Can You Get Out of a Car Lease?

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Nothing beats driving off the dealer's lot in a brand new car. But what happens if you have second thoughts? What if you need to trade in your sports car for a minivan because a baby is on the way? What if you can now afford that fully loaded luxury vehicle instead of the compact you've been driving? This isn't a problem if you purchased the vehicle. Just trade it in for a new one. Even if you are financing, the vehicle is essentially yours—you bought it. But what if you decided to lease instead of buy? Can you break a car lease after you've signed lease agreements, disclosure statements, and insurance forms?

There are many situations in which a lessee is unable or chooses not to fulfill a lease agreement. While there are ways to end a lease early, be careful—breaking a lease can be costly if it's not done correctly. Most terms for breaking a lease depend on the leasing company's contract. Breaking a lease with General Motors may have different penalties than breaking a lease with DaimlerChrysler. The first step in terminating your lease is consulting your leasing contract for early termination penalties and conditions.

After examining your lease contract agreement, determine what you can afford. There are three key concerns to keep in mind:

1. What penalties, if any, am I willing to pay?
2. What monthly payment can I afford?
3. How important is it to protect my credit history?

Once you've reviewed your contract and decided where you stand financially, you're ready to consider the options available for breaking your car lease:

Option 1: Return the Vehicle

Simply returning the vehicle to the dealership before the end of the lease is an expensive option. Why? Under most lease agreements, you are financially responsible for all remaining payments as well as early return penalties.

Option 2: Roll the Payments into a New Vehicle

You may decide to return the leased vehicle early and roll the remaining payments into a new vehicle. This will allow you to forfeit the old lease without financial penalties. However, you're still responsible for the lease payments on the old vehicle as well as the new one. Your new payments are likely to be high since they will include the payments for both vehicles.

Option 3: Request Voluntary Repossession

In this situation, you request the lessor pick up the vehicle prematurely. This might seem appealing because it won't cost you any money up front. However, it does damage your credit because it is a form of repossession.

Option 4: Find Someone to Assume the Lease

You can also find another buyer to assume the lease in a "lease assumption" transaction. This transfers the contract and liability to someone else. Check with your lessor before you pursue this option because the new lessee may need to meet certain requirements to be qualified to take over the lease.

Thanks to the accessibility of the internet and the purchase protection available for online transactions, lease assumptions have become a popular option for early lease termination. Online services like leasetrade.com, leasetrading.com, or swapalease.com allow you to advertise your lease to prospective buyers. People who are looking to get out of a lease are matched up with people who want to take over the lease for the remainder of the term. These services can be useful, but exercise caution and check the monthly advertising fees and any other out-of-pocket expenses you may incur.

Keep in mind that not all leasing companies allow lease assumptions. This takes us back to step one—consulting your lease contract. You must examine your specific lease stipulations before going through a lease assumption or any other lease-termination process. Be aware of the consequences of whatever action you take. You don't want to endanger your financial future just to get out of a lease.