Can you end a car lease early?

When you lease a car, you enter into a finance contract. Because of this, you are legally bound to the terms and conditions of that contract up until its end point, which both parties will have agreed to when the lease period began. 

Sometimes, though, you may find yourself in a situation where your personal circumstances have changed and the car lease is something you no longer need or can afford. While it's not always possible to get out of a lease deal, and leasing companies tend to discourage it, there are a few options open to you. These depend on the deal’s terms and conditions, the remaining lease time and your personal circumstances. 

If you do need to end a car lease early, then the most important thing is to tell the lease company as soon as you can – if you default on a payment without advising them, it could have a majorly negative effect on your credit score and will lead to the car being repossessed.

In some cases, you may just want to get out of the lease, and some leasing companies may agree to this if you agree to settle any outstanding costs. Others may allow an early termination fee to exit the contract, or may give you the option of transferring the lease to somebody else, who will then take the car on for the remaining duration.

Can I end a car lease early?

Whether or not a car leasing contract can be terminated early is usually down to the company that you are leasing it through, as some allow this and others don't. The terms of any early termination, if it is allowed, will be clearly stated in the terms and conditions that you signed at the beginning of your agreement.

Other car leasing contracts work in the same way as mobile phone contracts, in that after a certain period, providing you stick with the same company, you may be able to terminate your lease early to upgrade to another vehicle.

If you find yourself needing to end your car lease early, and your company allows this, there may be more than one option available for you to consider, such as a lease transfer, contract buyout or trade-in.

One thing that definitely won't happen, though, is you won't get any of the money back that you've already put in. Also, depending on the circumstances, you should be aware that ending a car leasing contract before the end of its term could have a negative effect on your credit score.

How much does it cost to end a car lease early?

Unless you are trading your lease car in against another one, in which case special terms might apply, there will most likely be a cost involved in getting out of the leasing agreement early. This will be in the form of an early termination fee, the amount of which will depend on the terms and conditions of your leasing contract as well as the value of the car and how much of the lease term is remaining.

Generally speaking, you should expect to pay a percentage as a proportion of the remaining lease payments, which could be anything from 50 to 100 per cent of the amount the company would have received if you continued with the lease until the end of the agreed contract.

Will your leasing company allow you to end your lease early?

One circumstance where you may not have to pay a penalty fee, other than a relatively small administration fee, is if you're able to transfer your lease to someone else, who will continue the payments up until the end of the agreed term.

Your leasing company may come to an agreement with you, as well, if you are altering the lease to change your existing car for another one, the cost of which will vary depending on whether or not you're going for a cheaper or more expensive replacement vehicle.

In these circumstances, most lease companies will be open to a discussion with you about ending your current lease early, but there are no guarantees and this will be entirely down to them.

Alternative ways to get out of a car lease

If you have no choice other than to get out of your car lease here are some options to consider.

Lease transfer

A lease transfer is when somebody else, usually a family member, agrees to take over the legal responsibility for your contract and for the car, on the same terms (notably mileage and condition) that you agreed to when you first took out the lease. This is usually one of the most efficient and inexpensive ways of getting out of a car lease contract, as it doesn't disadvantage either party, but there will be some administration costs involved in switching the lease over.

Lease buyout

In some rare cases, you may be able to simply settle the outstanding value of the lease and terminate it early. This works, for example, if you no longer need the vehicle in circumstances that you weren’t expecting, such as going to work overseas or acquiring a company car.

Another option is to make an offer to buy the car in its entirety from the leasing company. The cost of this will depend on the residual value of the car at the time you proposed to buy it and it's not something that all leasing companies agree to, but it is worth asking. 

The agreed price of the vehicle will be one that doesn't leave the leasing company out of pocket based on what they’d have received by selling it, plus the value of your remaining lease. If it is something they allow, then the purchase price of the car will be broadly similar to that of an equivalent used example at a dealership.

One thing you cannot do is trade-in a car that you’re leasing to a separate dealership, as at no point does the car belong to you. If you wanted to use the car as a trade-in when buying a new one, then you would need to do a lease buyout in the first place so that the car becomes yours.

While it may seem an obvious option to trade in your lease vehicle for another leased car, it's not an option that's offered by many leasing companies. This is because when they agreed the original lease, they factored-in the car's residual value at the end of that term along with the monthly fees they charged from leasing it to you. It becomes, in effect, a hire car – and the leasing company will only consider a trade-in against another lease vehicle if the financials are going to work in their favour.

How to end my car lease early

If you do find you have to end your car lease early, the first thing to do is read all of the terms and conditions of your contract, so that you know if there are any special terms relating to it.

If your decision to end the lease early is due to a difficult financial situation, it is far better to let the leasing company know in advance of any missed monthly payments, to prevent yourself getting into arrears and incurring further charges or a default on your credit file.

When you contact the leasing company, you need to discuss any early termination arrangements including fees charged, as well as arrangements for returning the car.

The car must be handed back to the lease company in good condition, without any major damage other than general wear and tear, and make sure that you include both sets of keys along with any load covers, charging cables or other accessories that came with the vehicle at the start of your agreement.

Bear in mind, too, that if the car does have any damage or is over the mileage allowance agreed at the start of your lease, then you will be liable for additional fees, which should be documented in your terms and conditions.

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