these options is discussed in more detail in the paragraphs below.
Return a Leased Car
The easiest way to end your lease early is to return the car to the dealership before the lease expires. Keep in mind that you stay obligated to continue making the remaining monthly payments, the cost of penalties for excess wear and tear, and the excess mileage charges.
In short, you may return the car, but your financial obligations do not stop. You are responsible for making lease payments until your contract terminates – even if the car is sitting in the dealer’s parking lot.
Lease a Different Car
You can also terminate a car lease early by leasing a different car from the dealership. If you decide on this option, make sure you understand how much equity you have in the car. What you owe is based on calculations that involve the car’s residual value, depreciation and capitalized cost.
If you’re in a negative equity position (you owe more than the car is worth), then the money owed is often rolled into the new lease, which has the opposite effect of a down payment. That means your monthly lease payment may be extremely high because you’re still paying off money owed from your old car’s lease plus the lease cost of your new car.
This means that you will be surrendering the car lease to the finance company without finishing off your financial responsibilities. In this, the finance company will pursue you for payments and if you insist on non-payment, charges will be made which may be detrimental to your credit rating. This relieves the driver of financial responsibilities and is least costly in the short-term, but a damaged credit rating can be costly in the long-run as you are unable to obtain credit or charged extremely high interest rates for credit products.
Another option you have is to buy out the lease from the dealership or financing company. This option can sometimes work in your favor if the value of the car has unexpectedly held up better than projected by the leasing company. For example, the buyout price might be $27,000, but the car’s true market price is closer to $30,000.
In reality, the above example doesn’t happen very often. That’s because leasing companies are rather good at estimating car values well into the future. In fact, more often than not, buying out the lease is a costly decision because cars experience their greatest depreciation over the first two years of ownership. That means the actual market price might be lower than the buyout price, especially when terminating just a couple of years into the lease.
Car Lease Swaps
Sometimes leasing companies permit the lease to be transferred to another party that is then responsible for making the remaining lease payments on the car – this is sometimes referred to a lease swap. The person assuming the lease gains the benefits of the down payments you’ve already made to lower your monthly lease payments. You have the chance to walk away from the car without worrying about taking a hit to your credit rating.
Looking for help for getting out of your lease?
There are several specialized lease transfer companies on the Internet who will list your car and help and find “buyers” who are interested in taking over your lease. These companies do significantly help with the lease assumption process and paperwork. They charge a reasonable fee for their services – a fee that is much smaller than a lease company’s early termination costs. Since these companies work directly with the lease company and handle all the details, the process is easy and painless.