How Can I Terminate My Car Lease Early?


Car leasing termination

In our previous blog on car leasing, we went through the basic terms of leases, how they work, how the monthly payments are calculated, as well as the pros and cons of leasing and more. In today’s piece, we will continue our topic on car leases, but this time we’ll be focusing on lease termination.

Circumstances change, and many of us will find ourselves in a situation where something we previously agreed to or signed up for can no longer continue. This will certainly include car leases. The trouble is, the terms and conditions of car leases are very strict, and the entire thing is linked to your credit rating. How then can car leaseholders terminate their leases early? Is it even possible?

Why Do People Terminate their Lease Early?

First, let’s understand why it is that people opt to end their lease agreement early in the first place. There are several key reasons for trying to get out of a car lease. They include, but are not limited to:

  • Current vehicle not meeting needs: A lot can happen in 3 years. You might have gotten married or had a baby, in which case you might want to get a larger car. It could also be going the other way, with your kids leaving home for college and the need for a big car diminishing.
  • Insufficient mileage: You signed up originally with a limit of 10,000 miles a year, but you recently just got a job requiring you to drive to various distant locations on a regular basis.
  • New living situation: You needed the car originally for commuting or everyday errands, but you now live in downtown Manhattan where you have a subway and all your goods and services are on your doorstep or deliverable.
  • New-found wealth: You got promoted or won the lottery and frankly don’t want to drive this mid-level sedan any more, nor keep paying for the privilege of not wanting it, and are now looking for new car deals.
car lease contract

Can You Terminate a Car Lease Early?

In short, yes you can. While there are some definite consequences to terminating a car lease early, which we will get into in more detail below, let’s first start by simply looking at the ways in which car leases can be ended.

Trigger the Termination Clause

Your lease will invariably come with an option for early termination. There may be a warning on the lease that says something along the lines of: You may have to pay a substantial charge if you end this lease early.

“Substantial” is the right word, but in the end, it does depend on just how early you are terminating. If you terminate with only a month to go, then the fees will be lower, but if you terminate having only paid a month or two of the agreed period, then you’ll likely face fees reaching into thousands of dollars.

Fortunately for you, federal law (Consumer Leasing Act) requires the leasing company to state the early termination terms clearly and provide either an exact amount that you’ll have to pay or detailed method for determining that amount so you could work it out for yourself before going ahead. If the payment is acceptable to you, and you don’t worry excessively about the other consequences, then this is the simplest way to end the lease early.

Transfer the Lease

If you want to end the lease and minimize any potential cost, then one of the best methods for doing is by lease transfer. What this means is transferring the lease into someone else’s name, who will then take over the terms and conditions. Before you do this, however, you’ll have to first be sure about the rules and requirements of a lease transfer in your particular state. After that, you’ll also have to consult with the dealership and find out about the conditions, process and any related fees that come with transferring the lease.

Generally speaking, as long as you are transferring the lease to a reliable lessee with a good credit score who meets the other requirements of the lessor, then there shouldn’t be a lot of trouble. The other crucial thing to consider is that you transfer it only to someone that you know for a fact will be responsible with the payments and conditions. Even though you transfer the lease to another lessee, you might still be liable to pay should the new lessee miss payments, or otherwise break the terms of the agreement.

Lease Transfer Websites

There are now many dedicated web platforms that are built for the purpose of connecting leaseholders with those looking for lease transfer deals. Prominent names include:

To use as an example, this website offers an easy-to-use platform upon which you can display your car’s image along with information on the monthly lease payment, needed down payment, how many months are remaining in the lease, and of course the location of the vehicle and its current lessee. A number of leases on the site even feature no money down, which is handy if you’re looking for a new lease yourself.

These platforms provide you with a simple engine through which you can plan and execute a lease transfer all in one place, with the platform assisting in handling the additional steps for you. The website makes money usually by charging a listing fee. You may still have to separately pay for your transfer fees with your leasing company, but these are things you can determine quickly and easily either by reading the fine print in your lease agreement, or by calling up the dealership directly and finding out.

If the problem is more with the specific model of car you are leasing, then another option related to transfer is talking to the dealership about switching your lease to another model early. At the end of your lease period, you’d normally be given the option to get the newest version of what you’re currently driving, or even switch to another model. You can talk to the dealership and look into the possibility of doing that early. There will likely be additional fees, but the dealership will be happy to retain your custom, and will assuredly not mind charging you a little something to get the task done.

Buy Out the Lease

If the issue with the lease is that you just need it to be over, and you have the money to buy it out, then this is often an ideal option. The dealership won’t make as much from you in the long term, but there is generally a mechanism through which you can pay the balance and perhaps some additional fees, but ultimately end the agreement in a way the minimizes or eliminates the potential negative impacts of early termination.

Buying to Sell

One of the reasons people opt to buy out their lease is because they plan to sell the vehicle immediately afterward. They may even have a buyer all lined up and ready to go. Selling the vehicle will cover the vast majority of the buyout costs and fees, though invariably still ends up as a financial loss for the lessee in the end. While some money is lost, other important things are retained, such as credit rating.

What are the Impacts of Early Lease Termination?

There are a number of immediate and lasting effects of early car lease termination. It’s important you consider all the impacts and not just the short-term shock.

Financial Penalties

The most immediate impact of finishing your lease early is the financial cost. Exactly what you’ll have to pay will be detailed in your lease, but it could include any or all of the following things:

  • Paying some or all remaining monthly payments
  • An early termination fee — usually the difference between balance and amount credited for the vehicle
  • Fees to cover resale of the vehicle upon return to the dealership
  • Storage and transportation costs
  • …and more, depending on which new car dealerships you’re working with

In all, an early termination of a car lease can end up costing you thousands of dollars. If the idea behind terminating the lease is to save money, then this may well turn out to be quite the false economy in both the short and the long-term.

Impact on Credit Score

This is where the damage from an early lease termination can get more serious and lasting. The good news is that your credit score won’t automatically be badly damaged by just any termination. The only way that you will seriously damage is your credit is if you terminate by defaulting on payment.

Believe it or not, some lessees opt for this method of dealing with their car lease because they believe it is expedient and cheaper in the short term. In both those senses, they are right. By not making a payment and then having the car repossessed you are certainly saving money in the short term, but at the same time you are putting yourself in a precarious situation financially in the long term.

A leasing company might still pursue you for the money you owe, resulting in additional legal costs, being forced to pay fees to the dealership, or even, God forbid, bankruptcy. All of the above have a truly detrimental effect on your lifelong credit score.

Ending a lease according to the stated terms and conditions in your agreement will minimize any impact to your credit score, perhaps even eliminate any impact. These impacts could easily be fixed with a new leasing agreement, the terms of which you stick to, or by building credit in other ways like paying your credit card on time.

car leasing payment

Conclusion: Know Before You Lease

The important thing to remember when it comes to car leasing is that what you are signing is a legally binding financial commitment. Before exploring leasing options, and certainly before signing any paperwork, you should be fully up to speed on the terms and conditions, the length of time you are committed to the agreement, and what it would mean to end that agreement early.

If and when you do have to terminate a lease early, the most important thing is to do things by the book. To that end, remember the following things:

1. Read the terms and conditions. Before you initiate any kind of process to terminate a lease, carefully read through all the wording on the agreement.

2. Contact the dealership. Open channels of communication with the lessor, and get straight answers from them about what it would mean to terminate and what the results would be.

3. Don’t default. If you only take one thing away from today’s piece, it would be to never follow anyone’s advice to simply default on the lease and get out of it that way. Defaulting will only bring you more trouble further down the line.

Ultimately, it’s about knowing everything there is to know about your lease before you sign it. That includes the ways in which it can potentially end prematurely. Read the information, and make informed decisions.

If you have terminated your lease and are now in the market to buy a new car, you will need to trust the best car dealership to ensure that you’ll have a good haggle-free experience. CarBevy can help car buyers get the car they need at the price point that they’re willing to pay. Visit to learn more.

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