Car Lease Term: Benefits of an Early Termination

When you sign a lease, you agree to a particular car lease term, a length of time over which you will make payments on the car. As is sometimes the case, you may want to terminate the lease on your current vehicle early. This can have some drawbacks, but the benefits include getting a car with lower monthly payments or, in some cases, getting out from under the payments entirely.

Just as a warranty guarantees that the auto manufacturer will make good on anything it covers over a period of time, a lease is a contract you enter into saying, in effect, that you will continue to make payments on the lease until that predetermined time period comes to an end. Whatever makes you decide that you may want to end your lease early there are a few ways of going about it. You can return the leased vehicle, buy out the lease, lease a different car or undergo a lease transfer. 

If you return the car to the dealership, you are obligated nonetheless to make the payments. That doesn’t work well for you, however, as you have to pay on a car you don’t have. You can buy out the lease on your car, hoping that its market value exceeds what you owe. It’s a gamble that can sometime pay off, but usually you end buying a car for an amount that you won’t get back if you turn around and sell it.

Leasing a different car is a good way to terminate your current lease early, but you have to know the car’s residual value or how much the car is worth or will be worth at the end of the lease term. If the car has held its value, the payments on your new lease might go down, but the opposite could be true. Lastly, the way to get out from underneath the lease without taking on another is a lease swap, whereby you transfer the car and payments to another party. If the leasing agent will allow this, you both can benefit. The other party has no down payment to make and you no longer have a lease payment.