If you like driving a nice set of wheels but can’t afford to pay cash or make big monthly loan payments, leasing a car can be tempting. But leasing does have its drawbacks, one of which is flexibility. If you want to return the vehicle before your lease expires, you’ll likely face a stiff early-termination fee and additional penalties. However, you do have some other options.
- One of the best ways to get out of a car lease early is to find another person to take it over for you, as long as your financing company allows that.
- If you don't already know someone who'd like to take over your lease, a lease swapping website can help you find one.
- Other options include exchanging the car for another one, buying the car to keep, or buying the car and then selling it.
How to Get Out of a Car Lease
One frequently overlooked way to get out of a car lease—and often the least expensive choice—is to transfer your lease to someone else.
Suppose you have two years left on a three-year lease. Whoever buys your lease agrees to make the remaining monthly payments. While some finance companies won’t allow such transfers, the vast majority do. The trick is finding someone who's interested in taking the car and the lease over from you. Fortunately there are websites that can make that relatively easy.
The earlier you want to get out of a car lease, the higher the early-termination penalties are likely to be.
These trades can be just as advantageous for those assuming the lease. For one thing, they won’t have to make a sizable down payment on the vehicle, which the original leaseholder has already done for them. Furthermore, some people only need a car for a relatively brief period of time—say, a year or two. Taking over someone else’s lease is an ideal way to obtain a relatively new car for a short period.
Keep in mind that getting someone else to assume your lease usually isn’t free. Using a trading website to facilitate the transaction typically costs between $100 and $350. However, that’s a fraction of what most leasing companies will charge should you decide to return your vehicle early. Some finance companies also assess a lease transfer fee—typically around $300—when you arrange a swap. But even after paying all that, you may still come out ahead.
To make your lease especially attractive, you might want to consider offering an incentive, say $500, to anyone who takes over your lease.
Before registering with a lease-trading website, you should check with the company that holds your lease and also confirm some information with the website itself. For example, you’ll want to know:
- Does your leasing firm allow transfers?
- Does the buyer take on full financial liability for the lease once it’s transferred? You could, for example, be liable if the buyer fails to make lease payments.
- Does the lease-trading website perform a credit check on potential buyers? That's worth knowing if you (the original leaseholder) will retain some responsibility for payments after the transaction.
If you transfer your lease to someone else, you may still be held responsible if they fail to make payments.
Three Alternatives to Lease Swapping
Depending on your goals, there are other possible ways to get out of your lease. These include:
- Trading the car in. Sometimes car dealers will allow you to exchange your current automobile for a different model. This option is a mixed bag. In many cases, you still have to pay the early-termination fees, although they’re rolled into your new payments. In other words, the pain is simply spread out over a longer period of time.
- Buying it. Often, a leasing company will let you buy the car before the lease runs out. This is a course you might want to take if, for instance, you’ve exceeded the lease’s mileage allowance and you know you want to hang onto the car long-term anyway. (Most car leases allow you to drive 10,000 to 15,000 miles a year but charge extra when you go beyond that.) The leasing company should have a payoff schedule showing how much you’ll have to pay to make the car yours.
- Selling it. Another alternative is buying the car in the middle of the lease, if that's allowed, and selling it to someone else. But be forewarned: The lease payoff amount might be higher than the car’s market value, forcing you to take a loss on the sale. But if that loss would be less than the early termination fee and other penalties, it’s something to consider.
The Bottom Line
There are a number of ways to get out of a car lease and avoid early-termination fees. Transferring the contract to someone else can be a particularly appealing choice. Just make sure your financing company allows such transfers before you start the process. Also find out whether you'll still be on the hook for payments if the other person fails to make them.