What Happens When You Break Your Car Lease?
Do you know what would happen if you ever had to break your car lease?
Nobody goes into a lease expecting to have to break it. However, life happens. Just as you sometimes need to make last-minute changes to your automobile insurance, you may experience life changes where you no longer need to lease a car.
But what happens after you do so? Will you be stuck with a big bill? If so, is there anything you can do about it? Keep reading to discover the answers you are looking for!
What Happens When You Break Your Car Lease?
When you break a car lease, you will most likely have to pay an early termination fee. You may also be stuck paying the rest of the lease depending on the contract that you signed.
In the eyes of your leasing company, you have a legally binding contract. Unfortunately, this means that unless they built in ways for you to break it early (more on this soon), you may largely be at their mercy when it comes to early termination.
Don’t worry, though: Our guide will walk you through some alternatives you can explore even if your contract doesn’t come with options for early termination.
Always Check the Fine Print
Before you ever sign on the dotted line, it’s important to check the fine print for your options. Even if you’ve already signed, it’s not too late to double-check everything and discover more about what you can (and can’t) do.
For example, look for language about the “early termination fee.” The nature of this fee and exactly how much you may have to pay can vary from company to company. The fine print also usually spells out what to do if you get into an accident with a leased vehicle.
In some cases, you may have to effectively pay the remaining amount of the lease, meaning you are financially no better off. In other cases, you may have to pay the difference between your car’s realized value and the balance. Other early termination penalties and charges may be included, so it’s always important to call the company and ask what the exact amount would be if you were to terminate.
What If I Can’t Terminate Early?
Early termination is not an option for everyone. In rare cases, the lessor may not allow early terminations at all. More commonly, though, the problem is that the driver cannot pay the exorbitant fees required for termination.
This doesn’t mean you’re necessarily stuck, though. Below, we have several different options that may help you end the agreement early without having to pay an arm and a leg.
- Find Someone to Take Over the Lease
Our first option is to find someone else to take over your contract. Before you get too far with this plan, though, make sure that doing so is permitted and that it is legal in your state. You may also need to verify that the person taking over meets certain requirements, usually credit requirements.
You may not know anyone in your own life who would want to take over for you. Fortunately, there are now multiple lease-swapping websites that can help you out.
If you can make it happen, then getting someone else to take over is often the most cost-effective strategy. You should be aware, though, that you will likely have to pay transfer costs and possibly other charges as well. As always, find out how expensive this solution really is before getting started.
- Buy the Car
One of the reasons we recommend getting quotes is so you can discover the most affordable solution. For instance, once you crunch the numbers, you may discover that you are better off buying your lease out entirely.
How is buying the car a cost-effective solution? For one thing, the car may be worth more than the lessor originally thought it would be, allowing you to buy a nice car for a cheaper price than similar used cars.
For another thing, once you own the car, you can do whatever you want. You may be able to sell it to generate a nice profit or even rent it out yourself as an easy source of passive income!
- Roll Your Remaining Payments Into a New Lease
Depending on why you want to terminate, you may have one more option available to you. Specifically, if you wanted to break this contract so you could get a different vehicle, you may have the option to roll what you owe into your new lease or loan.
While this solution is simplistic, it does mean you end up with a higher monthly payment. On top of that, you could easily end up upside down on a new loan. Because of that, we ask you to carefully explore other options before trying this one!
How Do I Know Whether I Should Break My Lease or Not?
Now you know a bit more about your options, which brings us to the big question. To paraphrase Shakespeare: “to break, or not to break?” In other words, how can you know whether or not you should break your contract?
Honestly, the best scenario is if you no longer need a personal car. This may happen if you move to a city with great public transportation. Alternatively, it could happen if you are downsizing into only using one family vehicle.
If you still need a car to get from Point A to Point B, you should reconsider whether breaking the lease is the best idea right now. If you’re not careful, you may end up paying for things like exorbitant early termination fees on top of paying for a new car loan or lease!
Protect Your Lease with the Right Car Insurance
Now you know more about what happens when you break your car lease. Since these leases require you to protect the car with the right insurance, it’s important for you to find the best coverage at the prices you deserve.
Agencies that offer Bluefire Insurance specialize in keeping you and your car safe. Agents who are interested in becoming a Bluefire partner are welcome to fill out this contact form or call us at (866) 424-9511 for more information.