Car leasing comes in handy when you don’t want to buy a vehicle or wish to own one for a limited period. While leasing is a cost-effective way of owning a car, you may want to get out of the lease for various reasons, including job loss, change in life situations, downsizing, growing out of a vehicle with growing family needs, problems making lease payments, and more.
While getting out of a car lease can be challenging, doing so the wrong way can complicate the process, impact your credit score, and cost you more. This article discusses four ways to get out of a car lease.
- Buyout your lease
Most lease agreements provide a buyout alternative which is an excellent decision if you wish to sell the vehicle you’ve been using on your own or keep it. While waiting till the end of an auto lease to purchase a car gets you the best deal, an early buyout is a great option if you want to terminate the lease agreement ahead of the agreed time. However, this could come with finance charges or fees.
When buying out a lease, you must pay off your monthly payments remainder plus an early termination fee. Before buying out your car lease, research the vehicle’s value and assess the payout amount to determine its worth. This may involve comparing your car’s market value (how much the car is worth now) with the excess amount.
Look at the lease agreement to determine how much you have to pay for the buyout and if it’s worth it. Should you decide to proceed with the lease buyout, you can apply for an auto loan to cater for the purchase. Since the leasing company or dealer might offer to finance the car, consider shopping around and comparing car loan terms and rates from multiple lenders to land the best deal.
- Consider early lease cancelation
While a lease agreement allows you to cancel whenever the need arises, returning a leased vehicle early can be expensive. Since leasing companies don’t want you to terminate the contract early, they charge hefty penalties to discourage you from doing so.
The precise amount you should pay to terminate a lease varies based on the company. They may need you to pay the remaining lease payments or half of the remaining payments, plus some termination fees.
The leasing company may, at its discretion and based on your circumstances, generate a custom fee depending on the mileage you’ve done and the payment months you have left. You might also have to pay additional car return charges, including expenses for getting the car ready for sale, early termination fees, vehicle storage, negative equity, and the taxes that come with leasing.
Canceling the lease can be costly, so consider this your last resort. You should also note that vehicles depreciate more in their first or second year. This means the further you’re into the lease, the minimal the overall cost will likely be. The lease agreement usually includes the requirements for canceling a car lease. So, read it carefully before signing.
- Trade in your vehicle
Trading in your leased car for a used or new one is an excellent option for getting out of your current lease. The dealership or leasing company rolls the existing monthly payments and transfers the termination fees into the vehicle payments. This option is ideal for people who still need a vehicle but a different type or can’t afford their lease payments.
This option is a convenient way of getting out of a car lease agreement and is only available when you lease or buy the new auto from the same dealership you have a lease with. Nonetheless, it comes with early termination fees.
If you don’t want to deal with the same dealership and have the required credit score requirements, your new dealer will pay the remaining lease amount and buy the vehicle from the leasing company or dealership.
Beware that if the vehicle’s residual value is above the dealer’s buyout price, you’ll get credit for the trade-in. However, should the buyout amount exceed the auto’s residue value, you must roll the difference into your new loan/lease or pay.
- Consider transferring the lease
Lease transfer, also called lease takeover or lease assumption, is a cost-effective option for getting out of a car lease. It involves transferring the vehicle plus the remaining lease term part to another lessee. Before taking this step, consult with the leasing company or dealer to ascertain it’s allowed.
If you’re given the go-ahead, look for somebody to take over your lease. You can find one yourself or leverage third-party platforms that help link persons selling their car leases to others who wish to assume them to streamline the process. Expect to pay a service fee if you utilize these platforms, plus lease transfer costs, shipping charges, and credit check expenses.
Note that based on your lease contract, the other person may be allowed to take over the lease’s responsibility fully, or the lease might be required to maintain your name as the other party assumes payments.
Endnote
While leasing a car can be rewarding, getting out of the lease can be challenging. However, these tips can help ease your struggle.
