When you sign a car lease contract, it is pretty much same as getting married. If you decide someday to come out of it, it could prove to be a costly affair. Quitting a car lease early could mean hefty penalties and termination fees. Your car dealer would be trying to lessen the financial impact by recommending a new car in exchange for your current leased one. But that too, would be involving added penalties to the actual cost of the new car.
What Does Quitting a Car Lease Imply?
Quitting a car lease implies breaking an original agreement or contract that facilitated low payments over given number of years. The agreed low payments are actually made possible only in case the car lease is completed as per the agreed terms. Lease firms rely on their clients to stick to the agreement and complete the lease period as scheduled earlier.
It is however, to be noted that people wishing to quit their car leases early, should go through the early payoff or early termination clauses provided by the lease firms in their lease agreements or contracts. These details in the contract are pretty difficult to comprehend and it is not possible for you to calculate your remaining lease balance without seeking professional help.
In fact, clients are often taken aback by the high cost of quitting a car lease early as they are unaware of the reality and usually expect a small or negligible penalty fee.
Return the Car
Car leasing is not the same as car renting. So you cannot just walk away by returning the car to the leasing firm. Leasing never operates that way and that is certainly not the way to quit an auto lease.
If you wish to terminate your car lease early, you may return the car, but additionally, you need to pay the leasing firm whatever amount you still owe and that could really be substantial.
You would be under the obligation of making all left over monthly payments, penalty fees for extra wear & tear, excess mileage fees etc. You are required to bear all the related financial obligations as a lessee quitting early. Even though you have returned your vehicle to the leasing firm, remember that the contract is still enforceable and you need to abide by it till the actual term is complete.
Leasing another Vehicle
You could consider quitting a current car lease by getting into a fresh lease on another car from your dealership. However, learn details regarding the car’s equity before you take the plunge.
The owed amount would comprise the car’s residual or remaining value, depreciation and the capitalized cost as well. The new car’s monthly payments could be incredibly high, if the car is said to have negative equity. You would then require paying the principal amount still owed by you from the earlier car plus all the expenses related to your new car.
An effective way of quitting a car loan early is by stopping all sorts of payments or not meeting your financial obligations so that your dealership is forced to repossess the car. What could be the consequences of such a decision? You could enjoy a short-term advantage of getting away easily without making any payments or amount owed by you to the dealership. But keep in mind the long-term impact as a result of this. Your credit profile would be damaged and it would be more or less impossible to secure a car lease in the near future.
Buy Out the Auto Lease
You could think of buying out your car lease from the concerned dealership or finance firm. The lessee could be benefitted by this supposing the car’s actual market value has been projected more than the reality, by your car dealership.
This may happen on very rare occasions as most car dealerships can accurately estimate future vehicle values. Buying out might actually be very costly. The vehicle’s buyout price could be higher than the actual market price. This is a fact, in case you quit the car lease within the first couple of years of the contract.
Swapping Car Lease
You could quit a car lease early by transferring your lease to another person. The new lessee would have to make all the remaining payments. Lease swapping therefore, helps you to quit a lease without really worrying about the negative effect on your credit worthiness or credit profile.
Sometimes, you could transfer the lease to someone else if the dealership allows you to. The new party would then be responsible for making the pending payments. This is called lease swapping. You could walk away from the lease without any tension regarding the negative impact on your credit score or credit worthiness.
Online vehicle lease trading provides unprecedented amount of freedom to the leaseholders. A lease agreement allowing vehicle transfers is quite similar to an automotive prenup. In such a case, it feels good to commit knowing that if you wish to quit, it would definitely not be a really painful parting.