At its onset, leasing a car seems like a good option to get a brand new car for a small monthly payment for a few years, after which you can return it. For most of us, leasing isn’t all it promises to be, because you may end up paying for that car for a very long time. There can be many reasons to end your lease early, but doing it is a difficult thing altogether. There may be some penalties applied if you try to terminate a car lease earlier than the required time, with the most common ones being an early termination fee, and the company can force you to make the remaining payments of the lease. This may become very expensive if the remaining term is more than a couple of months.
So how do you terminate a car lease with the minimum possible penalties?
- Return the car to the leasing company or the dealer:
This is the easiest way of getting out of the lease but is also the most expensive. The dealer or the company will handle all the specifications, but they will not let you go without paying all the penalties from the lease agreement. This will include a hefty early termination fee and the depreciation charges for the rest of the lease period. After that, the car may be auctioned at wholesale prices, which will give the minimum value of the car, and you may have to pay the difference amount, which will be as high as the selling price is low.
- Buy the car, and then sell it off:
Most car leases allow the user to buy the vehicle during the lease period, and this can be more beneficial if the buyout value of the lease is less pricey than the resale price for the car. There may still be an early termination fee of a few hundred dollars, but it would be less than what you would be paying if you don’t get out of the lease. To buy the car, first, you need to get a written amount for the buyout from the leasing company, then you need to find out at what value can you expect to resell the car. Even if the resale value is less than the buyout amount, this method may still save you money when getting out of a lease, compared to other methods.
- Buy another car from the same dealer:
If you buy a new car from the same dealership you leased a car from, they may be willing to forego some penalties or reduce them. However, it is important to make sure the exit fees on the lease does not affect the terms of the new car. In some cases, the penalty reductions may be transferred over to the loan amount for the new car by the dealership. Despite these factors, this method is an easy and hassle-free way to get out of the lease without spending too much cash from your pocket. But you may end up owing more than the new car’s worth.
- Default on the lease:
This should be used as a last resort, in which case you cannot make any more lease payments so, you default on the lease. However, it may result in more problems rising later on, including damaging your credit score, and you may also need to answer for the unpaid termination penalties and the lease payments and collection costs from the default. As a result, this method is not a recommended one.