Early Car Lease Termination
The truth is, anyone can break their lease at any time—you just need to know the consequences. If you take the right steps, you can end your lease early and avoid costly penalties.
Reasons for Early Termination
The reasons for ending or changing a lease agreement are usually dictated by either a change in lifestyle or financial status.
Reasons can include:
- Vehicle needs have changed: Maybe your family is growing and you need a bigger car, or maybe you need a smaller, more fuel-efficient vehicle.
- Annual mileage has changed: Your new commute might force you to exceed the annual mileage restriction for your lease.
- Change in location: You're moving to a new city where you won't need a car.
- Improved financial situation: Thanks to a raise at work or an improved credit score, you can now afford a larger monthly payment.
- You changed your mind: It's human nature—you thought you really wanted one vehicle, but after driving it for a while, you decided it's not right for you.
Whatever your reasoning behind early lease termination is, you'll need to know what you're up against.
Lease Termination Penalties
Penalties for early termination of a car lease can vary from one dealership to the next.
Early lease termination penalties can include:
- Remaining payments on your lease.
- An early termination fee.
- Costs related to preparing the vehicle for sale.
- Storage and/or transportation of the vehicle.
- Taxes associated with leasing, if any.
- Negative equity between your lease amount and the current value of your car.
Visit our page on Car Lease Penalties for more details.
How to Avoid Penalties
There are several ways to get out of your existing lease without paying tons of money in penalty fees.
Return the Vehicle
This is the least appealing option, as it will cost you the most. If you do not plan on leasing another vehicle and just want to get this one off your hands, then you'll have to pay some or all of the penalties outlined above.
Trade In for Another Vehicle
If you've decided you need a different vehicle, contact your dealership and discuss your options for rolling your lease into the lease or purchase of a new vehicle. Some dealerships may offer special incentive programs for turning in a lease early without penalty as long as you sign another lease.
Transfer the Lease
This option only works if it is allowed in your state and by your car dealership. To transfer or “swap" your lease, you can either:
- Find an individual buyer on your own, OR
- Use an online lease swap company.
These services charge a base price along with a commission when the transaction is complete. In addition, you can expect to pay up to $600 in bank fees for processing the lease transfer paperwork.
One last catch, is your car dealership may require you to keep your name on the contract, making you liable if the new leaser defaults on the loan.
Buy the Car
If you plan on owning the car at the end of your lease, and want to avoid mileage or additional wear and tear, consider buying the car early.
Be sure to research the value of the make and model of vehicle on a reliable site like Edmunds.com so you know what you'll be paying. If your car is at or above market value, you may end up paying more for this option, but it's a good choice if you can afford larger monthly payments and hope to own your car sooner.
Sell the Car
Use your payoff amount as your guide and sell your vehicle to a private party. This is a great option if you want to avoid mileage or wear and tear fees at the end of your lease.
Keep in mind—if your vehicle has a high payoff, it might be difficult to sell without incurring a loss, but if your car retains its value, you could break even.
If you're still unclear about the process of leasing, our Leasing 101 guide can give you a more detailed background on how the process works and what you can expect.
