It’s a mistake all too many people end up making – leasing a car they realise they cannot afford. Sure, it seems like a good idea at the time, you get a brand new, shiny car, put down a deposit and with manageable monthly payments, what could go wrong? Unfortunately, many individuals come to find that they cannot keep up with the payments, and end up struggling financially.

Any kind of monthly commitment will take a toll on your earnings and you may be paying out much more than you can afford to do. They could be many reasons as to why you are finding it difficult to make your car payments, such as a change in household income or a miscalculation when working out how much you could pay each month. This can put you and your family in a very sticky situation. But is it actually possible to get out a car lease?  The short answer is yes, you can opt out of your car lease early, however, it could be incredibly expensive, as you’ll be required to pay the remaining cost of the vehicle, which is exactly what you are trying to avoid.

So, What are My Options?

Thankfully, there are other ways you can break your car lease agreement without paying out a hefty amount of cash for the car. You could always return the car and face the penalties coming your way, swap a lease to another person, sell or trade the car, ask the dealership for advice, purchase a new car or default on the lease. We have detailed the process of each of these methods below, be sure to read through them carefully to figure out which options are best for you and your unique situation.

Return the Car and Pay the Penalties

This is the option you are probably trying to avoid – returning the car to the leasing company and consenting to pay all the costs you will be hit with. You will have to pay a termination fee which can be rather large. In addition to this, you will be required to pay the remaining depreciation of the car. The leasing company will then attempt to sell the car at wholesale auction, which could reduce your final payout when it is sold for it’s ‘realized value’. The issue with this is that this is the lowest amount you can possibly receive for the car, so the wisest option if you are in the position to do so, is to purchase and sell the car yourself. By doing this, you will save money in the long run and potentially make a larger amount of cash by doing it yourself. If you are desperate to leave your car lease because of financial issues, this is the best option.

Transfer the Lease

This is an easy and simple way to get out of your current car lease and is the most popular option for motorists. It involving transferring it to another person through the use of a third party service, such as Lease Trader or Swap A Lease. You will be required to pay a fee to transfer the car lease, which is usually between $50 and $500. The majority of car leasing companies will permit you to transfer your current lease to another individual, however in most cases, you will still be on the contract and liable if that person ceases making their payments.

Dependant on the mileage and the amount of money that was originally put down on the lease,  you might be required to offer an incentive in order to lower the monthly repayments for the person who is going to take over your lease. The could range between $500 and $5000, so not cheap, but still less inexpensive than shelling out the remaining cost for the car or continuing to pay for a car you cannot afford.

Trade or Sell the Car

You could always go down the avenue of selling the leased car. As we have mentioned, it is possible to sell the car once you have purchased it. This may be news to many motorists, but you have the option to buy the vehicle from the leasing company at any time. As known as an early buyout, it is a simple and quick way to get out of your lease if you need to. You just need to find a suitable buyer! The first step you need to take in order to do this is found out what the buyout, or payoff, the amount for the car is. You can discover this by speaking to the leasing company and be sure to deal with them directly rather than going through a separate dealership. This is because the leasing company still owns the car, so by communicating with a dealer, you are just bringing a middleman into the equation, which could cost you even more money. This cost will include a termination fee of about $200 to $500, with the remaining depreciation costs added on top.

You might find that the vehicle is worth less than the buyout price, so you will need to incur the difference as a loss when you trade or sell it on. However, if you put a sizeable down payment when you first took out the lease, the chance of breaking even is greatly increased. You may also be required to pay taxes, particularly if you are purchasing the car from the leasing company and selling it to a third party buyer, so do be aware of this. Some states in the US will allow exceptions if you buy and sell within a specific time period, although this is usually quite short, such as 10 days. Get in touch with your local DMV office to find out the individual rules of your state.

For ease, you could also trade the car in at a dealer, rather than selling to a private party. Just be aware that you will be paid the wholesale value for the car as opposed to the retail value, so you will make less money than if you sell it privately. The benefit to this is that the dealer will handle the purchase from the leasing company and you won’t have to be concerned with the issue of the tax. If you choose to trade it in with a dealer, be sure to get the buyout amount directly from the leasing company.

Contact the Leasing Company for Advice

From time to time, many of us find ourselves coming across financial troubles – sadly, it’s just a part of life. This might make it difficult to keep up with payments, however, if you feel that you’ll be back on track in a few months time, you could always get in touch with your leasing company to see if they can give you payment relief for a short period of time. They may agree to reduce the cost of your monthly repayments until an agreed time or if you are lucky, they might even offer you the option to suspend them temporarily altogether. You will be required to pay the difference at a later date, but it’s a good way for you to get back on your feet financially without being subjected to more penalties. In most cases, the only reason a leasing company will allow you to do this is id your only other option is to stop paying (known as default) the lease, which would cause them to incur extra charges. All the same, it is definitely worth speaking to them before you decide to go ahead and terminate the lease entirely.

Purchase a New Car Through the Same Dealer

You could always buy a new car through the dealership you leased your car from, it will not get rid of all the fees and penalties of the early termination process, however, it could reduce them. It is possible that they may waive or minimize certain penalties that you will incur. This method will make the termination less of a hassle and you will not need to throw down a whole lot of money in one go. However, the lease termination penalties will be included in the purchase of the new car. Dealers call this being left ‘upside down’ on the new vehicle, which in layman terms means that you will owe more on the newly purchased car than it is worth. For example, if you purchase a car that is worth $30,000 with 100 per cent financing, you will probably end up owing $32,000 – broken down, this would be $30,000 to buy the car and $2,000 for ending the lease early.

There is quite a large negative that goes along with this strategy – dealerships will often hide the cost of early exit fees in the terms and conditions of the new purchase. If you have to pay £2,000 to exit the lease on your current car, the dealer will most likely ‘roll over’ this onto the loan cost of your new car. As always, be cautious and always read the terms of the purchase to be sure that you completely understand what you are getting into.

Default on the Lease

If you are in a situation where you feel you have no other options left, you could always opt to default on the lease. This is where you simply stop paying your monthly payments. This method should only be considered when you absolutely cannot make your payments any more. The main issue with this is that it could create further problems in the not too distant future.

For instance, your credit will be affected negatively, it will be the equivalent of an auto loan default. You will likely receive a collection for the unpaid early end penalties and will undoubtedly face judgement for refusing to pay these.  

What Will Actually Happen if I Just Stop Paying my Lease?

If you do this, you will ‘default on the payments’, and is not a recommended way of getting out of your car lease. Your credit will be severely damaged and you could be yourself at risk of being sued. You could end up getting yourself into more financial worries as well as legal ones, so it’s important to look into all the above options and ask for help if needed instead of refusing to pay for your car. Although you might find yourself struggling to pay for the car lease each month, there are many other avenues you can look into to get yourself into a better financial situation in the long run. Sure, keeping up with your payments or buying the car may at first seem counterproductive, these are better options than defaulting on the lease.

Possible Penalties for Ending a Car Lease Early

Terminating your lease before the minimum period of time means that you will undoubtedly have to pay a number of penalties. Leasing companies will only make money on a lease if the customer keeps up with their payments, so as an incentive to keep you in the lease for the entire duration, companies apply penalties for those who attempt to leave early.

The DMV’s official website states that terminating a car lease early could incur all or some of the following penalties:

  • 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

Yikes – that’s quite a lot of penalties! It is a good idea to explore all your other options before exiting your lease because it came become incredibly expensive. However, if you do decide to leave the lease, be sure that you follow to understand the terms and conditions and all the penalties that you will incur. It is likely that they will all appear in the lease agreement in some way. The most common penalties are an early termination fee and the remaining payments on the lease.

It can become very costly if you are required to pay all of the remaining payments on the vehicle. For instance, if the lease is for 36 months and you decide to terminate it after 19 months, you will need to pay the remaining 17 months’ payments in order to exit the lease. In this situation, if you pay $400 monthly for the car, you will need to pay $4,600 up front in order to leave.

Instead of asking for the remaining payments, some leasing companies impose a penalty. This may be listed as a flat amount or appear as several monthly payments. You might find it easier to pay this back monthly than the whole amount in one go, so speak to the leasing company to see what they can do for you.

Early termination penalties can vary depending on when you want to leave, they are often based upon a sliding scale. For example, you may have to make three surplus payments if you were to leave the lease within the first 12 months, two extra payments if you leave within the second year and one if you leave during the third year, however, this can vary greatly depending on the leasing company’s terms.

So, if you are having money issues and want to terminate your lease, it could still end up costing you an awful lot. Unfortunately, the pricing structures are designed this way to ensure as little people as possible try to leave their leases early.

How to Avoid Getting Into Money Issues With Your Leased Car

As with all situations, prevention is the best cure, so it is better to not allow yourself to get into a sticky spot with your car payments so that you do not have to worry about dealing with the aftermath of struggling to pay it off each month. Before you go into a car dealership and decide to sign for a brand new leased car, there are a few things you need to consider first.

Know Your Finances

Have you just been given that promotion you’ve been waiting for and have received a big pay rise? You might want to get the brand new, shiny leased car you’ve been lusting over for ages, but don’t rush into it. Live with your new income for a few months and see how much disposable cash you have left over. Be sure that you can actually afford to make those payments each and every month before you sign on the dotted line.

Consider Buying a Car   

Most people begin leasing a car because they cannot afford to buy a brand new one outright, so the thought of purchasing one may sound as though it doesn’t make sense. However, buying a car will mean you will not have to worry about ensuring that you make those payments, so that will take a large weight off of your finances each month. If you do think to purchase a car might make sense for you, you might want to consider a cheaper, used vehicle. Shop around and keep an eye on local buy and sell apps, newspapers and when you are out and about. You might find the ideal used car for you, for the right price!


  1. How to Break a Car Lease – wikiHow
  2. How to Get Out of a Car Lease – U.S. News


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