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How Can I Terminate My Car Lease Early?

BY: Dario DiGiuseppe
Businesswoman shaking hands with male after car salesman

Deciding to lease a car can offer you both flexibility and convenience, but circumstances may arise where terminating that lease early is necessary. Whether you’re facing financial challenges or your lifestyle has undergone significant changes to the point a lease is unnecessary, learning how to navigate the lease termination process is crucial.

This guide will delve into the various aspects of ending your car lease ahead of schedule, including the key considerations to remember when making this choice.

Understanding the Implications of Early Lease Termination

All drivers leasing a vehicle must remember that they are involved in binding contracts, meaning terminating it early involves consequences. Be sure you comprehend the implications of your decision before embarking on the journey of early lease termination.

To that point, be aware that early lease termination often results in financial penalties, which can vary depending on the leasing terms and the remaining duration of the lease. You should always carefully review your lease agreement before deciding to terminate it to understand the key terms and conditions associated with the early termination.

Reasons for Terminating a Car Lease Early

A person may need to terminate their car lease early for many reasons. Be cautious, though, as some lease contracts will outline that only certain situations allow for an early termination of the lease. Regardless, common circumstances that may warrant early termination of a car lease include:

  • Changes in a person’s financial situations
  • Relocation to an area where the vehicle is impractical
  • Personal preferences changing and affecting your view of the vehicle
  • You no longer have any need for a vehicle
  • The vehicle itself just isn’t a good fit for you

Assuming your lease does not stipulate a specific reason that allows for early termination, any of the above and more can qualify.

Financial Implications of Early Lease Termination

While it’s true that early termination of a lease may provide a solution to your imminent problem, it may create an additional problem for you. In most cases, there will be an early termination fee that you will be forced to pay, which is essentially to make up for the lack of monthly payments resulting from the cancellation. Additionally, considering the current market value of the vehicle, the buyout price specified in your lease agreement may be too expensive for your current situation. This may lead to you taking out additional debt to pay off the car lease, which is never ideal.

Methods for Terminating a Lease Early

Assuming you have crunched the numbers and come to the realization that an early termination of your lease is feasible, there are several methods you can consider:

Lease Buyout Option

First and foremost, one method to end a lease early is through a simple lease buyout. This just means that you purchase the vehicle for a buyout amount before the lease term concludes. The feasibility of this option depends upon the current market price of the car, whether there was a prespecified buyout price in the lease agreement, the residual value, and however you wish to pay for the transaction.

Lease Transfer to Another Party

Another simple way to terminate your lease early is to transfer the lease to another party entirely. This is sometimes called a lease takeover and is quite a popular option. This method allows someone else to assume the remaining lease term and the associated payments with the lease.

However, approval from the leasing company or dealership is usually required, and this approval can be hard to acquire. Before agreeing to transfer your lease to someone new, also be sure that the new lessee will meet the eligibility criteria of the lease and that they are willing to take on the financial responsibilities and transfer fees of the car loan.

Early Lease Return and Negotiation with Lessor

An additional avenue to consider for early termination is simply to negotiate with the lessor for an early lease return. Some leasing companies or dealerships may permit early returns under special circumstances, but you won’t know unless you ask. You can reach a mutually beneficial agreement by openly communicating and being willing to discuss options with the lessor. When negotiating, be sure to emphasize your financial hardship, job loss, or other personal situation, as some lessors may be willing to work with you.

Trading in the Leased Vehicle

Simply trading in the lease vehicle to get out of lease payments is another option for an early end of the lease. This involves trading it in for another vehicle and incorporating the remaining lease balance into the new deal. You should be aware, though, that this strategy has financial implications, as the lessor may assess the market value of your vehicle and not give a fair trade-in value depending on its condition.

Steps to Take with Leasing Companies

Navigating the process of an early lease termination can be complicated and often involves specific steps and interactions with leasing companies. With that said, two of the most important steps to keep in mind include:

Communicating with Your Leasing Company

Above all else, be communicative with your leasing company as a first step. Be sure to convey your reasoning for requesting early termination of your lease, and understand that the company policies can pave the way for a smoother process, even if it seems like a headache.

Companies will often require some form of documentation to back up your claim for why the car lease agreement must be ended early, such as proof of job relocation or financial hardship, so have this handy if you are trying to get out of the remaining payments.

Required Documentation and Procedures

During the early lease termination process, it will be vital that you complete the necessary documentation and adhere to specific procedures. Whether that means working on settlement quotes, inspections of the vehicle, or additional paperwork, be sure to comply with all procedures outlined by the lessor to ensure a smooth process.

Considering Extended Warranties in Lease Termination

Another wrinkle that may arise as you look to terminate your lease early is if you have an extended warranty currently active on that vehicle. Believe it or not, some extended warranties can be carried to a new lease, whereas others may have larger problems.

How Extended Warranties Affect Lease Termination

Some extended warranties may be transferable or refundable in the event of an early termination of a lease, but it’s possible that this isn’t the case. It’s important to review the terms and conditions of your extended warranty contract before signing if you intend to terminate the lease early.

If you can’t find anything in the contract, don’t hesitate to contact the warranty provider to inquire whether there are options for transferring the warranty. It’s also worth mentioning that some warranties may have prorated refunds if they are canceled before the expiration date.

Transferring or Canceling Extended Warranties

Diving a little deeper into transferring or canceling extended warranties, be sure to leverage open communication with your warranty provider to find the best solution. Extended warranties can contribute significantly to the overall cost of leasing, so understanding your options to transfer or cancel the warranty can help minimize the financial implications of early termination.

Tips for Minimizing Penalties and Costs

Given all of the above, you would be forgiven for being apprehensive about canceling your lease early. Luckily, there are some key ways you can minimize the cost or penalties of an early termination:

 Assessing the Market Value of Your Leased Vehicle

One of the easiest ways to reduce the cost of your early termination is to determine the current market value of your leased vehicle to garner insights. This information can be instrumental in negotiations with the lessor and influence the overall cost of an early termination. Start by researching the current value of similar vehicles in your area, if not the same one, and consider factors such as age, color, mileage, make, and condition. Lenders will have a harder time offering you an unfair buyout if you know the actual market value for the vehicle.

Exploring Options with Third-Party Calculators

Another great strategy for reducing the costs associated with early termination is to use a third-party calculator designed to estimate the total costs of the early termination. Tools such as this consider various factors and provide a total estimate of the potential expenses involved with ending your lease prematurely. The primary benefit of this tool is that it allows you to understand better the financial implications of early termination based on factors such as the remaining payments, mileage, and even depreciation.

Some car lease early termination calculators include:

Negotiation Strategies with Leasing Companies

Finally, negotiation will be your best friend when trying to reduce the costs of an early termination of your car lease. You can potentially reduce costs by employing helpful tactics such as highlighting your history as a reliable customer, perhaps with loyalty programs, stressing the importance of your situation, and taking a proactive approach. Focus on emphasizing your commitment to fulfilling your lease obligations and show a willingness to collaborate to come to a solution.

Use Endurance to Protect Your Vehicle

Whether leasing a used car or a new car, finding yourself in the position where you are trying to terminate your lease early is daunting. Finding out the extended warranty on your current lease and the current car will not transfer to a new one is equally as difficult. Fortunately, this isn’t a problem Endurance Warranty customers need to worry about, as all our plans are transferable.

Endurance offers vehicle service contracts (also known as extended warranties) like our Superior, Supreme, and Secure Plus plans. However, we also offer customizable options to best fit your needs. Each plan covers the most important components under the hood (engine, transmission, and A/C!), but the coverage then ranges from stated to near bumper-to-bumper, depending on the plan. This means that there is a coverage plan for every driver.

In addition to the above protection, all Endurance new contracts come with Elite Benefits for a small activation fee, which offers bonus perks such as reimbursements for up to four tires per year due to road hazards, 24/7 roadside assistance, and up to $1,000 in total loss protection.

Call our award-winning customer service team at (800) 253-8203 to request a FREE quote, or shop online to see your price now.

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