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How to get out of a car lease you can't afford?

You may want to get out of car lease for many reasons. Whether it is financial troubles or you want another car, getting rid of a car lease is a grueling process, especially if you are not aware of the options that you have.

Getting out of car lease is not as simple as it sounds. Giving up the lease and returning the vehicle to the dealership is not the way to go about it. It leads to an enormous termination fee. In addition to this, you pay for the depreciation of the vehicle; it does not sound like the best way to get out of a car lease. The good news is that there are other ways to get rid of a car. However, some methods can cost you a lot. Other can help reduce the financial burden and ensure that you are not at the losing end of the bargain.

One of the main concerns with regards to quitting a lease is that it ruins your credit score. Some methods of transferring car lease certainly do that, but if you are smart about it, you can prevent a bad credit score.

Apart from this, the penalties for getting out of a car lease can sound scary. The hefty termination fee alone is enough to make it difficult for you to quit a lease. Hence, if your financial situation is tight, paying the termination fee to get out of a car lease is not an option. When you return a car to the dealership, before the end of the lease period, you also end up paying for excess mileage and wear and tear.

The concerns regarding getting rid of a car lease are valid. Hence, it is terrifying if you find yourself in a financial situation where you can no longer afford the monthly lease payments. However, there is an option that helps you avoid paying these fines and penalties and gets rid of the car lease the easy way.

What makes up the payment for a car lease?

A lease payment divides into depreciation, interest rate (money factor), and tax. Apart from the monthly payments, the lessee makes a down payment before the start of the leasing period. The higher the down payment is, the less the monthly payments are.

Moreover, the lessee covers the scratches on the car. The extent of the damage determines who covers the repair cost, though the leasing company may forgo minor repairs. Hence, it is better to get gap insurance from an insurance company that covers the cost of repairs. A leasing contract only allows the lessee to drive a particular number of miles a year. If the mileage exceeds, the lessee pays. So the lessee must be aware of the total mileage per year if they are to lease a car.

Ways to get rid of a car lease

1. Default on payments

If you miss out on payments for more than a month, you forcibly hand in the keys and terminate your car lease. The leasing company will repossess the vehicle. Hence, it should be your last resort. Defaulting should only be done if you can’t afford the monthly payments or your financial situation is at its worst.

If you make late payments or miss out on payments altogether, it affects your credit score. In this case, there is the possibility that the leasing company will sue you. It also ruins your credit score, and you receive a black mark, which lasts for more than five years. Even if default on the contract, you have to pay a termination fee. The lessee has to pay additional penalties to cover for excess miles and damage to the vehicle.

Hence, this should be your last option. Defaulting may give you temporary relief, but in the long run, it will affect your finances. A better option than this is to ask the leasing company for help.

Verdict: The worst option. You should avoid it, if possible. Ends up ruining your credit score.

2. Ask for help

Voluntarily giving up on a car lease only makes sense if you are in deficit or are facing a crisis such as loss of a job, poor health, etc. If you default on a car lease, it lands you in more trouble. Therefore, if you have a lease protection plan, you can put it to use to cover your expenses during hard times. Such insurances cover monthly lease payments so that you don’t have to give up ownership of the car. For example, a lease protection plan for unemployment helps you in keeping up with the monthly payments on the car lease until you find a job. If you claim the insurance, you can even sell or hand the vehicle back to the dealership.

But in the case, you don’t have a protection plan in place, and terminating the car lease is the only option you have, then you must ask the leasing company for help. Before you cease your payments, let the leasing company know that you can’t make the payment. Let them know that you plan to surrender the vehicle. Although this option is not ideal, it will reduce fines. But remember that you have to pay some money to the leasing company.

Apart from this, a leasing company can assist you in keeping up with the monthly payments. In this, the leasing company may reduce the amount and adjust it in future payments. However, this policy differs from one leasing company to another. Thus, when signing the leasing contract, make sure that you are aware of the terms and conditions.

Verdict: Leaves you with a bad credit score. You also have to pay for the protection plan and insurance.

3. Pay the termination fees and return the vehicle

When you terminate a car lease, you pay the termination fee (and additional charges), return the vehicle, and end your contract with the leasing company.

If the value of the car (residual value) at the end of the lease is more than at the beginning of the leasing period, you have positive equity. It means that you gain a profit. If, however, the residual value if less at the end of the lease period, you have negative equity, and you end up paying more to the leasing company. In other words, it means that the car’s value depreciates over time. If your car’s equity is negative, you pay more to the leasing company. When you terminate a lease, the vehicle has negative equity. Apart from this, the lessee must pay additional charges, such as repair costs, storage fees, taxes, etc. It adds to the overall cost of returning the vehicle.

The cost of ending a car lease is as follows:

  • Terminating fees
  • Negative equity
  • Additional charges (Repair costs, storage fee, transportation cost, and taxes)

In hindsight, this is a bad option. You pay enormous fees to get out of the car lease, without receiving anything in return. If you can’t afford monthly payments, paying the termination fee leaves you with a worse financial situation than before. In some cases, the termination fee is high than the remaining lease payments. Hence, this is not a smart option because you pay off the rest of the lease payment, only to get rid of the car you will no longer use.

Verdict: The lessee ends up paying hefty termination fee and penalties. It can also cause negatively affect the credit score.

4. Early buyout and selling the car

Instead of paying the termination fee and returning the car to the dealership, the early buyout is a better option. You buy the vehicle before the leasing term ends and sell it to someone else. You have two choices, either sell it to a third-party or the dealership. Many people are not aware of this. A car’s value depreciates over time, so either way, you end up paying more for the car than its worth.

When contemplating an early buyout, you must estimate the value of the car. In addition to this, consider the excess mileage, wear and tear charges, and others, if applicable. These can drive up the cost of an early buyout.

The payoff value is the amount you give when you purchase the car. The payoff amount includes the early termination fee and depreciation cost of the vehicle. In addition to this, you also have to cover the remaining lease payments. If the down payment on your car was large, you end up paying less in an early buyout. If you sell the car to someone else, you have to pay taxes. But in the case you sell the vehicle to the dealership, you don’t pay taxes.

The following costs are associated with early buyout:

  • Termination fee
  • Remaining lease payments
  • Negative equity
  • Additional charges (Repair costs, storage fee, transportation fee, and taxes)

In some cases, you can avoid penalty on wear and tear and excess mileage. Despite this, an early buyout is an expensive option.

Verdict: You end up paying more for the car than its actual worth. You also have to pay a contract termination fee.

5. Trading the vehicle

If you can’t afford the lease on a car, you can exchange the car and obtain a car lease on a new one. Most car dealers prefer that you end up trading the vehicle with them. It allows them to keep you in a loop, so you end up paying to them instead of another dealership.

When you trade a car, you still have to pay the termination fee. It is because you are terminating the previous contract to start a new one. The new leasing contract adjusts the remaining payment on the old car. This method of terminating the lease is advantageous if the new leased car is cheaper. In addition to this, trading in the leased car will not affect your credit score. But you will be getting rid of a car lease only to get yourself into another one.

However, this is not the most suitable option as the remaining payments on the former car roll over to the lease on the new car. In addition to paying for the new car, you pay the lease on the older car as well. Hence, it does not make sense to make lease payments on a car that you no longer use. This method would not resolve your issue if you are not in a stable financially. Instead of getting out of a car lease, you will find yourself in a new car lease while paying monthly payments on the previous one.

Verdict: The cost of trading a vehicle is too high. You have to pay the terminating fee and lease on the previous car.

6. Transferring your lease

The best option to get out of a car lease without ruining your credit score and hefty termination fee is to transfer a contract to someone else. The person who takes up the lease pays the monthly amount for the remainder of the lease period. The buyer of the lease complies with the same terms and conditions as the original lessee.

However, before posting advertisements on lease-transfer websites such as Quitalease, you need to ensure whether the leasing company and the dealership allow you to transfer a lease or not. Some automakers don’t allow you to transfer a lease, while others have a restriction on when you can transfer it. Some contracts don’t allow you to transfer a car before the first 12 months of the lease period. Moreover, some leasing companies do not approve of out-of-state lease takeover.

After you transfer the lease, some dealerships will hold you liable for extreme wear and tear of the vehicle and missing payments, even if the car is no longer in your possession. Since your name is on the original contract, you are still responsible for the vehicle. So you should be careful when choosing a buyer for the lease.

When transferring a lease, the buyer and the seller have to pay the following fees:

  • The transfer fee depends on the dealership and can range from $300 to $500. The buyer and the seller negotiate who pays the transfer fee.
  • Before transferring a lease, the leasing company must approve the credit score of the buyer. Hence, the lease buyer pays the credit application fee to the leasing company. It ranges from $50 to $250.
  • The registration fee includes the service charges paid to the lease swapping website.
  • A buyer may want to inspect the car before lease transfer. In this case, a third-party inspects the vehicle for damages and necessary repairs. So the buyer may have to pay a car inspection fee as well.
  • Likewise, the transportation fee is necessary for the transportation of the car.
  • The buyer registers for the vehicle and pays the vehicle registration fee.

Verdict: Even with strict regulations surrounding the transfer of a car lease, this is your best option if you don’t want to incur substantial losses.

The procedure of car lease transfer

Step 1:

Make sure that the leasing company allows you to give the car to someone else. In addition to this, ensure that you fall within the time bracket for when you can transfer the car lease. Many automakers do not allow transfer on car lease before the first 12 months and the last 12 months of the leasing period.

Step 2:

Check your credit score. It is essential if you want to lease another car. Also, ensure that the vehicle is in good shape before transferring the lease.

Step 3:

The next step is to put Ads on car leasing websites such as Quitalease. On the website, mention the model, color, and specifications of the car. It helps if you provide more detail about your car.

Step 4:

You may receive requests from multiple buyers for transferring the lease. After finalizing the buyer, the leasing company is informed. It will involve submitting paperwork and car inspections. The paperwork includes the credit score report of the buyer and the lease transfer document. Also, make the necessary payments such as transfer fees.

However, you should consider a few things before giving away your car lease to someone else. Remember that the seller is liable for damages and missing payments on the leased vehicle even after the lease transfer. Hence, the leasing company analyzes the credit score of the buyer to determine if they will hold their end of the bargain. You may have difficulty in transferring a car lease to out-of-state buyers since many automakers restrict car lease transfers to one state only.

Transferring a car lease can take from as little time as one week to a couple of weeks.

Why choose Quitalease for transferring your car lease?

Getting rid of a lease is not easy. It involves paying hefty fines and penalties to the leasing company and sorting through a ton of paperwork. With Quitalease, you can transfer the lease without having to go through all the hassle. Quitalease helps sellers find buyers for a smooth lease takeover. The process of finding a buyer on your own is hard. Hence, Quitalease provides a platform to buyers and sellers of lease from all over the country. Moreover, you can find lease buyers and sellers from your area.

How to transfer a car lease on Quitalease?

With Quitalease, you can transfer a car lease in four easy steps:

Step 1: Sign up on Quitalease and post an Ad. For maximum outreach, you should provide details about your vehicles.

Step 2: Once the ad is up, you will receive messages from potential buyers. You can contact them through Quitalease and negotiate a deal.

Step 3: The lease buyer must submit a credit score report with the leasing company to initiate the lease transfer process. The leasing company will accept the application of the buyer to transfer the lease. After the leasing company approves the application, the lease transfer process begins.

Step 4: After signing the lease transfer papers, the lease transfers to the buyer. The buyer is now responsible for the leased car.

When getting rid of a lease, the lessee has many options. As we have seen, not all options are the best. Most of these require the lessee to pay huge fees that a person who is already looking to get out of the lease cannot afford. Moreover, ending a lease is tiring, especially if you are not familiar with the process. However, with lease transfer, half of your problems vanish. Apart from a few payments to the leasing company, the cost of lease transfer is an inexpensive option. In addition to this, the process of lease transfer only takes a couple of weeks. With Quitalease, this process simplifies even more, since you have access to a market for your car.