Practical Steps on How to Get Out of a Car Lease Early
In this article, you'll learn:
- The implications of transferring your lease
- The pros and cons of opting for a lease buyout
- The potential costs associated with early lease termination
Last Updated November 10, 2023
11 min read
For many Canadians, car leasing offers a flexible and convenient way to enjoy a new vehicle without the long-term commitment of ownership. Yet, circumstances can change, leading many to wonder, “how to get out of a car lease” before the term concludes. At Roam, we understand that life is unpredictable, and while our car subscription model offers unparalleled adaptability, traditional leases might leave you feeling tethered. If you're exploring options to terminate your car lease early, this guide will be your beacon.
Transferring Your Lease: Handing Over the Baton
One of the most common strategies individuals consider when wanting to exit their lease early is transferring the car lease to someone else. The logic here is simple: if you can find someone willing to assume the remaining lease, you can effectively wash your hands of the contract.
There are dedicated platforms and services in Canada that connect individuals wanting to exit their leases with those eager to take over. This can be an efficient way to navigate out of your lease commitment. However, a few points are worth noting:
- Lease Transfer Fees: Some leasing companies charge a fee for transferring your lease. Before proceeding, get clarity on the exact charges you might incur.
- Vetting the New Lessee: Ensure the individual assuming your lease has a solid credit history. If they default on lease payments, it might circle back to you, having an impact on your credit score.
- Complete Transfer: Ensure that the transferring process relieves you of all obligations. Some contracts may still hold the original leaseholder partially accountable, so a thorough review of the lease agreement is paramount.
Lease Buyout: Claiming Ownership
Another avenue worth exploring is the lease buyout option. Essentially, this means you opt to purchase the leased vehicle before the lease term concludes. By doing so, you bypass the remaining lease payments and take ownership of the car, which you can then choose to keep or sell.
However, there are essential aspects to ponder:
- Buyout Price: This will be stipulated in your lease contract. Typically, it's a sum of the car's residual value at the end of the lease term and any remaining lease payments.
- Depreciation: Cars depreciate over time, and sometimes the buyout price might be higher than the current market value of the vehicle. In such instances, you'd essentially be paying a premium to own the car. A quick assessment of the car's current market value can help guide your decision.
- Ownership Benefits: If you opt for a lease buyout and choose to keep the car, you're no longer bound by any lease-related restrictions, such as mileage limits. Moreover, selling the car post-buyout can sometimes yield profit if market conditions are favourable.
Early Termination: Breaking Free, But At A Cost
In some scenarios, individuals might not have the luxury of time or suitable candidates for a lease transfer. In such situations, opting for early termination becomes a consideration. This involves returning the vehicle to the leasing company and paying an early termination fee.
While this method might seem straightforward, it's essential to weigh the costs:
- Early Termination Fees: These fees can vary but are often significant. They're meant to compensate the leasing company for the potential loss they might incur due to the premature end of the contract.
- Remaining Payments: In addition to the termination fees, some leasing companies might require you to make a lump-sum payment of the remaining lease payments.
- Potential Credit Impact: Terminating your car lease early might have implications for your credit score. It's crucial to understand the potential credit ramifications before proceeding.
- Returning the Vehicle: Once you opt for early termination, the car must be returned in good condition. Any wear and tear beyond the "normal" threshold might result in additional charges.
Selling the Leased Vehicle: A Different Approach
Another strategy that some individuals explore is opting to sell the car they've leased. This might sound unconventional, given you don't technically own the leased vehicle. However, here's a step-by-step look at how it can be done:
- Determine Buyout Price: The first step is to call your leasing company and ask for the buyout price, which is the current amount required to purchase the vehicle outright.
- Assess Market Value: Once you have the buyout price, you can compare it with the car's current market value. If the market value is higher than the buyout price, selling the car could potentially cover the costs and might even profit.
- Finalize the Sale: If you choose to proceed, you'd buy the car from the leasing company and then sell it to a third party. Remember, this strategy's viability is contingent on favorable market conditions and the leased vehicle's demand.
Weighing the Options: What's Best For You?
With multiple avenues available to terminate your car lease early, the next step is to evaluate which option aligns best with your circumstances.
- Financial Implications: Determine how each approach impacts your pocket. While paying an early termination fee might seem like the most expensive option, it could be more cost-effective when factoring in the time and effort associated with transferring your lease or selling the vehicle.
- Time Constraints: If you're moving to a different province or country and need to terminate the lease promptly, certain options might be more viable than others. Early termination or a lease buyout might serve you better in time-sensitive situations.
- Credit Score Considerations: Maintaining a healthy credit score is vital. If potential lease decisions might negatively impact your credit score, it’s essential to factor this into your decision-making.
Navigating the Fine Print: Always Review Your Lease Agreement
Every lease contract will have its stipulations regarding early termination, transfers, and buyouts. Before making any decisions, it's paramount to revisit and thoroughly understand your lease agreement's nuances.
- Look for Clauses: Some agreements might have specific provisions or exceptions for early termination, especially if there's a genuine reason, such as a financial hardship or medical condition.
- Understand Penalties: Leases will detail the penalties or fees associated with breaking the agreement. This section will provide clarity on the potential financial implications of your decisions.
- Seek Expert Advice: If your lease contract seems ambiguous or if you're unsure about certain terms, consider consulting with a legal or financial expert. They can provide guidance tailored to your specific situation.
Exiting a car lease early is undeniably complex, but with the right information, it's far from impossible. Whether you're considering transferring your lease to someone else, pondering a lease buyout, selling the leased vehicle, or simply returning it and paying the associated fees, understanding the pros and cons of each option is critical.
At Roam, we champion flexibility and convenience, which is why our car subscription model is designed with adaptability in mind. However, for traditional leases, the path to early termination requires a combination of research, understanding your lease terms, and weighing the financial and temporal implications.
Life is unpredictable, and your car commitments should be able to adapt to your ever-changing circumstances. With the insights from this guide, you can confidently navigate your options and make the best decision for your unique situation. Safe driving and happy journeying, wherever the road might take you!