How to Get out of a Car Lease

How to get out of a Car Lease

It is No Different Than A Car Loan

how to get out of a car leaseLeasing skeptics and many financial advisers often warn people that if they lease a car then change their mind, they are stuck. There are a couple of problems with this reasoning:

  1. It is factually incorrect. You can always pay-off a car lease, just as you can always pay-off a car. You may even be able to get some to take over car payments or take over car lease.
  2. Whether you purchase or lease a car, there will be financial consequences for deciding not to keep it a few years or more.

The truth is you can get out of a car lease early.

Leaving a Car Lease Before it’s Term

Neither of these scenarios are desirable, and the sooner you try to get out of a car lease or car purchase, the more money you stand to lose. The problem is depreciation. To illustrate, let’s say you purchase a $30,000 car on a 60 month loan at 7.0% interest. A year later you decide you don’t like making those $600 a month payments and you no longer want the car. Sure, you can sell the car and pay off the loan; however you are going to lose money no matter how you look at it. For one thing, you’ve already made $7,200 worth of payments. The other problem is the car is not worth nearly as much as what it will cost you to pay off your loan. A car’s most rapid depreciation occurs in the first 2 years. One year later, even a $30,000 car with a very solid resale value like Honda is going to be worth $6,000 to $7,000 less than what it cost brand new. You can never get the money back that you’ve spent on a new car, even if you decide to sell it a few months later. Paying cash for a new car by far carries the most immediate risk. The $7,000 you will lose in depreciation after one year is a given, but what if you need to get rid of the car sooner? If you had bought the car on a 60 month loan, you’ve only lost your down payment plus the number of payments you’ve made to the bank. When you pay cash for a new car, the instant you drive it off of the lot, you’ve immediately lost thousands of dollars in depreciation. Should you lose your job or decide you really made a bad choice in buying a new car for this kind of money, you’d wish that you had only made a couple of monthly payments rather than blowing $30,000 all at once. Either way, you have to sell and cut your losses.

Don’t Take a Loss

Leasing is really the safest and lowest-risk way to finance a new car. In fact, getting out of a car lease  has more options than with a car loan. With a lease, your worst case scenario is that you have to continue making low monthly payments which are about 33% lower than a purchase for a typical two or three year term. A car lease payment on the $30,000 example above would be in the $400 range, which is a good $200 less than the purchased monthly payment. After one year, you’ve only paid $4800 rather than $7200, or $30,000 all at once. With leasing, you are only paying for the portion of the car you use (Depreciation plus Interest). As with a car purchase, you can always pay off a car lease early. Your payoff will be the sum of the total number of payments remaining plus any unpaid interest and taxes, along with turning the car back into the bank or lender. Another option would be to sell the car for market price and use the proceeds, along with the extra cash required to pay off the bank and acquire the title. Though you will take a loss if you turn a car lease in early, you are not actually “stuck in the car” as leasing skeptics warn. As you will learn, there are plenty of people out there willing to take over a car lease.  How do you find them?

Ways of Getting Out of a Car Lease

Turn the Car Back In

This is the most straightforward approach to terminating a car lease. The way you turn your car in varies only slightly among Car Financing companies. In the last few years that I’ve leased from GM, Ford, Honda, Toyota, Hyundai and Subaru. The procedure works like this: Call your leasing company or bank and tell them you are turning the car in because it is at the end of your lease term. They will usually have an inspector come out to your home or office to inspect the condition of the car for any unreasonable wear or tear. After that, they will have you sign something that shows what they did or did not find in the way of excess damages. In my case, there was never anything to worry about here. From there, you will take the car down to your nearest car dealer. Make sure you take your license plates and any personal belongings out of the car. The dealer will usually check the odometer, take the keys from you and you’re good to go. The last step is to call your leasing or finance company and tell them where you left the car. If your lease included a termination fee or deposit, you will get a final bill in the mail, along with any excess mileage or damage costs. I’ve never had to worry about excess damage or mileage.  In fact, I’ve never really dreaded ending my car lease. In fact, the entire process is pretty straight forward as far as damage is concerned. Usually, anything smaller than a quarter-sized dent is allowed. As I am about to turn in a 2009 Subaru Legacy, I can tell you that they do things slightly differently: You don’t have to meet with the inspector. Simply take the car to the dealer and they will take care of the inspection from there. Obviously, the risk here is what happens to the car once you leave the dealer? Personally, I will be taking pictures of the car before I leave it there. While turning the car in is certainly straightforward, you do have some other options which might be beneficial to you, especially if you’re worried about excess mileage or don’t want to pay the $300 – $500 Lease Termination Fee. Getting out of a car lease is easier when you research your options ahead of time.

Buy Your Leased Car

What if you Love your Car?

Before you turn your car in, it’s not a bad idea to call the bank and ask them for the pay-off, including sales tax. The Payoff is the residual amount of the car and the cost to you to buy out the lease and own the car free and clear. But not so fast…just because there is a payoff doesn’t necessarily mean you have to buy it for that price. If you did your shopping on Car Lease Tips right, you probably got an outstanding lease deal, based on an extremely high residual value. That high residual value is probably more than the car is worth. It certainly doesn’t make sense to buy an overpriced car, does it? On the other hand, the leasing company will not be able to re-sell the car to another buyer at the high cost of the payoff either. It might actually benefit them to sell the car to you at a better price. Make your Leasing Company or bank an offer. What do you have to lose? In the case of a Chevrolet Venture Minivan I leased many years ago, the Leasing company made me a very attractive offer to buy the car at low interest and below residual value. I still felt the Van was in great shape and so I decided to do it!.. In the case of my Pontiac G6 2 years ago, GM Financing would not entertain an offer. So, it could go either way. It never hurts to ask. In fact, in the case of my current Lease, Subaru Financial WILL entertain an offer and they make this clear on their recorded message. When I called about turning in the lease, they mentioned that I should feel free to make them an offer on the car if I want to buy it. The payoff on my Subaru Legacy is quite a bit higher than what a dealer would be willing to pay for my car. If I offered them $3,000 to $4,000 less, it might be equal to what a dealer would pay them for it and save them the time and costs associated with inspections, etc. So, it really depends on who you are leasing the car from as to whether or not you can get a better deal on the buy out of the lease. If you’re over your mileage or worried about some dings and dents that might not be covered – or, if you just think it’s a dang good car that you took very good care of, make them an offer for the actual Used Suggested Retail Value of the car. Perhaps, they can make you some very good 3, 4 or 5-year financing too. It’s a win-win situation. On the other hand, if the point of leasing is to drive a new car every 3 years, there is one more viable alternative to either turning the car in or buying it:

Trade your Car Lease into the Dealer

Obviously, car dealers want to sell or lease new cars. If you’re concerned about the termination fee or any other costs associated with your old leased vehicle, negotiate that into your new car lease with the dealer. Make it known to the dealer, that your lease or purchase of a new vehicle is contingent on getting out of your current car lease, cost free. If the residual value is quite high as it in the case of my 2009 Subaru Legacy, the dealer will certainly be motivated to find some other way to help you. In my case, the Toyota Dealer offered to pay my termination fee and last month payment. They paid me $547.00 to lease a new car from them. Of course, you still have to know you are getting a good deal on the new car, without the confusion of your old lease costs being tied into the deal. Don’t make Getting Out of a Car Lease a stumbling block for you. Use your options to your advantage. That’s where is here to help. Always use the Car Lease Deals each month as a starting point – and refer to my article on How to Lease a Car. If you’re only fear is Getting out of a Car Lease, now you know how to do it.

Take Over Car Payments

Simply find someone to Take over the Car Payments is how to get out of a car lease. Today, there are some even better options for getting out of a car lease early. You can always transfer your lease to another driver. Lease Trader is an online service that brings lessees and leasers together. They make it a breeze for getting out of a car lease by finding people who want to take over car payments from you.  Yes, there are people out there ready to take over car payments or take over your car lease. Lease Trader provides a free, full page color, 7 day advertisement with photo and buyer credit verification. For just $49.95 you can get your ad renewed for 21 days or for $89.95, your ad will be listed until your car lease is transferred. The paid listings also give you web statistics. Personally, I wouldn’t hesitate to pay for the $89.95 service, if I needed out of a car lease. It’s a small price to pay compared to the sum total of the monthly payments you will risk making if your car lease listing does not gain favorable results in the first several days.

The bottom line is that depreciating assets cost money to own or borrow. Buying a car we wish not to keep will cost us some money. On the other hand, leasing a car preserves our cash and keeps our options open should we find ourselves in a tight spot.

Now, the question to you: Is getting out of a car Lease is not as difficult as you first thought.