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Finances & Money

What Happens if You Need to End a Car Lease Early?

December 27, 2019
By Susan Paige
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The benefits of leasing a car are many, varied and well documented. 

However, there may be times when what seemed like a great idea turns out to involve obligations you no longer can — or wish to — meet.  

So, what happens if you need to end a lease early?

The good news is there are some definite steps you can take. Be apprised though, all of them will require a bit of effort on your part and some can be quite expensive. 

However, you do have choices.

What You Need to Know First

Before exploring the options, it important to ask: How does leasing a car work? 

A leasing company agrees to buy a vehicle with the understanding you’ll pay a certain amount to keep it each month. You also agree to do everything possible to ensure it brings its full residual value at the end of the contract.

The company is counting on earning a certain amount of money off the payments you agree to make so it can profit on the deal. If you end the lease early, the company is still going to want to make its money. If you help them accomplish that in a way they find amenable, you’ll have no problems ending your lease early. 

Sell the Car

In most instances, this will be your least costly approach, especially if the market value of the car is higher than your payoff amount. You might even make a profit. 

To make that determination, you’ll need to contact your leasing company to find the current payoff amount of your lease and compare it to the market value of the car as found on a site like Kelley Blue Book. 

You’ll also need to sell the car on your own. Trading it in might not work because you’ll only get the wholesale value of the car from a dealer. You’re usually going to need to get as close as possible to its retail value to end the lease with no money out of your pocket.  

Transfer the Lease

An online cottage industry has emerged around this activity. You’ll list your car on a lease trading site and someone interested in assuming your lease will get in touch. You’ll then present that person to your leasing company, where they’ll need to seek approval. If their credit history is good and their income will support the payment, the deal will usually be approved. 

Drawbacks include the fact that you might still be listed as the lessee, so it could blow back on you If that person defaults or otherwise breaks the terms of the lease agreement. You’ll also have to pay transfer fees, as well as compensate the site that brought the two of you together. 

Early Termination

While this is indeed an effective option, it can be quite expensive. You’ll be asked to come up with the total amount of the payments the company expected to get from you. 

The car will be evaluated as if it is being turned in at the end of the lease, so you’ll be held liable for mileage charges, as well as wear and tear. You could also be looking at termination fees as well as the disposition fee to which you agreed.

These are the three most favorable ways to end a car lease early. While each has its drawbacks, all of them get you out of the contract with your credit history unblemished. 

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