Can You Break a Car Lease?

You can break a car lease but as with any contractual obligation, there is a cost for changing the terms. If you need to break a car lease because your needs have changed or your financial circumstances have changed it is critical to choose the best option for you. Otherwise, you could end up with a severely damaged credit score and still owe money. 

Why Does It Cost?

When you lease a car, your monthly payments reimburse the car owner (the leasing company) for the depreciation on the vehicle during the time you drove it. That is why your lease payment varies with the original cost of the car, the miles you drive and the expected resale value. You are, in effect, paying for the time you use the car and the wear and tear you put on it. Your lease is your binding commitment to make those payments for the agreed time. Leasing companies will work with you if you want out of the lease, but they expect any solution to which you agree will result in their getting the full amount of the lease.

Lease Assumption

The least-expensive method to break a car lease is to find someone who wants to take the lease over. Most auto leases have a clause that allows the dealer to reject this option, but leasing companies often will work with you. There are even companies that specialize in matching you with someone who wants to assume a lease. There are fees for the service, typically paid by the person who wants the car, but there also may be transfer fees levied by the leasing company. This is an attractive option if your financial circumstances have changed and you can no longer afford the auto lease.

Take another Lease

Another reason people want to break a car lease is their needs have changed. As an example, a person with a leased, two-seater sports car who marries or who has a growing family might need a minivan. Car lease companies may allow you to break a car lease by taking out a lease on another car.

Some dealers will insist the remaining lease payments on the initial lease be rolled into the second lease. So this might not be a money saving option.

Lease Buyout

You can also break a car lease by buying yourself out of it. Again, this is not a low-cost option and may not be a good option at all if financial reversals have led to your needing to break a car lease. But by paying the remaining lease payments in a lump sum - perhaps through a lower interest loan that reduces your monthly payment - you avoid taking a hit on your credit for defaulting on your lease payment.

What Not to Do

As a last resort, some people break a car lease by simply returning the car to the dealer and walking away. While this solves a short-term problem (you no longer have the monthly payment), it creates long-term problems. The default on the lease payment will be reported to the credit bureaus and lower your credit score making it harder and more expensive for you to borrow in the future. Plus the outstanding lease payments may be turned over to a collection agency, which is another bad mark on your credit history. And, if the dealer chooses, they may seek a court judgment against you requiring you to pay.

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