If you are thinking about opting out of your car lease early, you should first consider the penalties you will face.
You should carefully review your car lease agreement to understand the terms and conditions of early termination before seeking an alternative plan.
The outcome of this will allow you to weigh the benefits and costs so that you can make an better decision.
Every lease agreement is different, so you’ll want to examine yours carefully. Here are a few of the common consequences of early termination:
- Early termination fees
- Negative equity between the current value of the vehicle and the lease amount
- Liability for the remaining payments on the current lease
- Car storage fees
- Dealer fees for covering the cost of preparation of the car for sale; and
- Transfer fees and taxes.
Option 1: Transfer the Lease
One of the easiest and most popular ways to get out of your lease early is to transfer it through a 3rd party service, such as “Swap a Lease” or “Lease Trader.”
As a seller of a lease, it’s important to make your vehicle stand out on these trading websites. You might have to put up some additional cash as an incentive.
Buyers are typically looking for the best deal. It helps to have your vehicle in good condition and below the lease’s mileage limit too.
Although most leasing companies allow you to transfer a lease from one person to another, realize that you are still technically liable if the second party stops making payments.
You will also have to pay a transfer fee which can range between $50 and $500.
Option 2: Trade it in
If you trade in your lease, the dealer could give you an offer for the leased vehicle like it would with any trade-in. You would still be breaking your lease, but you would be doing so by having it bought out.
As a bonus, if your car has equity, you could use it as a down payment on your next vehicle.
This option is suitable for those who still need a car but can’t afford their lease payment or need a different kind of vehicle (a bigger car for a growing family, for example).
You’ll still be charged an early termination fee, but it may be spread out over the monthly payments of a new car loan. When you buy a new or used car from the same dealership you leased your current car from, the leasing company may waive or reduce certain penalties.
Option 3: Lease buyout
Many people don’t realize that they can buy the car out of their contract and sell it independently. Sometimes buying out your lease early and purchasing the vehicle outright could be your best option.
There are still fees involved. Consider whether paying the early buyout amount, along with any fees, and then selling the car yourself would place you in a better financial position than an early termination or lease transfer.
Be aware, however, that you’ll need to factor in buyout financing if you’re unable to pay the early buyout fees.
A lease buyout could be advantageous for you if the market value of the car is higher than the leasing company anticipated it would be. The anticipated value should be listed as the “residual value” on your lease agreement.