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If your leased car no longer fits your budget or your lifestyle, you may be wondering how to break a car lease. There are several ways you can cancel a lease early. You could terminate the contract before the lease is up, transfer the lease to someone else, or trade in the lease for a different vehicle.
Regardless of which path you choose, there will probably be a hefty fee involved. Learn how to break a car lease, what it might cost, and how to make the right choice for your situation.
Here are the four most common methods to end your car lease early:
Returning your car before the lease expires is called early vehicle lease termination, and it’s the most straightforward (but often the most expensive) way to break a lease. The leasing company will typically charge you a significant fee for returning the vehicle early, and it might require you to pay the balance due — meaning you must make all the remaining lease payments. The earlier in the lease you return the car, the more expensive it will be, because most of the depreciation occurs the first year.
You might owe a disposition fee or mileage overage, too. And some companies will only let you break a lease if you buy the car outright. Check your lease contract to verify the specific terms, conditions, and fees of your agreement.
Another option for getting out of your car lease is to transfer it to another person.
A lease transfer, also called a sublease or lease swap, lets a third party take over your lease for you. That person will be the one to make the lease payments and finish out the lease. There is usually a fee to transfer a lease to someone else, and not all leasing companies or states allow it. Sometimes, even if someone else assumes the lease, you remain ultimately responsible for making the payments.
Online lease-swapping platforms allow you to list your vehicle and terms and then connect with buyers who are interested in short-term leases.
Instead of turning in your car lease early, you can purchase the car. That’s called a lease buyout. The difference between a lease payoff vs. a lease buyout is that with a buyout, you keep the car. With a payoff, you return the car to the dealer.
The price of buying out a lease is called the residual value. The residual value is predetermined and is already included in your lease contract. When you purchase the car, you pay the residual value plus fees, taxes, and other costs. If you’d rather not make a balloon payment at the end of your lease to buy your car, a lease buyout loan could help you cover the cost.
Once you pay to buy the car and settle the fees and taxes, the vehicle is yours; you can keep it and drive it around, or you can sell it. If the car’s current market value is higher than the buyout price, you have positive lease equity, and a lease buyout may be worth it. You could sell the car for more than you paid to buy out the lease. But if the car’s market value is less than the buyout price, purchasing the car could be a step backwards financially.
If you want to know how to get out of a car lease early because you want to drive something else, then consider trading in your lease. Some dealerships will let you trade in your leased car for a new car. They’ll pay off your old lease and, if there’s any money left, apply the difference to your new car.
The benefit of this method is that you get out of the old lease and into a new car that suits you better. The drawback is that you’ll still have to pay any end-of-lease charges (such as the disposition fee) plus transfer fees for trading the lease to the dealer.
You can also check whether it’s possible to trade in your leased car and roll any remaining payments into a new auto loan. The downside of that option is that your new car payments will be more expensive, and you might end up paying more than the car is worth. Auto refinancing is one way to bring those expensive payments more in line with your budget.
Sometimes, a car you once could easily afford becomes too big a burden for your budget. For example, you might be struggling to afford your lease payments if:
If you can’t afford to lease your car anymore, contact your leasing company right away. Explain your situation and see what options are available. Instead of breaking your car lease early, they may offer a new payment plan that lets you keep the lease but make more manageable payments. You might also have the right to make up missing payments before the company repossesses your car.
On the other hand, depending on the contract and the state you live in, the leasing company might be able to repossess your car after just one missing payment. In that situation, you’d lose your car, and you might have to pay a fee, too. Plus, repossession has a pretty serious effect on your credit history.
If you can’t afford to lease your car anymore, find out what laws apply to your situation by reviewing your contract carefully and reaching out to your state’s attorney general’s office. Then you can decide if you want to end your lease early or explore other options.
Follow these steps to protect yourself before you decide whether to break your car lease:
Lease buyouts might be new to you, but RefiJet can help you make sense of them. Our lease buyout tools and resources help you understand the ins and outs of ending your lease, including everything you need to know about lease buyout loans.
Yes, it’s possible to get out of a car lease early. If you choose early termination, your contract will specify the fees and charges for terminating the lease early.
It depends on how much time is left on your lease, the value of the car, and the amount of the early termination fee. Ending a lease early can cost hundreds or even thousands of dollars. The earlier you break the lease, the more expensive it will be.
If you stop making payments, that will break your lease, put you into default and hurt your credit. You can protect your credit score by following the leasing company's procedures for terminating a lease and paying the fees.
It really depends on the wording in your lease contract. The earlier you give up your car, the costlier it will likely be to get out of the lease.
Sometimes you can. If that dealership is willing to pay off your lease and take ownership of the car, perhaps to sell to another buyer, then yes. Check your lease agreement or call the leasing company to know for sure.
It’s possible. If you trade in the lease for something else, your insurance will be based on the new vehicle, which could affect your payments. Changing GAP coverage or insurance add-ons at the end of a lease can also affect the cost.
Learn whether you can refinance a car loan with high mileage, what lenders consider, and how vehicle age and mileage affect approval.
