How to get out of your lease early

Can I return a lease car early?

In short, yes. However, while you have cancellation rights within your contract, this can be a costly option. A termination fee will apply if you want to return a car early. Charges may be calculated based on factors such as remaining term length, mileage and additional costs.

If you’re considering this option, contacting your leasing company to discuss your circumstances is the best first step. They will provide a termination quote based on the details of your contract.

Note: All car lease contracts have a 14-day cooling-off period. There is no cancellation fee if you decide to cancel the contract during this time. However, early termination after 14 days is subject to a penalty charge.

Process to terminate your lease early

If you're considering terminating your car lease early, ensure you call your leasing company before officially stopping any payments.

To start the termination process, you need to discuss your decision with the leasing company. They will talk you through the terms of your contract and your cancellation rights. Most agreements can be terminated early. However, they will incur a termination charge.

The leasing company will consider your circumstances and provide a quote, which may be based on several factors. This quote generally depends on the number of instalments you have left and is typically around 50% of the outstanding payments.

Other factors may apply to the termination quote including additional end-of-lease fees, such as:

- Early termination administration charges

You may have to pay an administration fee to the leasing company to process your early termination request.

- Wear and tear charges

The process of returning a lease car involves ensuring the vehicle meets fair wear and tear guidelines. This process is the same whether you return the vehicle at the end of the agreement or earlier.

The fair wear and tear policy is provided at the start of the contract and details what is required regarding the car’s condition when it's returned. It must be in the best condition possible, but some general wear and tear is expected. However, excessive damage not rectified before its return will incur a penalty charge.

- Excess mileage

Returning a lease early could incur excess mileage fees too. Mileage is typically based on an annual amount. So, if you hand the car back mid-term and you've exceeded the pro rata mileage for the year, an excess fee may be charged alongside the termination quote.

- Taxes associated with the lease

Road tax generally forms part of a car lease, and in some cases, the leasing company may charge you any outstanding tax left in the agreement.

- Transportation and storage

Some leasing companies may add an additional fee for collecting the car early and storing it while it's processed.

- Negative equity

One of the perks of leasing a car is not worrying about the depreciation of the vehicle. But, depending on your contract, some leasing companies may charge the difference between the lease and the value of the car if you decide to end the agreement early.

Charges differ between companies. So, it's advisable to give your leasing provider a call to fully understand your end-of-lease options.

Do I have to pay to return my lease early?

If you want to end your lease early, there will be charges for the contract termination. The costs incurred depend on several individual factors. The leasing company will consider these, and you'll get a personalised termination quote.

There are three penalty options that companies most commonly use. These include:

- 50% of outstanding instalments

Many leasing providers charge 50% of the instalments you have left in your agreement. Depending on the length of the term, this can be pretty expensive. In addition to this charge, there are often extra termination fees, such as administration fees.

- All remaining lease payments

In some cases, all of the outstanding payments you have on your lease contract must be paid to end it early. Again, this is a considerable cost, especially if you have many months left on your lease.

- Customised termination charge

Upon speaking with your leasing company, they may provide a customised quote based on your circumstances and lease factors. For example, the calculation could include remaining mileage or an instalments percentage.

Alternatives to early lease termination

If you want to end a lease early but don't want to incur the hefty penalties that come with this option, there may be alternatives to consider.

These will be based on your circumstances and whether your contract allows them. So, what are the options?

Can I transfer a lease?

Lease trading is possible, however, it is subject to your contract terms. So before looking at transferring a lease, speak with your leasing company to discuss your plans.

There are several third-party services that provide lease trading. Simply, this process involves transferring your lease to someone else. As a result, they get the advantage of a shorter lease and a nearly new car. Plus, you are free of monthly payments.

Most lease trading services charge a fee to list the vehicle and complete the transaction. However, as most are a few hundred pounds, this is typically more affordable than a hefty termination fee.

Some leasing companies will not allow you to transfer your lease. So, if you decide to go ahead outside of your contract, you'll still be liable for the agreement and all fees related to it.

Can I buy out my lease?

Buying out your car lease means purchasing the vehicle outright. Some leasing providers allow this, while others don't. So, check with your provider for details.

This is quite a costly option because there are associated fees and residual values to consider. But, if the figures work out, you can sell the car and incorporate the costs without being out of pocket.

Of course, having the funds to do this is necessary. Otherwise, you'll need buyout financing to factor into the decision.

It's worth noting that most leasing agreements require you to return the car at the end of the lease contract. So, there may not be an option to purchase.

Can I pay off a car lease early?

If you have the funds available and want to get out of your lease early, you can pay off the lease.

Again, you'll need to speak with the leasing company regarding your contract rights and termination charges. Like the standard process of ending a lease early, you will incur a closing fee and any administration charges on top.

What happens if I default on my car lease?

If you're experiencing financial issues and are having trouble paying the agreed instalments – contact your leasing provider straight away.

Leasing companies will work with you to address the issues and will potentially provide a solution that is suited to you and them. For example, extending the term and lowering the monthly instalments could be an option.

Unfortunately, if you're unable to pay, the leasing company will look to take the car back. This is typically under voluntary repossession, but you'll still be liable for the lease payments or agreed outstanding balance.

Defaulting on your car lease will affect your credit score and may affect your chances of securing a lease in the future.

Will ending a lease early affect my credit score?

If you choose to end a lease early and pay the termination charge, this will close your account and finalise your finance agreement. In this case, your credit score will not be affected.

Alternatively, if you default on payments or the leasing company repossesses the vehicle, this will appear negatively on your credit score. Learn more about how bad credit affects car leasing.

The next steps – ending a lease early

If you're considering ending your car lease early, contact your leasing company to discuss the options available to you.

Depending on your situation, alternative solutions may be suitable if you want to keep the vehicle for the remainder of the term. However, if your circumstances have changed, then they'll give you a termination quote based on your contract rights.

Chatting with your leasing provider before ending payments is always advisable, as this could result in default, which may affect your credit rating.

If you have any questions about potentially ending your car lease early, don't hesitate to get in touch with our team.