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How to End Your Lease Early

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CarThe buy versus lease debate has raged since the auto lease became popular but one thing is for certain about a lease: You aren’t going to end it early without paying a lot of money to do it. The recent economic headwinds have caused a rise in not only lease defaults but also people who, due to a job loss or other economic event, want to terminate their lease early. When they call the leasing company or go to the dealership where they leased the vehicle, they learn that early termination of a lease is difficult and expensive.

Why? Because the monthly payment for your car lease is calculated with the assumption that you’re going to hold the lease through the end of the term. If you don’t, the leasing company loses a lot of money in part, because they have to recoup the cost they incur for the depreciation of the car. The earlier you terminate your lease, the less money they recoup.  Although you’re probably going to have to pay something to get out of your lease, there are ways to greatly minimize the payment.

Pay It Off

This is the least attractive option. Not only are they going to charge you for all or a portion of the remaining payments but they will tack on an early termination fee, mileage overage fees, and other fees. This is so they can avoid losses but also to discourage you from terminating the contract early. In most cases attempting to terminate your lease isn’t going to save you a lot of money. The payoff amount is too high and if you have to pay for it anyway, you might as well drive it.

Trade In

As you get closer to the end of your lease, car dealerships will be more willing to work with you if you are planning to lease or purchase another vehicle from them. In some cases, for very little out of pocket, you can trade in your currently leased vehicle early and buy or lease a new model. Make sure the car is clean, has no damage, and all current payments are made. Again, this isn’t going to be the best deal for you but it is easy to complete.

Transfer the Lease

Not all leasing companies allow this but if your company does, you can transfer your remaining lease to somebody else for the balance of the term. This relieves you of all further responsibility and doesn’t cause damage to your credit score. It may not be as hard to find a person willing to take over your lease as you think. There are online services like swapalease.com that will not only match you to somebody willing to take your lease but they will also work with your leasing company to facilitate the paperwork involved. They do all of this for a fee that is still much less than paying off the lease. Do not find somebody on your own and allow them to take over payments but keep your name on the lease. This is a violation of your lease agreement.

You should never sign a lease if you believe that you won’t be able to fulfill the entire contract. Regardless of the method you would use to terminate your lease early, it’s going to cost you and sometimes the cost is substantial.

(Photo: brunociampi)

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3 Responses to “How to End Your Lease Early”

  1. Steve says:

    I never understood why someone would take over a lease. Given the way depreciation works, more value is lost from the car in the first half of the lease, which then is paid back in the second half.

    • Bryant says:

      Longer lease periods have cheaper monthly rates. The shorter the lease period, the more the monthly payment will be because of exactly what you said that more depreciation happens at the beginning. So if someone wanted a shorter termed lease but wanted to pay the longer term, lower monthly payment, then taking over someone’s lease would be a great idea! Taking over someone’s lease let’s say with 24 months might only cost you $300/month. However, if you were to do a 24 month lease from the dealer, it may end up costing something like $400/month. In addition to these monthly savings, the person taking over the lease won’t have to pay as much upfront costs as the original leasee may have paid. However, the person taking over the lease will be subject to paying the fees at the end of the leasing period that a lot of companies try to hide.

  2. Cat says:

    Actually mine is a question–I turned in a leased vehicle (SUV) to the same dealer I leased it from b/c the vehicle had a horrible turning radiius and was difficult to drive and park in crowded conditions without damaging it. But in return I leased a different vehicle from the same dealer–and later discovered that the dealer had effectively added the monthly fee for the new lease to the monthly fee for the old lease to come up with the total monthly fee for the new lease–which was not my understanding of what we were doing–since he took back the first vehicle. why was I charged for two leases –if that’s typical why didn’t I get to keep the first leased car as well as the second leased car? If I was going to have to keep paying for it why shouldn’t I keep both cars? The dealer must have done something with it–effectively he got paid twice for the remaining time on the first lease,didn’t he?


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