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Renting a car can be a useful option if you need access to a vehicle for a limited time and don’t want to buy one. However, in some cases you may want to end your lease early, for example if you can’t afford the payments or you just don’t need the car anymore.
If you’re wondering how to get out of a car rental agreement, here’s what you need to know.
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What is car leasing?
Unlike buying a vehicle, car leasing essentially allows you to lease one for the long term. The dealership or leasing company that leased the car to you owns the vehicle and lets you drive it for a certain period of time. A traditional lease typically lasts two to five years, although you can get a short-term lease for less in some cases.
Since you’re not buying the car, your upfront costs will likely be lower by comparison. For example, you generally won’t have to deposit any money unless you have bad credit. You’ll also typically pay less per month on a lease than on an auto loan. The average car loan payment for a new vehicle was $648 in the first quarter of 2022, compared to an average lease payment of $522, according to Experian.
Once your lease is over, you can simply return it to the dealership or leasing company, or you can consider buying the car from the leasing company if your agreement permits.
Can you get out of a car lease?
Yes, there are several ways to end a car rental agreement early. Some lease-breaking strategies are more expensive than others. So be sure to carefully consider all of your options and review your rental agreement to understand any penalties or consequences you may face.
4 ways to get out of a car lease
If you want to end your car rental agreement early, here are four options to consider:
Car leases often offer an early termination option if you want to break the lease. You’ll usually have to pay a termination fee, which is usually the difference between the appraised value of the car at the end of the lease and what you still owe. This is called the residual value.
There may also be additional charges, such as applicable taxes or vehicle disposal or transfer fees. The federal consumer leasing law requires that certain lease costs and terms be disclosed. So be sure to check your lease beforehand to get an idea of what you’ll end up paying. You can also call your leasing company to ask how much it will cost to end your lease early.
Breaking your lease comes with substantial costs, so it’s a good idea to deal with it as a last resort. Also keep in mind that cars generally depreciate the most in their first year or two, so the further along you go in your lease, the lower your overall cost is likely to be.
Transfer of lease
You can also consider transferring the car and the remaining part of your lease to another lessee. Also known as a lease takeover or lease takeover, a lease transfer will likely be a less expensive option than breaking your contract because you won’t be subject to early termination fees.
If you want to transfer your lease, you will need to check with the dealership or leasing company first to make sure this is allowed. If so, then you will need to find someone to take over the lease.
Although you can search for a new tenant yourself, it is usually easier to use a third-party platform like LeaseTrader or QuitALease.com. These platforms make it possible to connect people who are selling their lease with people who wish to take over a lease and to streamline the transfer process. You can usually expect to pay between $100 and $350 to use one of these companies’ services. Other potential costs may include lease transfer fees, credit check fees, and shipping charges.
Also keep in mind that depending on your rental agreement, you might be allowed to give another person full responsibility for the lease, or you might be required to keep your name on the lease while the other no one takes care of the payments. In the latter case, you could be held responsible if the new tenant does not make their payments. So make sure you understand in advance what you are agreeing to.
Many leases offer a buy-back option, which can be a good choice if you want to keep the car you’re driving or if you want to sell it yourself. While you’ll usually get the best deal if you wait until your lease ends to purchase the vehicle, you can opt for an early buyout if you’d rather end your lease sooner than expected, but keep in mind that this could happen with fees or finance charges.
Before approaching the dealership or rental company, be sure to do your research to see what the vehicle is worth and what a reasonable price would be. Next, check your lease agreement to see what you would have to pay to buy the car and if it’s worth it.
If you decide to continue, you will likely need to apply for a car loan to cover the purchase. Although the dealership or leasing company may offer to finance the vehicle, be sure to take the time to shop around and compare your auto loan rates and terms with as many lenders as possible to find the right fit. best offer.
In some cases, you may be able to trade in your current car for a new vehicle. While this can be a convenient option, it can also come with early termination fees. So be sure to check your rental agreement or contact the dealership or rental company to see.
If you meet the credit score requirements, the dealership will pay off your remaining lease balance and purchase the car from the other dealership or leasing company. Note that if the residual value of the car is greater than the dealer’s buy-back amount, you receive credit for the trade-in. But if the buyout amount exceeds the car’s residual value, you’ll either have to pay the difference or roll it into your new lease or loan.
Advantages and disadvantages of terminating your car lease early
If you want to end your car rental agreement, it is important to carefully weigh the pros and cons of each option to determine which one is right for you.
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