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Everything that happens in your life is not always under your control – you could lose your job, acquire significant health problems, be forced to relocate for a job or have a family member die suddenly. Any of these major events can have a significant financial impact on you, giving you a valid reason to terminate your automobile lease before it expires.
We developed this get out of a car lease article to help explain how to get out of your car lease early if you don’t know all of the choices accessible to you.
Methods for Getting Out of a Car Lease
While it may appear difficult or costly to terminate an automobile lease early, there are several options available that may be better for your position. To make it work, you’ll need to put in varying amounts of time, effort, and money, as well as consider the financial ramifications down the line. Make sure you think about your options thoroughly.
Most people’s best option, in my opinion, is to transfer their car lease to someone else. If you can locate someone prepared to take over your lease, this is the cheapest alternative and will have no financial consequences for you. Finding someone and then going through the formalities to accomplish the move takes some time.
If you’re wondering why someone else would want to take over your lease, it’s because they’ll get all of the benefits of leasing without any of the additional fees. If you put down a larger down payment to lower your monthly payments, for example, when someone else takes over the lease, they will obtain the cheaper payments without having to make the down payment.
It enables customers to enter into a lease and, in most cases, get a better deal. The disadvantage is that the lease will be for a shorter period of time, but that may be exactly what they want.
2. Consider Purchasing a Car Lease
You have the opportunity to buy out the remainder of the money and term remaining in the lease at any moment throughout the lease. You would be purchasing it from the lease company, and as a result, you would be the only owner of the vehicle.
In terms of upfront costs, this can be a costly alternative because you’ll need to have enough money to cover the vehicle’s value as well as any remaining lease costs and fees. There are, however, ways to mitigate this, and you may be able to regain a part of the value with only a minor loss, or even break even in the end.
The first step is to contact the leasing company and explain that you are considering purchasing the car lease and would like to know how much it will cost. If you put down a substantial down payment at the beginning of the lease, you will pay less to buy it out at the end.
You’ll also have to pay an early termination fee of $200 to $500, as well as the depreciation cost for the remaining lease term, which is used to calculate your monthly lease payments. You do not have to pay any fees for damage or exceeding the annual kilometer limit if you buy it out.
Next, consider taking out a loan to help cover the cost of purchasing the vehicle at the end of the lease. Find out how much the loan will cost. Then, based on the year, make, model, trim, kilometers, and options, do some in-depth research into what the vehicle would be worth on the resale market in your area. You may conduct this research using websites such as AutoTrader, CarGurus, Kijiji, and Canadian Black Book.
3. Trading In a Leased Car for a New Lease
It is still feasible to trade in your existing vehicle and lease to the dealership and pick up a new vehicle with a new lease if you are not close to the end of your lease. It’s a straightforward procedure that’s likely the easiest method to get out of your existing lease. However, it may prove to be more costly in the long run.
This is usually a preferable alternative for folks who aren’t in dire financial straits and don’t want to give up their automobile entirely. It’s mainly for customers who don’t like their current lease vehicle and want to get a new one without having to pay a large termination charge.
Simply ask your dealership or leasing business whether they will accept a trade-in for a new lease to trade in your current lease for a new one. If you are allowed to trade it in, any costs, fees, or penalties from your previous lease will be rolled into your new lease.
When calculating payments, for example, if the old vehicle is worth less than what you still owe on the lease, you must add the difference to the new lease. Similarly, any excess damage or yearly kilometer fines you accrued on the previous vehicle would be carried over to the current lease.
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It may be more expensive in the long run, but it allows you to spread these payments out over the course of your new lease rather than paying them all at once. It is not suggested to trade in your lease more than once in a row because this might lead to a risky game of incurring more charges and payments.
If you truly require a new vehicle, this is a realistic alternative to pursue only once. If you lease a compact sedan and then have a child a year or two later and need a larger family vehicle, you can trade it in for a larger SUV or van as long as you can afford the additional lease payments.
4. Understand the Termination of a Car Lease
If you are unable to use any of the preceding choices outlined above for whatever reason, you will be forced to consider considerably more expensive options for terminating your lease early. There are very few scenarios in which it would be preferable to simply ride out the remainder of the lease, but you can simply terminate the lease if necessary.
Because you are not paying to purchase the car, this is not the same as buying out the lease. You’re only paying to get out of the lease, not to keep the automobile. This implies you are paying the remainder of the lease’s charges, fines, and penalties without receiving anything in return other than the right to terminate the lease. You will have to pay a very substantial termination fee in addition to the usual costs, fees, and penalties. If you cannot afford to complete all of the termination payments, you may face a credit score penalty.
You can always contact the leasing company and negotiate a solution if you are in highly unusual circumstances and this is the greatest choice accessible to you. In the end, you’ll definitely pay a lot more than you want, but depending on the circumstances, they may be able to accommodate you in certain ways. Finally, you should not try to quit your car lease early without exhausting all other possibilities first. You will save a lot of money if you do everything you can to make them work.
5. Voluntary Return of the Leased Vehicle
This is your ultimate final option for getting out of your car lease before it expires. If you absolutely cannot afford to make the payments or any of the other options listed, this should be your last resort. If you must do so, there is an ideal procedure to follow.
Check to see if you purchased Walkaway Protection, Job Loss Protection, or any other type of financial protection plan. They provide further protection in this event, where you are unable to make your payments owing to unforeseen circumstances. For example, you may have suffered a devastating and long-term sickness or injury, or you may have lost your work unexpectedly, rendering your ability to make future payments impossible. These policies allow you to return the vehicle without incurring any financial penalties or harming your credit score.
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If you do not have such a plan, you should contact the leasing company and inform them that you are unable to make future payments and wish to relinquish the vehicle. If they have to come to take it from you, taking it to them will help you avoid extra fines, and if they do come after you for the remainder of the lease money, you may have less to pay.
Some leasing firms have a policy whereby if you relinquish the vehicle voluntarily, they will sell it and deduct the amount owed from your account. They may still pursue you for the balance outstanding, but it will be far less than it would have been otherwise. This is even another reason to notify them ahead of time and offer to hand it over to them.
This has the highest financial cost in terms of payments and fines, as well as the impact on your credit score. It should only be used as a last resort if all other options have been exhausted.
The Bottom Line
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