Turning in a lease early? Here’s what you need to know
If you’re looking to turn your lease in early, there are a few options to consider and evaluate before taking the plunge. You may want to turn in your lease early for several reasons — maybe you no longer need a vehicle, have a different financial situation, or find the vehicle itself simply isn’t a good fit for your lifestyle. If any of these situations apply and you’re thinking about turning in a leased car early, there are a few things to keep in mind when making this important financial decision.
What happens at the end of a car lease?
If you make it to the end of your lease, there are generally three options:
- Buy your current car (if your lease includes a purchase option)
- Turn in your car
- Turn in your car and lease or buy a new one
If you can make it to the end of your lease that’s usually the best option from both a financial and logistical perspective. When you terminate your car lease ahead of the agreed upon date, you may face additional fees and penalties that may cost you more than keeping the car through the full lease term. If you only have a few months left on your lease, you may decide that it is better to wait until the term ends before returning your car.
Early termination of a car lease, defined
Early termination of a car lease means terminating your contract before the end of the agreed upon term. If you have a three-year car lease, ending it before the three years are up would be an early termination. Early termination can be costly and a bit cumbersome to deal with. An early termination fee is standard and, depending on the lessor’s standards and the terms of your lease agreement, may require payment of remaining lease payments, an amount equal to the difference between the remaining balance of your lease and the realized value of the car after sale, or other charges. It is important to understand that the charges may be substantial if you terminate the lease early and can total up to several thousand dollars. The actual charge will depend on when the lease is terminated. The earlier you end the lease, the greater this charge is likely to be.
What to consider when ending a lease early
- Your reason for termination
- What the early termination fee would be
- Your lessor’s policies
Before turning in a lease early, it’s best to first speak with your lessor. They may be able to work with you to find a solution or at least inform you of their early termination policies.
