Early Car Lease Termination: Options and Costs

Leasing a car can be a convenient choice for many, but circumstances occasionally demand that you end your lease early. This guide explores several options and the associated costs when considering ending your car lease before it concludes.

Understanding Your Options

Ending a car lease early usually incurs a financial cost, but if the desire to get out of the lease is strong enough, you may be willing to pay it. Here are some strategies to consider:

Contacting the Finance Company

The first step is to contact your finance company and inquire about the cost of terminating the lease early. They can provide you with a clear estimate of the financial penalty associated with early termination. Take note, this cost might be reasonable enough to just pay it.

Selling the Car On Your Own

Another option is to attempt a private sale of your car. However, be aware that the car's market value at the time of selling will likely be less than the payoff amount from the lease. This means that you might need to pay the difference out of pocket. For instance, if your payoff is $18,000, you might receive $16,000 or $17,000 in a private sale, leaving you with a potential shortfall of $1,000 to $2,000.

Trading In at a Dealership

Dealerships offer an alternative where they will take your leased car as a trade-in. Keep in mind that they will typically provide you with a significantly reduced trade-in value, which may be lower than the payoff from your lease. The difference between the payoff and the trade-in value will be added to the cost of your new car, resulting in higher payments for the new vehicle.

Calculating Costs and Alternatives

To make informed decisions, you can calculate the total cost of your remaining lease payments and add that to the residual value of the car (the amount you could buy it for at the end of the lease). Compare this total amount to the trade-in value of your current car. Typically, this calculated total will be higher than your car's trade-in value, though the difference might not be significant.

The difference between the calculated total and the trade-in value is the amount you’ll need to pay to conclude the lease early. Alternatively, you could choose to continue the lease and roll the difference into the next lease as an increased payment. For example, if you are $3,600 upside down in your current lease and you plan to lease another car for 36 months, you can increase your future lease payments by $100 per month to cover the cost of breaking your previous lease early.

Finding the Best Deal

Remember that exactly as described, it is indeed possible to end your lease early and exchange it for a new car under these conditions. If a specific dealer disagrees, try a different one. Finding a dealer who understands and agrees with these procedures can make all the difference.