Car leasing deals usually run for two, three or four years. At the end the contract, you hand your car back and that's that. However, sometimes you’ll need to exit your deal early.
There aren’t a whole lot of options in the car leasing process for getting out of a deal early but I'l give you some info on your options should you want to exit your deal early.
What is Early Termination?
Early termination is (surprise, surprise) terminating your lease before it’s due to end. Since car leasing agreements are designed on the assumption that you will make all the payments, there are usually some costs incurred if you want to cancel early. (I’ll get into this a bit later.)
Early termination is usually negotiated with the finance company (the organisation that actually owns the car) but your leasing broker may act as a go-between.
Why Would You Cancel a Lease Early?
There are dozens of reasons why someone would want to exit a car lease early. They may want to take a job in a different country, their financial situation might have changed or they might want to swap to a newly released car.
However, as you’ll see in a minute, early termination can be pretty expensive so it’s important to weigh up your options before making a decision.
How Much Does It Cost?
Before we get into the details, it’s worth repeating that early termination policies vary between finance providers. Some will be strict, others will be lenient and most will fall somewhere in between.
Usually, finance providers will ask for 50% of all outstanding rentals. So if your monthly payment is £100 and you have 12 months remaining, you’ll have to pay 50% of £1,200 (£600) to exit your deal early.
On top of that, you might also have to pay an early termination charge.
That this is only general advice and it may not match up with your specific terms and conditions. Always ask your finance company for their T&Cs and read them carefully before making a decision.
What to Do if You Can’t Afford Your Lease?
Car leases are reasonably long financial commitments and it’s inevitable that your financial circumstances will change along the way. Unfortunately, sometimes that change will leave you unable to afford the monthly payments on your lease.
If you become unable to pay your monthly bills, get in touch with your finance provider as soon as possible. There are a couple of ways they can help but the most common is simply extending the length of the lease, which reduces your monthly payments.
Whatever you do, don’t bury your head in the sand and ignore missed payment letters. Your finance company will do their best to help you but missing payments and ignoring communications is going to going to make them jittery and less likely to compromise with you.
Can I Transfer My Car Lease?
A final (and fairly niche option) is what’s called a lease transfer. (You might be able to guess what this is based on the name.)
With a lease transfer, you find someone who wants a short-term lease and transfer the remainder of your lease to them. They become the registered keeper of the car and take over the payments for the remainder of the contract.
This might seem like the perfect option for someone who wants out of their lease early but it’s usually not an option in the UK. First, you’ve got to get approval from the finance company and they are well within their rights to say no. And second, you’ve got to find someone who actually wants to take over your lease for a couple of months. And since leasing is still relatively unknown, there aren't many people out there looking.
As leasing grows in popularity, lease transfers should get more popular so keep an eye out!