Can you end a car lease early?
At Leap Vehicle Leasing, we understand that sometimes circumstances change. Car leasing is a great option for anyone wanting an affordable and flexible way to drive the latest car models.
Sometimes, however, life happens.
Whether you're facing financial difficulties, relocating, or are simply considering an upgrade, you may want to part ways with your leased car before your agreed contract end.
If this sounds like you, you should start by thoroughly re-reading your lease agreement. You’ll need to fully understand the options available for ending your car lease early, as well as the potential costs and credit implications of doing so.
Please note: Leap Vehicle Leasing is not a financial lender. Please contact your lender directly for precise details and personalised advice on ending your car lease early.
Understand your lease agreement
A car lease agreement is a legally binding contract that outlines the terms and conditions of your lease. Before considering ending your car lease early, you should have a clear understanding of the agreement you've entered into.
Here are the key elements you should pay attention to:
- Lease duration. Your lease duration specifies your contract length – how long you’ve agreed to make monthly lease payments. Your agreement should also determine when you can potentially end your lease early.
- Mileage restrictions. Lease agreements come with mileage restrictions that define the maximum number of miles you can drive during your lease term without incurring additional fees. Lenders will use this to evaluate how much to charge you for ending your lease early.
- Penalties for early termination. Lease agreements typically include provisions for early termination. These provisions outline the penalties or fees you may incur if you decide to end the lease before the agreed term.
In the UK, the Consumer Credit Act gives you the statutory right to cancel a lease contract with no charge within 14 days of agreement. After 14 days, you’ll have to pay the penalty fees laid out in your lease contract. Please note there may still be separate broker fees chargeable, so it’s best to check with your broker with regards to these charges.
However, it’s important to note that there is no legal obligation for a lease company to offer early termination after the 14 days. This is why it’s crucial to carefully read every detail of a lease agreement before signing your lease deal.
Ways to end your car lease early
You should contact your financial lender right away if you're struggling financially and need to cancel your car lease early. It’s in the lender’s best interest for you to make your monthly lease payments, so they'll often do their best to help.
However, if you really can’t afford the payments, there may be other options available for ending your car lease early:
Early termination
Early termination happens when you contact your financial lender and express your desire to terminate the lease ahead of time. You may apply for an early termination at any point during your contract.
However, it's important to note early termination may come with financial consequences, such as lease termination fees and other additional charges.
Defaulting on your car lease
Defaulting on your lease contract is an unfortunate option that should be avoided if possible. Not making your contracted lease payments can lead to serious consequences, including damage to your credit score and potential legal action from the leasing company.
It's vital you carefully consider the financial implications and talk to a debt advisor before choosing this path.
- Repossession
If you do not make your lease payments on time, the financial lender has the right to take back your lease vehicle. Repossession can have severe legal and financial consequences, so it's always best to speak with your leasing company and explore other solutions before repossession becomes necessary.
- Voluntary surrender
Volunteer surrender means you return the leased vehicle to the leasing company willingly. This is a much better option than having the car repossessed unwillingly. However, it's important to note that voluntary surrender does not absolve you of your financial obligations. The debt is still owed, and you may still be responsible for any outstanding payments and fees associated with the car lease.
Lease transfer
Another possible way to end your car lease early is through a lease transfer. This involves finding another party who is willing to assume the remaining lease term and take over the lease payments.
Lease transfers can be a good idea for some people, as they allow you to avoid fees for ending your lease early. However, you must check with your leasing company first to ensure they allow lease transfers and to understand any associated fees or legal requirements.
Can you buy a leased car?
You cannot buy the vehicle at the end of your lease period if you have a standard Personal Contract Hire (PCH). If you would like to have the option of buying the car at the end of your contract, you should explore Personal Contract Purchase (PCP) finance options instead.
Read more about the different types of car finance.
How much does it cost to end a lease early?
Finance companies really don't want you to end your lease early. They specifically put high fees in place to discourage people from trying to cancel their contract – so it’s usually a pretty expensive process.
Your early termination fees probably won't include all the penalties outlined below, but in pretty much every lease you will have to pay at least some of the remaining payments and an early termination fee.
Read more: The Cost of Leasing a Car
Early termination fees
Early termination fees are charges imposed by financial lenders to make up for the financial loss incurred from ending your lease early.
You should consult your lease agreement or contact your leasing provider directly to understand the exact termination fees applicable to your situation. The specific amount you’ll pay can vary significantly – ranging from a few hundred pounds to several thousand pounds – but the fee will usually be calculated in one of the following ways:
- Pay the remaining monthly payments. This means you pay the rest of the payments you owe until the end of your agreed lease period – as one lump sum.
So, if you have a 36-month contract and cancel it after 18 months, you will have to pay off the remaining 18 months to end your lease early. For instance, if you pay £200 a month, that works out at £3600.
If you’re near the end of your contract and just want an early upgrade, it can be an affordable option. However, if you’re right at the beginning of your lease contract, this is going to be a colossal fee, as you're basically paying off the entire cost of your car lease in one go.
- Pay a set termination fee. This is the option most likely to be offered to customers who can’t make their monthly payments.
If you’re 6 months into a 36-month lease, you’ll likely be offered a set early termination fee. This fee will vary depending on how long your contract is and how many miles you’ve driven in the car. Usually, however, you might expect to pay something like a 50% charge of all remaining months.
Check your lease agreement or contact your financial provider directly to confirm what your early termination fee will be.
Additional fees and charges
Apart from the lease termination fees, there may be additional costs associated with ending your car lease early. These can include:
- Excess mileage charges. If you've exceeded the mileage restrictions outlined in your lease agreement, you may be subject to additional charges per mile driven over the limit.
- Wear and tear costs. If the vehicle exhibits excessive wear and tear beyond the normal wear expected of your lease term, you may be responsible for covering the repair costs.
FAQs about ending your car lease early
Will ending my car lease early affect my credit score?
Ending a car lease early can significantly affect your credit score if you fail to meet your financial obligations to the leasing company.
For example, if you cancel your car lease without paying the required early cancellation fees, outstanding charges, or remaining payments, it could result in negative reporting to credit agencies. This will lower your credit score, which can potentially impact your ability to get a mortgage, credit card or future car lease.
It’s important to be open and honest with your leasing company and financial lender to ensure you fulfil all your financial responsibilities.
If I end my car lease early, will I get my initial down payment back?
No. Typically, the initial down payment made at the start of a car lease is non-refundable, even if you decide to end the lease early.
Need more info?
At Leap Vehicle Leasing, we're dedicated to helping you navigate the car leasing process from start to finish. We can provide all the information you need to make the best car lease decision for you.
However, if you need to cancel your lease contract early, we recommend consulting your leasing provider directly for personalised advice and specific details about your leasing situation.
Get in touch to speak to our friendly team today or call 0161 623 2891.
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