The market for cars right now is unique. Used cars are in demand, which means they also cost more to buy and can be hard to find. Leasing is also in a similarly unique position, since some vehicles are keeping their equity—meaning now might be a good time to end your lease early. We reached out to some experts for guidance on how to end a lease early, including the steps you should take.
DIFFERENT WAYS TO END YOUR LEASE
Multiple ways exist to end your car lease, but Grant Feek, CEO of Tred, cautions that it won’t be simple. He says one option is ending the lease early by “directly canceling” it but says you should try to avoid this because of the typically high termination fees.
Next, you could transfer your lease to someone else—if your contract allows it. Or you could opt for a trade-in if your dealership is open to trading your current car for another vehicle. Then there’s a lease buyout, which means you’d buy your vehicle for the price set by your leasing company. You could come out ahead here, assuming you find a buyer that will pay you at least the buyout price when you sell your car.
“Bear in mind that in many states you’ll have to pay sales tax on the purchase amount if you do this,” says Feek. Some states have grace periods to avoid that if you complete the sale to the new buyer within a certain amount of time; so check with your state’s DMV on this.
IS IT A GOOD IDEA TO END YOUR LEASE EARLY?
Ultimately, Feek says, “The only time it’s truly a good idea is if you have equity in the car—meaning that you have a buyer willing to pay more for it than your current lease payoff price.”
Zander Cook, with Lease End, adds there are a few factors to consider here. He recommends making sure you don’t have significant damage and you haven’t exceeded the mileage limit in the lease, both of which can drive up fees if you’re ending the agreement.
“In the current economy, impacts of supply chain disruptions make it difficult to buy new cars,” Cook explains. “The best and most cost-effective way to own a car now is by buying out your lease. Almost every lease that was entered into two (to) three years ago is in a positive equity position.”
Cook advises that you won’t be able to negotiate the buyout number, but “most consumers will benefit in the current environment by buying out their lease and capturing the equity that has been built up.”
STEPS TO END YOUR CAR LEASE
If you’ve decided ending your lease early is the way to go, Cook put together a few steps to guide you through the process.
First, he recommends you “evaluate any wear, tear, and mileage on your car.” Cook adds, “Before heading to the dealership, clean and detail your car, take pictures and check the tires. This could help prevent any surprise fees that could be tacked on when you return your car to the dealership.”
Next, determine what your car’s value is, which you can look up on Kelley Blue Book or Carfax. He notes, “If the current value of your lease vehicle is greater than the ‘Residual Value’ you may benefit by buying and reselling the vehicle or selling it. Many who are driving leased cars are noticing that their car’s buyout price is much less than the car’s current value, giving drivers the ability to use their car’s equity as a way to help them during a recession.”
Third, take a look at all of your options before deciding what route to take when ending the lease. As a reminder, you can choose to trade in your car, have another person take over the lease, or buy the car and sell it to someone else. You may be able to return the car to the dealer but Cook points out that this is likely to be “the most expensive option.” You could also “purchase your vehicle out,” which Lease End views as your best option, according to Cook.
If the process sounds overwhelming, you could partner with a company to end your lease. Cook explains the steps are very similar but notes that companies like Lease End can help you navigate your options, complete paperwork, and more.
DECIDING WHETHER TO LEASE AGAIN
Leasing can be a great option for many people, but it really depends on you and your needs. Feek notes, “Leasing can be a great way to get more car for less money, if you negotiate a good enough lease deal.” He also explains that leasing is “ideal for people who like to get a new car every two to four years, and who don’t drive a lot of miles per year.”
However, he advises if you think you may want to end your lease early, “it’s best to buy.”
ENDING YOUR CAR LEASE
Ultimately, you are the person to decide whether you should end your car lease early. You’ll need to take some time to look into the various options to pick what’s best for you. There are some general steps you can take to end the lease early if that’s what you choose to do, or you could partner with a company to help you through the process.
And remember, if you sell your car to someone else and immediately need another vehicle, make sure you have other transportation lined up before someone else drives your old car off into the sunset!
More on HerMoney:
- Car Buying Experts on How to Save Big on Your Next Vehicle
- Insurance Checkups for Auto and Homeowners
- HerMoney Podcast Episode 229: How to Buy a Car and be Smart With Big Purchases
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