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4 Tips To Get Out of a Car Lease

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In a Nutshell

Leasing a car can seem like a great idea at first. But over time, leasing a vehicle may become more of a burden. Unfortunately, one of the biggest drawbacks of leasing a car is how difficult and expensive it can be to get out of your lease early, regardless of your financial status. Thankfully, there are a few ways that you may be able to unburden yourself from a lease you no longer want to be in. You may be able to transfer the lease, buy the leased car and sell it to someone else, trade in your car, and/or lower or suspend your payments. This article will explore each of these options in detail.

Written by the Upsolve TeamLegally reviewed by Attorney Andrea Wimmer
Updated November 11, 2021


Leasing a car can seem like a great idea at first. But over time, leasing a vehicle may become more of a burden. Unfortunately, one of the biggest drawbacks of leasing a car is how difficult and expensive it can be to get out of your lease early, regardless of your financial status. 

Thankfully, there are a few ways that you may be able to unburden yourself from a lease you no longer want to be in. You may be able to transfer the lease, buy the leased car and sell it to someone else, trade in your car, and/or lower or suspend your payments. This article will explore each of these options in detail.

What Happens if You Terminate a Car Lease Early?

It can cost a lot to get out of a lease before your contract is up. But if the benefits of terminating the lease early outweigh these costs, it may be worth it. You’ll want to calculate how much it’ll cost to terminate your lease early and compare it to how much you’ll save. If you’re moving to a new city or state where public transportation is widely available, you may save money even if you have to pay fees to terminate your lease. But if you just don’t like your car and want to get another one, it may not be worth the financial cost.

When thinking about whether to opt out of your car lease early, consider the penalties you’ll face. Every lease agreement is different, so you’ll want to examine yours carefully. Some common consequences of early termination include: 

  • Early termination fees; 

  • Negative equity between the current value of the vehicle and the lease amount; 

  • Liability for the remaining payments on the current lease; 

  • Car storage fees; 

  • Dealer fees for covering the cost of preparation of the car for sale; and 

  • Transfer fees and taxes. 

The most well-known of these consequences is the early termination fee. Early termination fees are usually substantial fees that you’ll be required to pay to get out of your car lease early. These fees will generally be much higher if you decide to do this with a new lease. That is if you want to cancel during the first half of the car lease term. The cost generally drops as the end of the lease term approaches. Depending on where you are in your lease cycle, these early termination fees may help you decide whether you think it’s worth backing out of your lease at this time. 

Although some of these fees may not apply to your specific car lease situation, it is important for you to read your lease contract carefully to avoid costly surprises. Also, keep in mind that not paying certain fees or all payments as agreed can hurt your credit score. Failing to pay all of your fees could also lead to collection actions against you, which will cause further damage to your score. 

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How To Get Out of a Car Lease Early

Because terminating a car lease is so expensive, it’s important to carefully consider your alternatives. If you want to end your car lease early, it’s a good idea to call your lender and ask them to explain what fees and costs you’ll face s a result. By law, they must explain these to you. This can help you to make an informed decision about your options.

If you decide to move forward, there are some approaches that can help you avoid some or all of the penalties associated with terminating your car lease early. Consider these approaches if maintaining your lease isn’t your best option at this time:

Option 1: Transfer the Lease

A lease transfer (or swap) is one of the most beneficial ways for a leaseholder to terminate their car lease before the term has expired. Essentially, a lease transfer allows you to place your current lease in someone else’s name so that you are no longer attached to it. Lease transfers often occur in the wake of a divorce or the death of a loved one. Many lessors permit transfers of car leases, but some don’t. Others only permit transfers under certain circumstances. 

To determine whether a lease transfer is permitted, you should check the language of your car lease agreement. If you don’t understand  the dense language of your agreement, that’s okay. Just call your lender and ask if you are permitted to transfer your lease under some or any circumstances. Note that the new lessee must meet your lender’s credit requirements, and the lease transfer must be legal in your state. 

Transferring a lease may require a lease transfer fee or charge, but this is likely to be small compared to the early termination penalties that you would have to pay if you simply opted out of the lease altogether. With a lease transfer, the lease term will not actually end, someone else will simply become the lessee and take over the lease agreement. By contrast, early lease termination actually ends the lease, which can lead to early termination fees and penalties. 

Despite being a great alternative to early termination of your car lease, transferring your car lease requires finding a new lessee. Finding a new lessee to take over your car lease can be quite challenging. Thankfully, there are some websites that make it easier to find a new lessee. Although each lessee’s situation is different, transferring your car lease is likely to be the best option. That is if you can find a suitable lessee and your contract and state law allow for a transfer.

Option 2:  Lease Buyout and Sale

Another option is a lease buyout. In a lease buyout, you would buy your leased car (for the payoff amount) and sell it to another party (if permitted by the leasing company). Potential buyers could include a car dealership, a family member, or a private party in an online marketplace. If you have the means to do so, buying your leased car and selling it to another party at market value could be a great option. You might even be able to make a profit.

When purchasing the leased car, you should look at the leasing company’s payoff schedule to see how much it will cost to buyout the leased vehicle. If you can’t find a buyer interested in covering that amount, this might not be your best option. You’ll also want to consider the current market value of the vehicle. Buyers may be willing to pay more for the vehicle than it costs you to buy it out. This is rare, but when economic conditions changes, such as with the recent pandemic, it can happen.

Also, when selling your leased car, you should be aware of your state’s tax laws. If you make a profit on the sale of your car, you could be subject to capital gains taxes. The capital gains tax will either be a short-term capital gains tax or a long-term capital gains tax. A short-term capital gains tax is a tax on the profit made from the sale of a car owned for less than one year. A long-term capital gains tax is a tax on the profit made from the sale of a car owned for more than one year. Capital gains are reported on IRS Form 1040 Schedule D.

Option 3: Trade in the Car

Another good option for lessees who are looking to get out of their car leases is trading in their leased car for a used or new vehicle. This option is suitable for those who still need a car but can’t afford their lease payment or need a different kind of vehicle (a bigger car for a growing family, for example). You’ll still be charged an early termination fee, but it may be spread out over the monthly payments of a new car loan. When you buy a new or used car from the same dealership you leased your current car from, the leasing company may waive or reduce certain penalties.

Option 4:  Lower or Suspend Payments

This is worth considering if you are experiencing financial difficulties. You can contact your leasing company to discuss whether you can lower your monthly payment or temporarily suspend your car lease payments. Often, leasing companies are willing to lower or suspend payments to ensure that they receive at least some sort of payment. It is important to note that this doesn’t mean your car lease is canceled. Lowering or suspending your payments does not release you from eventually paying back your obligations. Leasing companies may simply be willing to modify the original terms of the lease agreement to make it easier for you to pay.

Let's Summarize...

Getting out of a car lease contract isn’t easy, but it is possible. If you want to avoid early termination fees and other penalties, you can look into transferring your car lease to another person, purchasing the car and then selling it, trading in your car, or contacting the leasing company to see if they can lower or temporarily suspend your payments.

Before you commit to a plan, carefully examine your car lease agreement to better understand the terms and conditions of early termination. This will help you weigh the costs and benefits so that you can make an informed decision about your options. 



Written By:

The Upsolve Team

Upsolve is fortunate to have a remarkable team of bankruptcy attorneys, as well as finance and consumer rights professionals, as contributing writers to help us keep our content up to date, informative, and helpful to everyone.

Attorney Andrea Wimmer

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Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor. While in private practice, Andrea handled... read more about Attorney Andrea Wimmer

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