Car leases remain the best option to drive a nice car if you can’t afford the big purchase or the huge monthly payments of buying a new car. However, leasing has its biggest disadvantage. And that could be flexibility.
What does this mean? If you return the leased vehicle before the lease is up, you’ll be faced with a huge early lease termination fee and other early termination penalties. So, can you terminate your lease early without penalty?
Getting out of a car lease early can be done, but typically it will cost you. If you’re returning the vehicle before the lease is up, you’ll likely have to pay an early termination fee.
This fee can be as high as several thousand dollars and is designed to compensate the leasing company for having to find another lessee for your vehicle.
What are your other options when terminating your lease early? Here are our best tips on how to get out of a car lease. Let’s dive in!
Lease transfer
This is one of the most neglected ways how to get out of a car lease early. If you’re in financial trouble, a lease transfer is the cheapest choice. Lease transfers mean that you find somebody to take over your remaining payments. You’re essentially transferring the lease to another person.
There are a few online services that can help facilitate this like Swap-A-Lease and LeaseTrader. With these platforms, you can list your car for free and potential buyers can contact you directly if they’re interested.
The only thing you need to do is to transfer the lease to another person. And you’re done! Of course, you’ll need to check with your car leasing company if this is an option.
Most leasing companies are okay with lease transfers as long as the new lessee meets the lender’s credit requirements.
Here’s how this work. Let’s say you have about one year left from your three-year lease contract. The new lessee agrees to pay for the remaining lease payments of the term. The key is to find the interested person to take over the lease from you.
What makes this a good option is that you’re not required to pay fees like early termination fees or other penalties. The only thing you need to be careful about is the lease transfer fee, which is generally very reasonable (usually around $100-$350).
What’s interesting about this method is it could be just as beneficial for the new lessee who assumes the new car lease. The biggest advantage is they don’t have to make a huge down payment as it was already done by the previous leaseholder.
Another thing is some people only need the vehicle for only a short period. This makes lease transfer very desirable for the other person to drive a new car who only needs it for about a year or two.
Here’s a bonus tip to make your lease transfer more attractive. Consider giving an incentive for anyone who accepts to transfer your lease. An offer of $500 for that lucky person could just sweeten the deal.
The steps to take for a successful lease transfer:
- Call your leasing company and inform them that you plan to transfer the lease.
- Find someone interested in taking over the lease and is qualified by the leasing company.
- Have both parties sign the contract and pay the transfer fee.
Whether you want to get out of the lease for good or you just want to turn the leased car early so you can get another better lease is up to you. However, you need to be careful because you’ll be held responsible if the person who took over the lease fails to pay the monthly payments.
Trade the car
The second option is to trade in the leased car and get another one.
You might be thinking, I don’t want another car. I just want to know how to get out of a car lease early!
But trust us, this could be one of the smartest ways to get out of your current lease and into a new one. Let’s say you’re halfway through your three-year lease and you want to get a new car. The dealership will first appraise the residual value of your current lease.
After that, they’ll deduct the remaining amount you need to pay for the current lease from the price of the new car you’re planning to purchase. The good thing about this method is you can trade in your current car for a brand new one.
The only downside is you might end up paying more than what you’re currently paying for the lease. This is because the monthly payments of a new lease will be higher than the payments of your current leased car.
Plus, you’ll need to pay the early termination fee but they can be rolled out into the new payments.
Buyout the leased car
The third option on how to get out of a car lease is the lease buyout. Paying the full amount of the vehicle might not be feasible for some people, but it could save you a ton of money in the long run.
How? You won’t need to pay monthly payments anymore since you already own the vehicle outright. This means you can put that extra money towards other things like savings or investments.
The only thing you need to be careful about is the early termination fee, which could range from $200-$500. But if you’re planning to keep the car for a long time, then a lease buyout is a great option.
Keep in mind that the payment you need to make for the buyout is the negotiated price of the vehicle, plus any additional fees and the sales tax.
Sell the car
The last option is to buy the car from the leasing company before the lease agreement ends and sell it. But this can only happen if it’s allowed by the car dealership.
But you need to be careful with this method because there’s a chance that the lease payoff amount could be higher than the vehicle’s current market value.
This will end up as a loss on your part.
However, if that loss is only a small fraction compared to the early termination fees and other penalties, only then would you need to consider it. Call your leasing company and ask if this is an option for you.
Take your time in deciding which method you want to take. Weigh all the pros and cons before finally settling on one.
Whatever you do, make sure you read your lease agreement carefully. There might be some clauses that could hinder the process. So, we hope that we have provided you with the best answers on how to get out of my car lease without having to pay any penalties.
And if you’re still not sure what to do, you can always consult with a financial advisor or a lawyer who specializes in car leases. They can help you understand your options and even negotiate with the leasing company on your behalf.
Take an early termination insurance policy
If you’re still not sure about any of the methods we’ve mentioned for early lease termination, then there’s one last option you can take. You can purchase an early termination insurance policy.
This type of policy is designed to protect lessees in cases where they need to get out of their lease agreement early. But keep in mind that not all insurance companies offer this type of policy.
And even if they do, it might not be available in your state. So, do your research and see if this is an option for you.
In perspective, this policy covers the following circumstances:
- Military deployment
- Divorce or legal separation
- Illness or disability
- Accidental Death
- Expatriation or deportation
The great thing about this policy is that it will cover the early termination fees and other penalties that you might incur. But of course, you will need to pay for the policy upfront. The downside is that it could be quite expensive, depending on the insurer. So, make sure you do your research and compare rates before
These are just some of the reasons why you might need to get out of your lease early. And if any of these happen, the insurance policy will cover the costs for you.
But keep in mind that this is just an insurance policy. So, there’s no guarantee that you will be accepted. And even if you are, the company might not cover all the costs associated with early termination.
Voluntary repossession request
You can get out of a car lease early if you request for a voluntary repossession of the leased vehicle. However, this should only be your last resort as it will have a negative impact on your credit score.
A voluntary repossession is when you return the leased vehicle to the dealership or lender without them having to come and get it from you.
This usually happens when lessees can no longer make the monthly payment and they don’t want the vehicle anymore.
The process for voluntary repossession is quite simple. You just need to call the dealership or lender and inform them that you want to return the car.
Then, they will come and pick it up from you. But keep in mind that you will still be responsible for paying the remaining payments on the lease.
And if the vehicle is sold for less than what you owe, you will need to pay the difference. So, this is something you need to consider before requesting a voluntary repossession.
What’s the best time to get out of a car lease early?
Can you sell a leased car and make money from the deal? The best time to get out of a car lease is when the vehicle’s market value is higher than the buyout price.
This usually happens after you’ve made all your lease payments and the vehicle is no longer under warranty. So, if you’re planning to sell the car, this would be the best time to do it. Otherwise, you’ll have negative equity.
Another good time to get out of a car lease is when you can no longer make the car lease payments. This is because you might be able to negotiate with the leasing company and get them to waive the early termination fees.
Of course, this will all depend on your credit score and payment history. If you have a good credit score, the leasing company might be more willing to work with you.
But if you have a history of late or missed payments, they might not be as lenient. In this case, you might need to consider some of the other methods we’ve mentioned for early termination.
What’s the worst time in terminating your lease early?
Leased vehicle values can depreciate quickly, so the worst time to get out of a lease is often early on in the agreement.
If you terminate your lease within the first few years, you’ll likely end up owing more than the car is worth. This is because you would’ve only made a small dent in the total amount owed on the lease.
So, if you’re thinking about getting out of your lease early, make sure you do your research first. You don’t want to end up with a car that’s worth less than what you owe on the lease.
In Conclusion
There are a lot of ways how you can get out of your current lease early. But you need to be careful with your choice because some methods could end up costing you more money.
The best thing you can do is to consult with the car dealership or the leasing company directly. They would be able to advise you on what course of action you should take.
Take your time in deciding and don’t rush into anything. After all, it’s your hard-earned money that’s at stake here. With that being said, these are our four best tips on how you can get out of a car lease.
Consider your options and choose the one that’s best for you.
We hope this article has helped you in some way. If you have any questions, feel free to leave a comment down below and we’ll try our best to answer them for you.
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