7 Ways: How To Get Out Of A Car Lease
The lure of lower monthly payments than from a car loan may draw you to a vehicle lease.
However, circumstances can later eliminate your need for the car or lease or make it financially unworkable. For example:
- You move to where public transportation is widely available
- A new job or your current employer requires you to relocate to a long distance
- An addition to the family means you need a vehicle with more space
- You’re in the military and get orders to deploy
- A job loss, a major home repair or a significant illness stresses your finances
“How to get out of a car lease” is not answered merely by returning the vehicle and keys to the lot. Termination fees, charges for mileage or wear and tear and other costs may await you if end the lease early.
In certain situations, you do have ways to get out of your lease without taking a heavy financial hit. Some will depend on how you took care of the car, while others come from online companies or even your lease company.
Prepared for Departure
The tools and knowledge you need depend in part on your exit strategy:
- The lease agreement
- Car valuation guides, such as Kelley Blue Book and NADA Guides
- Lease company special deals and offers
- Tracking your mileage and driving habits
- The features of your vehicle
- Paperwork showing your job transfers or your military deployment
- Records of defects in and repairs to your vehicle
Route 1: Lease Swap
In a lease swap, another person takes over your lease. The other party can ride with low monthly payments without having to make a down payment. For you, the option frees you from monthly payments and solves the problem of how to get out of a car lease without penalty.
Online swap sites include:
Check with your company about restrictions or limitations. Edmunds reports that approximately 80 percent of car lease companies allow lease swaps without strings attached. About one in five require you to remain liable for regular payments and excess mileage and other fees. In these cases, you’re effectively a co-signer.
Make sure the person to whom you transfer the lease is creditworthy. Your leasing company likely will anyway require the new party to pass its credit standards. Online outfits such as Swapalease.com run credit checks on a prospective transferee.
Other requirements may include
- A minimum period that you’re on the lease, such as six months
- Being current on your lease payments, including no outstanding charges or parking tickets
Route 2: Roll-Over
Your lease company may offer the option of turning in a leased car early for another lease. When you trade-in the current leased car for another, you don’t exactly avoid the early termination fees. Instead, the company rolls them over into the new lease payments.
You can also absorb termination fees, and actually save money, if you’ve treated the lease vehicle with tenderness and care. Depending on the stage of the lease, you might have equity in the vehicle. By using the car as a trade-in, that equity is applied to the new lease.
You might even consider using it as a down payment if you’re ready to buy. Consult Kelly Bluebook or the NADA book value for trade-in values.
Route 3: Pull-Ahead
The “pull-ahead lease” represents a variation of sorts of the roll-over option. In a “pull-ahead lease,” the dealer offers to relieve you of some of your current obligations. Forgiveness may include no more payments on the current lease or waiver of fees for early termination, excess miles or wear-and-tear.
In turn, you agree to lease another vehicle from the dealer.Through the pull-ahead approach, the dealer seeks to keep you as a customer and manage its own inventory. In particular, pull-ahead leases may allow dealers to replenish used or pre-owned vehicle inventory.
Route 4: Buy-Sell
If you’re stocked with the right information, you can end the lease at a profit or gain to you.Specifically, you can buy the car from the lessor then sell it. Your buyout number depends upon the remaining lease payments and the residual value.
The latter number represents what the dealer says the car will be worth at the end of your lease. With the residual value, the dealer determines your monthly lease payments and what it would cost you to buy at lease-end.
To make the buy-sell option worthwhile, you want the vehicle’s actual value or resale value to exceed the buyout price. Consult the NADA or Kelly Blue Book to learn the market value of the car. The value will depend upon factors such as:
- Your zip code
- Mileage. Relatively speaking, you should have a low mileage since the lease company charges you for excess miles.
Here’s another place where tender care of your vehicle can lower the hurdles to getting out of a lease. The ability to use “clean retail” values reported by Kelley Blue Book or NADA can fetch you a higher price, enough for you to recoup the buyout you paid to the lease company and more.
Route 5: Relief For Your Military Service
In some circumstances, your service in the United States military allows you to terminate early penalty-free. The Servicemembers’ Civil Relief Act (SCRA) relieves military personnel of certain civil or legal obligations while on active duty.
This includes responsibility for a vehicle lease you enter into before active duty starts and, afterwords, you spend at least 180 days on active duty.
If you start the lease during active duty, your qualify if a “Permanent Change of Station” order
- Relocates you from a place inside the continental United States (i.e., the “lower 48”) to a location outside; or
- Relocates you from Alaska or Hawaii to another state; or
- You are deployed with a military unit or in support of a military unit for at least 180 days.
For instance, if you lease during your active duty, you get relief from SCRA for a move from Hawaii to Alaska or Hawaii to Florida, but not from Texas to Florida.
Should you become eligible:
- Tell your lease company in writing that you intend to terminate the lease. Mail or hand-deliver the notice. Emails do not suffice.
- Furnish a copy of your military orders; and
- Return the vehicle no later than 15 days after you sent the written termination notice.
Route 6: Bankruptcy
Bankruptcy can offer you relief from the termination fees.
When you file for bankruptcy, you get a discharge of your unsecured debts. As it applies to a leased car, these include any fees, charges and outstanding payments that in total exceed the car’s value.
The type of bankruptcy you file depends on your income. If you’re a wage earner and you income exceeds a certain amount, you will be funneled into a Chapter 13 plan.
You pay a portion of your earnings each month to a Chapter 13 trustee who then pays a portion of the unsecured amount on your lease. Typically, plans last three to five years.
Should your income not reach the Chapter 13 threshold, the alternative is Chapter 7 bankruptcy. Here, your non-exempt property, i.e., what you can’t protect from creditors, is liquidated to pay debts. Depending on the amount of property you have, all of conceivably can be protected.
Filing bankruptcy is a drastic option with significant consequences to your credit. Specifically, information about a Chapter 7 stays on your credit report for ten years after the date of filing, while a Chapter 13 remains for seven years from filing.
Route 7: When The Vehicle Becomes Sour
Depending on your state, a defective car might afford you a way out of the lease. Under “lemon laws,” covered vehicles must operate free of major or substantial defects or a combination of defects that would prevent you from normal use of the vehicle.
These problems might include defective engines, brakes, steering wheels or other components. In states such as Massachusetts, defects yielding a ten percent drop in the vehicle’s value can render the vehicle a “lemon.”
Lemon laws generally protect purchasers or lessors of “new” vehicles. Whether your car meets the definition of “new” depends on the when the car was manufactured and its mileage when you lease. If you lease it new, it stays that way until you reach a specific date or mileage.
Certain states bring used vehicles within the lemon law umbrella.While specifics vary by state, the dealer is given a certain amount of chances to fix the defects. If those attempts fail, you can either replace the lemon or get a refund.
If your vehicle develops problems:
- Describe the problems as specifically as possible to the dealer
- Obtain and examine records of the repairs. Your state’s law may entitle you to an itemized statement of the repairs which includes the date, nature and charges for the work. This also includes any warranty work.
- If problems persist, demand a final attempt in writing
Also, see if your agreement allows you to terminate should your vehicle undergo a recall for safety or other reasons.
These suggestions on how to get out of a car lease involve can empower you as a consumer while you’re in a lease. Hopefully, you’ll also use them to understand the mechanics of leasing and whether you decide whether to lease at all.