What Happens When You End Your Lease Too Early?
Leasing a car is a great way to be able to drive a new set of wheels every few years with low monthly payments and under the new-car warranty. But what if those “low monthly payments” aren’t low enough to fit your monthly and budget and you find that getting rid of that leased car altogether is your only solution? Like a borrowed book from a library, you can return the car to the dealership, but there will be penalties involved.
Returning the car to a dealership
The easiest way to literally get out of your leased car is to simply drive it to your local dealership, or the one that you bought it from, and return it to them. They will have you sign a couple of forms, including an “odometer disclosure form,” and then you can be on your merry way. However, the bad news will come in the mail later on.
Ari Janessian, a Youtuber and auto sales broker, claims that after around 45 days or so, you’ll receive a notice in the mail from the manufacturer, or lease company, stating how much you owe for the car. And while you might think that it’s as simple as paying the remaining payments that were on the lease, it’s a little more complicated than that.
Make payments or voluntarily repossess
If you do decide that you want to get out of your car lease early, then the first step would be to read the lease agreement that you signed when you leased the car to get familiar with the fees that you might face. According to DMV.org, some of the lease penalties that you could face include:
- The remaining payments on your lease
- An early termination fee
- Transportation and prep costs to sell the car
- Storing the vehicle
- Any taxes associated with leasing
- The negative equity between your lease amount and the current value of the car
While all of these fees might not apply in your specific early lease termination case, the most likely fees that you will have to incur are the remaining lease payments plus an early termination fee. However, in some cases, the leasing company will take the car to auction and subtract the auction value of the car from the “payoff amount” of the car and charge you for the difference.
Janessian says that in some states, the leasing company will charge you the lesser of the two charges are. For example, if you have 15 remaining payments of $300 on the lease, then they will charge you $4,500 plus whatever early termination fees. But if the payoff amount of the car is $25,000 and they end up getting $21,000 for it at auction, then the leasing company will charge you $3,000.
In either case, it’s important to pay the remaining amount they charge you on time because if you don’t, then the leasing company will have to report it to the credit bureaus as a “voluntary repossession” and the will affect your credit score and report negatively.
One of the easiest ways to get out of a lease early
One of the easiest ways to get out of a lease early that we found was to sell it to a third-party used car dealer like Carvana or Carmax. Those types of dealers will typically offer you more for the car which will work in your favor because you will either pay less of the overall payoff amount owed or if the car happens to be worth more than the payoff amount, then they will give you a check for the positive equity on the car. Also, with a dealer like Carvana, you can do everything online and you won’t even need to leave your house as they will pick the car up from you.