Leasing a car has many benefits – lower upfront costs, lower monthly payments, and a new car every three years. But it can get tricky if you want to get out of your lease. Whether the vehicle you chose doesn’t suit your needs anymore or you are unable to make lease payments, getting out of the lease can be complicated.
Here are the options you should consider when you want to get out of a car lease.
Transfer lease to a third party
You can transfer the remaining lease to a third party – a friend, a family member, or even someone you don’t know. Websites such as Swap A Lease or Lease Trader allow you to transfer the lease.
You have to provide incentives to the new leasee to take over the lease – lower payment for the new leasee than what you are paying. Depending on the mileage and how much you put down, it could cost you a few hundred to a few thousand dollars.
The person taking over the lease is responsible for making remaining lease payments. There may be some additional costs involved with this option – lease transfer fees, new registration fees, etc. Note that in most cases, you are still on the contact and will be liable if the new leasee stops making payment.
Sell the vehicle
If you are leasing a car, you have the option to buy the car at any time. You need to tall the leasing company and ask for the payoff or buyout amount. The payoff amount will include a penalty and the remaining depreciation cost.
If you buy the car and sell it privately to a third party, you may be liable for taxes. But you can sell it to the dealer without paying taxes but the catch is that the dealer is likely to pay you less for the car. So do the math and understand the tax implications of selling your car.
Return the vehicle and pay penalties
You can return the vehicle to the leasing company and pay the penalties. This is one of the worst options you can take. You will not only be paying penalties but also the remaining depreciation of the vehicle.
You will get the lowest value for your vehicle if you pursue this option. The leasing company will sell the vehicle at a wholesale auction and reduce your payout by the realized value of the sale. You are better off buying the vehicle from the leasing company and selling it yourself.
Call the leasing company and ask for help
If you are unable to make lease payments, call your leasing company and explain your situation. You may be able to get some payment relief. You are still responsible for your payments – you can make the payments later.
If you default on your lease, the leasing company incurs extra expenses. So they may be willing to work with you.
Default on lease payments
If you go this route, you will take a big hit to your credit for 7 to 10 years. You are likely also likely to get sued for defaulting on your payments.
There are long term implications to your credit if you take this route. Exhaust all your options before defaulting on your payments.