How to Get Out of a Car Lease
There are many benefits to leasing versus buying a vehicle. Those who lease aren’t responsible for the standard maintenance of the vehicle like oil changes and tire rotations. Leasing also is a short-term agreement and works similarly to a rental. When the lease period ends, the individual can just turn in the vehicle.
Sometimes, though, individuals who sign lease agreements need or want to get out of the lease before the contract officially terms. Those who are wondering how to get out of a lease have four options:
- A buyout
- Lease transfer
- Early-lease termination
- Lease trade-in
About a Lease Buyout
A ‘buyout’ means that the individual who is leasing the vehicle agrees to purchase the car. This is typically an option in most lease contracts. How much does a buyout cost? The price depends on the contract; a buyout amount should be included in a lease agreement.
CreditKarma explains that the buyout price is the ‘residual value’ of the vehicle. The buyout price is noted in the lease agreement and it refers to the amount that the car is expected to be worth when the lease is officially terminated.
When opting for a buyout, the individual can elect to finance the purchase with a lease buyout loan. CreditKarma recommends researching to find the best financing option. The site explains that the dealership could offer financing.
Is a buyout a good idea? That answer depends on a number of factors. CreditKarma explains that the condition of the vehicle and any mechanical issues could factor into the decision. Individuals also should consider any additional charges or fees that may be included in the buyout.
If the dealership includes additional charges and fees, buyers need to consider if the final price is worth it.
Those who decide to purchase their vehicle also need to understand that as a car owner all those maintenance costs that were the responsibility of the dealership are now the owner’s financial responsibility. However, owning the vehicle also means that any mileage restrictions that were placed on the vehicle are nonexistent.
A lease transfer or ‘lease takeover’ lets the individual leasing the vehicle transfer the lease to another individual. When a lease is transferred, another individual basically takes over the remainder of the lease payments.
However, lease transfers or takeovers are not allowed by all companies. First Quarter Finance offers a list of companies that allow for lease takeovers and those that do not allow them. Those considering lease swaps should research the laws in their state.
In addition, CreditKarma explains that the new lease owner could end up with a car that needs more maintenance, additional fees could be applicable and there could even be tax issues. To better understand the tax implications, the site recommends researching how leases are taxed in the state.
Another issue of a lease transfer is that the previous lease owner might have racked up too many miles on the odometer. In this case, the individual taking over the lease could have to watch how much they drive or they may be assessed charges for too many miles. New lease owners also should be mindful of mileage restrictions in the lease.
Individuals who don’t wish to continue with their lease also could consider an early-lease termination. This allows the individual to be released from the lease prior to the end of the contract.
Chase explains that the termination could require that the remainder of the lease be paid in full or it could be the difference between the lease balance and the car’s realized value. To better understand the cost of the early termination, consult the lease contract.
Ultimately, the cost of terminating the lease prior to the end of the contract could be expensive, and it could be a better option to simply continue with the lease. Some individuals might be in a situation, though, when a lease termination is necessary and unavoidable.
The benefit of leasing a car is that when the lease ends, the individual can simply return the vehicle. While some individuals opt to buy the car, others return the leased vehicle and begin another lease on a new model.
However, a lease that is still under contract also could be traded-in. This option makes sense when the vehicle holds equity. For a leased car, the equity requires that the value of the car is more than the lease buyout amount.
If the vehicle’s value is less than the buyout amount, though, the individual is underwater or has negative equity. Using the car as a trade-in would require that the individual make up the difference represented by the negative equity.
Before using the lease as a trade-in, individuals need to review their lease agreement to understand any fees or charges that may be assessed.
What’s the Best Option to Get Out of a Lease Early?
Individuals who need or want to get out of their lease before it officially terms might wonder if one option is better than another. Since lease agreements all have stipulations tied to early termination, how to get out of a lease is really a decision that should be made based on the individual’s financial situation.
Lease buyouts are not an option with every company. In addition, not every individual can afford the costs associated with an early termination. If the leased vehicle has equity, though, it could be used as a trade-in, but, again, individuals need to understand the costs associated with this option.
Buying the leased vehicle is another option. The buyout price should be stated in the contract. Experts recommend that potential buyers research their financing options to find the best interest rates and/or loan terms. Those buying the vehicle, though, need to understand that they are now on the hook for all the maintenance costs that the dealership managed during the lease.
Use Carzing to Find Lease Options
Whether an individual is interested in buying or leasing a car, they can use Carzing to find all their best and most affordable options. Carzing lets buyers search for vehicles by price, make/model or body type. To find available leases for the budget, opt to search by price and then select the ‘lease’ option under the Monthly Payment section (this can be found in the toolbar to the left of the results).
Those looking for a vehicle to lease also can select specific criteria for their vehicle. Specify color, drivetrain or choose desirable features like leather interior, a backup camera, etc. Results also can be sorted by price, location or other criteria.
Carzing also lets buyers get pre-qualified for financing (if they are interested in buying their vehicle). For those who prefer to lease, Carzing also includes a lease calculator to better understand monthly payments and the lease cost.
When car shoppers find their ideal automobile, they can reach out to a participating dealership to arrange a test drive and to discuss lease options. When leasing, review the contract to understand the buyout option and costs associated with an early lease termination.
Leasing a car can provide a less expensive option when individuals want to drive a newer model or prefer a luxury automobile. However, those considering a lease need to understand all the contract terms.