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How to Get Out of a Car Lease: Will It Hurt Your Credit?

Stuck in a car lease you don’t want or can’t afford? Here are some options to get out of the lease and their pros and cons.

April 29, 2022

Whether commuting to work, taking the kids to school or running other errands around town, many people rely on a car every day. When it comes to obtaining a new vehicle, you generally have two options: to make a down payment to purchase the car and take out a loan that you pay off over the next several years, or to use a car lease to essentially “rent” the car for a three-year period.

While leasing can have some advantages, such as being able to drive a new car that would be too expensive for you to buy outright, you may find yourself in a situation where you can no longer afford your lease payments.

If staying in the lease agreement is becoming a financial burden, you may be wondering how to get out of a car lease. While ending a car lease early isn’t necessarily easy, it is possible. Here’s a look at what options you have to get out of your car lease early as well as whether this will affect your credit.

Can you get out of a car lease early?

Most leasing companies provide options for you to get out of your lease contract early. However, the specifics of how to get out of a car lease as well as any penalties for early termination can vary based on the terms in your contract.

Before deciding to terminate your car lease early, you should carefully consider the total expenses for each option compared to how much it will cost to continue making payments for the remainder of the lease period. Depending on your monthly fees and the amount of time left on your lease, it may actually be cheaper to stay in the lease until the agreement expires.

If you are having trouble keeping up with lease payments, carefully review your agreement to evaluate which options are available and which would be the least expensive. While negotiating with the leasing company can be a hassle, it could be worth it to avoid going to collections or hurting your credit score.

The following are some of the most common solutions that might be available to help you get out of your lease early.

Early termination

Early termination lets you return the car to the dealership so you will no longer be obligated to make monthly payments on the vehicle. However, most agreements impose early termination fees and other costs if you decide to end your lease early. 

Depending on the contract language, you may be obligated to make several of your remaining payments as part of the termination process. You may also be obligated to pay storage and transportation fees and taxes for the leased vehicle. As a result, the payoff amount for an early termination can total several thousand dollars.

If you obtained your lease through a dealership, you may be able to trade in the leased vehicle as you prepare to buy a new or used car. In this situation, the early termination fee can sometimes be applied to the new car loan and incorporated into your monthly payments.


Lease transfer

A lease transfer, also known as a lease swap, allows you to transfer your current lease to a new lessee. Transferring the lease to someone else’s name is commonly done in situations such as divorce or if a spouse has passed away. But it can also be used in other circumstances when you would like to get out of the lease early because your finances or lifestyle have changed. The new lessee would take over the monthly lease payments for the remainder of the original agreement.

Lease trading websites such as and serve as online marketplaces where lessees can facilitate lease transfers. However, not all leasing companies — or states — allow lease transfers. Contact your state's department of motor vehicles and your lender to confirm. 

Lenders that do allow transfers will typically charge a lease transfer fee to both the current and new lessee, though this tends to be much less expensive than early termination penalties.

Lease buyout

A lease buyout is an early buyout of your lease so that you can purchase the car. You could do this if you want to own the car outright or if you want to get out of the lease and then sell the car to a dealership or another party for a profit. This money can then be used toward the purchase of a new car so you can lower how much you need to take out for an auto loan.

Of course, your ability to make a profit depends on how the market value of the vehicle compares to the early buyout amount that is required by the lender. Leased vehicles tend to experience significant depreciation, so the current value of the car may not make this a feasible option. If the car has lost too much value, buying it could result in negative equity, where you owe more than it is worth.

Temporarily lower or suspend payments

If you have a good relationship with the leasing company, you may be able to request temporarily lowering or suspending your payments. This is typically only done when you are experiencing temporary financial challenges. You will still be obligated to pay the full amount designated in the agreement by the end of the lease. Leasing companies are more likely to agree to such requests if you have an extended history of making on-time payments with them and a good credit score overall.

Does ending your car lease early hurt your credit?

When you end your car lease early, the impact on your credit report is somewhat mixed. By ending your obligations associated with the lease, the account is closed out on your credit report — similar to if you closed a credit card account or paid off a loan.

Because of this, it is possible that your credit score could actually take a small dip if you no longer have a diverse mix of different types of credit accounts. This is similar to the small dip that can occur after paying off a car loan. However, your score should bounce back relatively soon, particularly if you take out a new auto loan or lease.

On the other hand, getting out of a car lease may have a positive impact on your finances because it will lower your debt-to-income (DTI) ratio. This essentially means you’ll have more money available to save each month, making it easier to stay on top of any other debts you might have. A low DTI may also help you secure other lending.

On the other hand, if you default on a car lease instead of getting out of the lease using sound methods, it would have a negative impact on your credit score. Failure to make monthly payments or even going to collections can be a major negative mark on your credit report that hurts your score and hinders your ability to obtain a new lease or buy a new vehicle

Defaulting on a lease is going to be viewed the same as if you defaulted on a loan for a vehicle that you bought. Worse still, you will be responsible for unpaid monthly payments, early termination fees and collections costs.

Knowing how to get out of a car lease can protect you in the long run

While the early lease termination process can be expensive in and of itself, understanding how to get out of a car lease is important if you are having trouble keeping up with monthly payments. By working with your leasing company or the dealership to bring about an amicable end to your lease agreement, you can avoid defaulting on your lease payments, which could hurt your ability to buy your next car.

Whether or not you should try to get out of your lease early ultimately depends on your lease terms and your individual financial situation. By carefully weighing the financial costs and benefits, you can prepare to navigate the end of the lease.

If you’d like more financial tips to help you better understand how to manage car payments and other personal finance issues, sign up for the Tally† newsletter!

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