Leasing is a wonderful thing.
It's quick, easy, and it lets you get behind the wheel of a brand new car every other year for an affordable price.
However, suppose your life circumstances have changed and you're now looking to bail out before completing the full term of the car lease agreement.
Of course, nobody likes the thought of upsetting the leasing company, but it's important to know that you have rights too. Meaning that, yes, ending a car lease early is entirely possible.
That said, there can be some hoops to jump through and some costs involved, not to mention a few different ways by which to actually end your agreement.
What is Early Termination?
Early termination is exactly what it sounds like: a way for you to end your car lease agreement early by processing an early termination request with your leasing company.
Returning your lease car for any reason before the end of the lease contract is considered early termination, and depending on the exact circumstances, you will probably be subject to various early termination costs (more on that in a bit).
Why Would an Early Termination be Required?
Maybe personal circumstances have changed and you're being forced to relocate or take redundancy, or perhaps your financial situation isn't looking as strong as it was.
But it doesn't even have to be about not affording the payments.
Maybe you're just sick of the car and are eager for a change, or maybe you're not far from the end of your lease agreement and want to take advantage of a spectacular new deal that you've just seen.
How to Trigger Early Termination
There are other methods, but by far the simplest way to end your vehicle lease early is to request an early termination to your lease company.
Phone your leasing company and tell them that you want to end the agreement early. They'll then ask for the mileage and will calculate how much the early termination fee is going to be. Should you agree to it, you'll then pay the fee and they'll pick the vehicle up.
Simples.
Just make sure that you repair any scratches or damage before you hand the lease vehicle back and that it meets the BRLA's Fair Wear and Tear standards. If not, then you'll incur extra charges, and the same is true if you've gone way over the prescribed mileage limit that was agreed upon at the start of your contract.
Will The Leasing Provider Put Up a Fight?
Make no mistake, leasing companies don't want you to terminate early.
It's a hassle, it costs them money, and like most contracts, a car leasing agreement isn't designed to be broken.
That being the case, the people over at the lease company aren't going to be very happy when you make that phone call, and may try to sway you.
Don't worry . . . there'll be no intimidation or Godfather-like threats, but be prepared for some stalling and delaying tactics.
Remember, you have a right to terminate your vehicle lease early and the finance company is going to respect that.
Early Termination Fee: How Much Does It Cost To End A Car Lease Early?
Exactly how much your early termination fee will be depends on a number of factors and can vary from funder to funder.
Some will calculate the fee on an individual basis by taking into account the contract length, mileage allowance, and outstanding payments, but the average finance company will charge a fee that equals 50% of the remaining monthly payments.
For example, if you're paying £250 per month and have 14 months remaining on your car lease contract, then your early termination fee to end the contract early will total £1750. So the further you are into your agreement, the better.
However, the fee terms aren't always set in stone and some finance companies may expect you to pay more or even all of your remaining lease payments.
How Long Does the Early Termination Process Take?
The length of time it takes to carry out an early termination can vary from funder to funder, but generally speaking, you're looking at a timeframe of 1 to 2 months.
Will Ending My Lease Affect My Credit Score?
Your credit score will only be significantly affected if you are unable to afford your monthly payments and have to default on them.
However, if an early termination is planned well and all goes smoothly, then your credit score won't be negatively affected. However, your credit report will show the fact that you exited an agreement early, so there's a slim chance that you may be less likely to be accepted for credit in the future, or that certain providers might hit you with more interest.
Can I Sell My Lease Car On?
Yes, but only if the leasing company agrees to it.
You're rarely going to make a profit, but say you can buy the car for £13,000 and sell it on for around £12,000. If the car is in excellent condition and you've stuck to your mileage limit, then the cost of exiting the lease contract early in this case would be £1000 – which is far better than paying double or triple that amount in penalty fees.
On the other hand, if the buyout price of the lease car is significantly more than its market value, then it obviously wouldn't make any sense for you to choose this method. But if the difference works out cheaper than having to pay the early lease termination fees, then by all means go for it!
Can Someone Else Take On My Lease Contract?
Yep.
Also known as 'lease trading', this can be another viable option when it comes to ending your lease early, as oftentimes the lease company simply wants to be paid and doesn't care too much about who's paying them.
But again, just make sure that it's permitted in the contract terms of your lease agreement or that your lease provider agrees to it. Some lease agreements contain a clause which specifies that it's the original leaseholder (you, in other words) who has to be the one paying.
If you find out that it is permitted, and if you are interested in passing your lease onto another driver, then there are special websites like Swap-A-Lease which let you list your car and help you find that special someone.
However, there is a catch . . . because if a buyer is successfully found, you'll be required to pay the cost of 2 months' lease payments as well as the fee for listing the car in the first place (which is usually around £40). So if your monthly lease payments were £250, then you'd have to pay around £540 in total.
It's a lot, but depending on how many remaining lease payments you have left, it could still work out less than the cost of an early termination fee.
Repossession Or Voluntary Surrender
This is for when you absolutely, categorically cannot afford your next monthly payment, and are going to have to default on the loan.
So last chance saloon, basically.
Voluntary surrender is like repossession, but with fewer penalties attached. Still, it's best to avoid it at all costs if possible, as it's obviously a very stressful position to be in. Consider going down the avenue of getting financial help from family members or other means first, and if not, only then should you consider this method.
Of course, voluntary surrender is not a Get Out of Jail Free Card. You'll still be liable for the remainder of the monthly payments in the leasing contract and will have to pay back the debt at some point. Plus, defaulting on your car lease loan is going to punch a HUGE dent in your credit score, thereby reducing your chances of obtaining a mortgage or any other form of loan or credit in the future.
Never a good position to be in . . . so seek advice on how to best handle the debt and not dig yourself into a deeper hole.
Summary
Needless to say, the best option is to see out the term of your lease and not have to end a car lease contract early, but it's always good to know you have a way out if that's neither possible nor desirable.
Just be warned that not all leasing companies will make it easy for you, and you'll almost always have to fork out some money for the privilege.