Returning a leased car early can be an option if your situation changes, but it usually comes with certain steps and possible costs. Leasing is a popular choice because it lets you drive a newer car without a long-term commitment, but ending the lease early may not always be straightforward.
If you want to return a lease car early, read this complete article to learn all the details.
Can You End a Car Lease Early?
Yes. If you wish to terminate your car lease early, your lease agreement may allow you to do so by returning the leased car to the dealer early and paying any early lease termination fee required by the terms of the lease agreement.
What Happens at the End of a Car Lease?
If you reach the end of your lease, there are usually three options:
- Buy your current car (if your lease includes a purchase option)
- Return your car
- Return your car and lease or buy a new one
If you can make it to the end of your lease, that’s usually the best option from both a financial and logistical perspective. If you terminate your car lease before the agreed-upon date, you may face additional fees and penalties that can cost you more than keeping the car for the entire lease term. If you only have a few months left on your lease, you may decide it’s best to wait until the term is up before returning your car.
How Early Termination of a Car Lease Works
Ending a car lease early means canceling your agreement before the contract period is over. For example, if you signed a three-year lease and decide to return the car before the three years are up, that’s considered early termination. However, this process can be expensive and complicated.
Most lease agreements include an early termination fee, and you might have to pay other costs. These could include the remaining payments on your lease, the difference between the car’s remaining value and what it sells for, or additional charges.
It’s important to note that these fees can add up to thousands of dollars, especially if you terminate the lease early in the term. The sooner you end the lease, the higher the costs are likely to be.
What to Consider when Ending a Lease Early
Your reason for termination
What the early termination fee would be
Your lessor’s policies
Before terminating a lease early, it’s best to talk to your landlord first. They may be able to work with you to find a solution, or at least let you know about their early termination policies.
How the Early Termination Administrative Charge is calculated
The Early Termination Administrative Charge is based on the percentage of months overdue in the lease term, according to the following table:
| Percentage of months expired in lease term (rounded to a full percentage point) | Number of base monthly payments due |
|---|---|
| 0 to 25% | 2.5 |
| 26 to 50% | 2.0 |
| 51 to 75% | 1.5 |
| 76 to 100% | 1.0 |
Car Lease Termination Fee
Typically, the cost of ending a car lease early includes a fixed fee plus the difference between what you still owe on the lease and the car’s current value. If there’s a lot of time left on your lease, the early termination costs might be higher than simply finishing your monthly payments until the lease ends. To know the exact cost, check your lease contract, as it will outline all the fees and terms for early termination.
When Is It a Good Idea to End a Car Lease Early?
Sometimes, ending a car lease early makes sense if your circumstances change significantly. For example, if you move to an area where you can walk or rely on public transportation and no longer need a car, it might be a smart choice. Just ensure that the cost of ending the lease early is less than what you’d pay if you kept the lease until the end.
When Is It a Bad Idea to End a Car Lease Early?
On the other hand, if you just don’t like the car but it’s still functional and affordable, it’s usually better to stick with your lease. Dealing with minor inconveniences and keeping the lease until it expires can save you money. While it might not be your favorite option, it’s often the best choice for your finances.
Alternative Ways to Get Out of a Car Lease Early
If you can’t afford the fees for breaking your car lease early, here are some options to consider:
1. Buy Out the Lease and Sell the Car
Many lease agreements include a buyout option, allowing you to purchase the car before the lease ends. To do this, you’ll need to pay the remaining lease payments, any fees, and the car’s residual value (its estimated worth at the end of the lease).
After buying the car, you can sell it to recoup your costs. If the car’s market value is higher than the residual value you paid, you might even make a profit. However, if it’s worth less, you may not recover the full amount.
Residual Value: This is the estimated value of the car at the end of the lease, determined by factors like its age, mileage, and condition.
2. Roll Payments Into a New Lease
If you plan to lease another car, you might be able to roll your remaining payments into the new lease. Keep in mind this will increase your monthly payments on the new lease, potentially making it more expensive than the car is worth.
3. Transfer the Lease to Someone Else
Many leasing companies allow you to transfer your lease to another person. This is often the cheapest way to get out of a lease, but you’ll need to find someone to take it over.
You can use online services like Leasetrader or Swapalease, which connect people looking to exit a lease with those looking to take one over. While these services charge a fee, it’s usually much less than the cost of early termination.
Once the lease is transferred, the new lessee becomes responsible for the remaining payments. In some cases, your obligation ends when the transfer is complete, but certain leasing companies may require you to co-sign on the agreement. If this happens, you’ll still be responsible if the new lessee misses payments.
These options can help you avoid the high costs of early lease termination while still addressing your changing needs.
Final Thoughts
Returning a leased car early is possible, but it’s essential to weigh the costs and explore all available options. By understanding your lease agreement and working closely with the leasing company, you can make an informed decision that minimizes financial strain while meeting your needs.
