How to Get Out of a Car Lease

How to Get Out of a Car Lease

Written by Corrina Murdoch
Fact-checked by Caitlin Wood
Last Updated April 15, 2021

When times get tough, it’s natural to look for ways to tighten the purse strings. Naturally, there are a few key steps you can take before making big leaps. However, if you’ve already crafted a budget and cut your expenses, getting out of your car lease may be increasingly necessary. While there are multiple different reasons to make this decision, the most important thing is to cancel the lease responsibly. By gaining a full understanding of how your lease works and what your options are, you can make the best choice. 

Reasons You May Want to Get Out of Your Car Lease

There are many different situations that cause someone to look into cancelling their car lease. Some are financial and others are comfort-based. In order to choose the best route, it is important to understand why you wish to close out your lease. Reasons include: 

  • Budgetary restrictions: If you can’t afford your regular payments, or are looking at your future finances and see paying the lease as impossible, you may want to cancel the lease. Naturally, the first thing to do is see if you are able to pull the money from elsewhere in your budget. However, if this isn’t a possibility, you may wish to pursue leaving your lease. 
  • Desiring a different vehicle: Whether there is a new addition to your family or you wish to downsize, seeking a new vehicle is a common reason to look at ending a lease. Perhaps your leased automobile doesn’t offer enough room or guzzles fuel. In any case, wanting a new car is a top reason people look to leave their leases. 
  • Car is no longer required: Perhaps you are moving to an urban area and plan to take public transportation. Maybe you are leaving the country and will no longer use the vehicle. There are many situations where a car is not required; so, if you are leasing, naturally you will want to terminate the arrangement. 
  • Environmental consciousness: As the world moves in an increasingly eco-friendly direction, many households are taking steps to contribute. Sometimes this entails getting rid of a vehicle and opting to bicycle or take public transit. In other situations, it involves finding a car that is better for the environment, like a hybrid or electric vehicle. Each of these scenarios leads to looking at ending your existing car lease. 

Things to Beware of Before Trying to Get out of a Car Lease

When you’re looking to get out of your lease, an important consideration is the potential ramifications. Though not always apparent at first, there are certain risks associated with early termination of your lease. These include: 

Impact on Credit

Since a lease is a form of credit, all the transactions ultimately impact your credit score (and resulting reputation to lenders). Should you miss a payment, it will be detrimental to your long-term credit. Regardless of whether you plan to end the lease down the road, defaulting on your financial obligations must be avoided. It can lead to the vehicle being repossessed, which is even more harmful to your credit score.

Early Termination Fees

While credit is one of the main factors in choosing whether to close your lease in a certain way, another risk is a monetary penalty. When lenders lease vehicles to drivers, they make most of the money on their investment through interest. If you are ending the lease early, the lender may seek recuperation of these funds by way of a penalty. Generally, you are on the hook for paying out the balance due, judged against the current value of the vehicle. 

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5 Ways to Get Out of a Car Lease

There are several approaches to responsibly exit your lease while minimizing the repercussions on your financial future. Each of these routes comes with its own advantages and disadvantages. By identifying your priorities, you will be able to make the wisest decision for your household. 

Lease Buyout

  • What it is: This path refers to you paying off the arrangement of the lease. In fact, all leases enable you to pay out the remainder owing at any time. This gives you full ownership of the vehicle. If you are unable to access that amount of money, many choose to sell the vehicle to get the majority of the funds needed. 
  • How it works: There is one of two ways to approach this lease exit strategy. The first is to simply pay the amount owing in full, plus any associated charges. The other, provided your lease allows it, is to find a buyer for the vehicle. You sell the automobile, though are still responsible for paying out the lease.
  • Benefits: The key advantage of this approach is efficiency. If you need to get out of your lease quickly, this may be the best route. It’s well-suited to those focused on moving forward as soon as possible. 
  • Drawbacks: While this is an efficient approach to exiting a lease, it will most likely result in an early termination charge applied to your account. This sum (usually in the low three figures) is added to the depreciated value of your automobile. Ensure that when you do your calculations this is taken into consideration. 

Lease Roll Over

  • What it is: This method involves you extending the term of your lease itself. It gives you the chance to pay off the amount over a longer time period.
  • How it works: Basically, provided you have a lease that accommodates a rolling arrangement, you can lengthen the period. For instance, if you have a five-year lease with an evergreen clause, after the first year you can stretch it out for another five years from that point. 
  • Benefits: Due to the added length of time, you can achieve lower monthly payments. If you are facing a short-term financial issue, this can be a good way to keep your vehicle and save up in the immediate future.
  • Drawbacks: Like with all lending arrangements, interest is a consideration. This means that you will ultimately end up paying more. 

Transfer Your Lease

  • What it is: When you choose to transfer your lease, you find a person to take over the contract. There are companies that specialize in finding those amenable to this approach; or, conversely, you can find a friend or family member to take over the responsibility.
  • How it works: Essentially, you find someone who wants to use the vehicle in question. Pursuant to the underwriting of your lease, you transfer the lease responsibility to that individual. They make the payments, though the lease remains in your name. 
  • Benefits: If you no longer need the vehicle and can’t make payments, this is a popular approach. It frees up your finances, lets you avoid early termination penalties, and has no negative impacts on your credit score
  • Drawbacks: While there is typically a cost associated with transferring the lease, it usually falls between two and three figures. It depends on the nature of your lease; however, in pretty much every scenario, you face a surcharge. Additionally, the lease stays under your name. So, if the new party defaults, you are still on the hook financially. 

What happens to your leased car if you file for bankruptcy? Find out here.

Return the Car

  • What it is: This method entails you giving the car back to the company that manages the lease. While it does result in penalty charges, these might be less than what you would pay over time. If you have undergone a serious financial issue, and no longer need a car, this may be a suitable path. 
  • How it works: Quite simply, you contact the leasing company and arrange to return the vehicle. You are then responsible for paying any depreciation in addition to early termination charges. 
  • Benefits: Advantages of this method include taking an upfront financial hit in order to save money down the line. If you are truly unable to make the payments and lack the time and resources for other options, returning the car may be a prudent path.
  • Drawbacks: Not only do you no longer have access to the vehicle, this method is associated with heavy penalty fees. Additionally, if you have had the lease for some time, there is likely to be significant depreciation. This will result in a higher cost associated with the return. 

Ask Your Car Lease Company For Help

  • What it is: Financial issues are not as uncommon as you may think. Especially with the state of the current economic landscape, lenders are tending towards leniency in certain situations. This path entails you reaching out directly to the lender to ask for a deferral or reduced payments on a temporary basis. 
  • How it works: Depending on the lender, when you contact them, you can avoid penalties. Ultimately, you will be responsible for the full amount of the lease. However, with a helpful lender, you may be able to postpone payments or reduce your monthly amount owing. 
  • Benefits: This method is helpful for those who have fallen on hard times, though will be back on their financial feet within a few months. It offers a temporary reprieve and prevents you from defaulting on your lease agreement. 
  • Drawbacks: Though lender assistance can be helpful, it isn’t without drawbacks. In the long run, you will be responsible for paying the full amount. This includes the difference in the cost of reduced payments as well as repaying any deferred amounts. Should your financial struggles last longer than expected, you are still responsible for the lease. 

Final Thoughts 

Provided you choose the best approach to ending your lease, it can be a way to better account for your financial future. Identify your priorities and select the path that accommodates them best. Exiting a lease early, so long as you are prudent, is a goal that can be achieved with minimal repercussions. 


Rating of 4/5 based on 5 votes.

Corrina Murdoch has been a dedicated freelance writer and editor for several years. With an academic background in the sciences and a penchant for mathematics, she seeks to provide readers with accurate, reliable information on important topics. Working as a print journalist for several years, Corrina expanded her reach into the digital sphere to help more people gain insight into the realm of finances. When she's not writing, you can find Corrina swimming and spending time with family.

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