How to Get Out of a Car Lease
You can get out of a car lease early, but it’s probably going to cost you. Still, that doesn’t mean it’s always a bad idea, and sometimes you may have no choice.
Returning, trading, transferring or selling the car are your main options, each with its own pros and cons, though in some cases you may have other alternatives.
4 ways to get out of a car lease early
Although getting out of a car lease early is possible, it might not be easy. Since the leasing company is the one writing the lease contract, the terms include protections against customers backing out of the agreement.
But if you’re really determined, there are four main ways for how to get out of a car lease early — if you need to and are willing to pay the price.
Return the car and terminate your car lease
This may be the most damaging way to end a lease early. If you’re returning your car because you can no longer afford it — and you don’t pay off the balance you owe and any penalties — your credit score will probably take a major hit.
And even if you do pay everything you owe on your lease, this is usually the most expensive option. Expect to face these costs if you terminate your lease early:
- The regular termination fee (as specified in your lease)
- An additional early termination penalty
- Any amount you still owe on your full lease
The early termination fee also takes into account how much the car has depreciated in value while you had it. If you’ve already made a lot of payments, those could offset some of the drop in the car’s value, lowering the termination fee.
Generally, the earlier you terminate your lease, the more you will have to pay.
| Pros | Cons |
|---|---|
Gets you out of your lease quickly Past car payments may reduce the amount you owe | Can hurt your credit Can cost thousands of dollars |
Trade the car for a new car and lease
Trading in your leased vehicle for a new one can be a way to sidestep some of the fees you would face for early termination. Many dealers will waive these penalties if you’re willing to pick up a new vehicle, via either a lease or a purchase contract.
However, this is not always the case. As always, you’ll have to read the fine print of your contract to understand what you’ll be on the hook for.
If you do go for a trade, the leasing company might allow your previous lease payments to help offset early termination fees and maybe even reduce the cost of your new contract.
| Pros | Cons |
|---|---|
May be able to avoid early termination fees Allows you to switch to a car you may actually prefer Equity from past lease payments might offset fees, penalties or a down payment on a new car | Requires remaining in a lease or finance contract Some lenders may still assess early termination fees |
Transfer the car and lease to someone else
A lease transfer is not always possible, but when it is, it can be among the cleanest and least expensive ways to get out of a car lease.
Under a lease transfer (also called a car lease swap), you hand over the responsibility for paying the lease to someone else. You’ll usually have to work through a third-party company to do this, and you’ll definitely need to get permission from your lender.
Be aware that in some lease transfer situations, you may still be legally responsible for payment or insurance. In this case, you’ll want to transfer the lease to someone you trust, such as a family member.
If you transfer your lease, you might not need to pay anything at all. On the other hand, the person taking over the lease might insist that you cover some of the remaining balance owed on the agreement.
| Pros | Cons |
|---|---|
Can cost little to nothing No hit to credit report | Requires finding someone to assume your lease Leasing company must give permission You might still be liable for the lease and/or insurance |
Sell the car
The residual value of a leased car is the price that you agree to pay the dealer if you want to buy the vehicle when the lease ends.
If you want to end the lease early and do a car lease buyout, you’ll also have to pay the sum of your remaining lease payments and maybe some type of penalty or fee, along with this residual value.
The residual value is usually higher than the car’s market value, but sometimes you may actually be able to turn a profit if you can sell the car for a good price afterward.
| Pros | Cons |
|---|---|
Could potentially turn a profit Can help limit the financial downside of getting out of a lease early | Requires money up front, which you may not have Must find a buyer for the car |
Other options to get out of a car lease early
If you’re in the military
If you’re an active-duty member of the U.S. military, you may be able to get out of a car lease early without paying any fees or penalties, thanks to the Servicemembers Civil Relief Act (SCRA).
Dependents of service members can also access this benefit.
To qualify, one of the following needs to be true:
- You must have signed your lease before you went on active duty, and you must be called to serve for at least 180 days, OR
- You must have received a permanent change of station (PCS) during active duty to outside the continental U.S., OR
- You must have been deployed for at least 180 days to a military unit in support of a military operation
Lenders can verify your status by using the SCRA Centralized Verification Service.
If your car is having issues
All 50 states and the District of Columbia have some type of lemon law that protects new (and sometimes used) car purchases, though the details vary from state to state.
Lemon laws also usually apply to leased vehicles, except for in Nevada and New Mexico.
The best course of action for lemon law protection is to contact the manufacturer or dealer directly. If they can’t resolve the problem for you, then you may have to contact your state’s attorney general or consumer protection agency.