Should You Swap a Lease? Your Options for Ending a Car Lease Early

If you have leased your car and need or want to terminate it, you have options. You can terminate the lease, purchase the car outright, and even swap a lease. Before you take action, find your lease and read it, determine the actual value of the car you are leasing, and grab a calculator. There are pros and cons to every option.

Read on to explore many of the options you available to you. If at the end of reading this, if you still have questions, we are happy to discuss any remaining questions or concerns and help you make the right decision for your unique situation. 

Know the Real Reason You are Getting Out of Your Lease

There are many reasons to terminate the lease on your vehicle. Although one of the most common is a financial hardship in making payments, due to a loss or change of a job. There are other reasons that people seek to terminate their lease. 

Maybe you need to change the type of your car because that fun little two-seater won't fit the baby's car seat.

You are moving to a new town with an extensive mass transit system and parking the car may be prohibitively expensive.

Your company is sending you to a foreign company, and you can't take the car with you. (Some leases prevent the car from leaving the country in which it was leased.) This is also a common reason for those in the Military when you are deployed or re-stationed. 

It should be noted that regardless of the reasons to terminate your lease there are costs associated with terminating or transferring your lease. So if you only want to terminate your lease is to lease a better, flashier, newer car, make sure you take the time to look at all the costs involved before you make a decision. It may not be worth it financially and if you can wait out your lease, you may be able to buy an even better ride. 

Find Your Contract and Read It

Every dealership has its own leasing contracts and they vary like people and the cars they drive. Make sure you read yours carefully to determine your options.

Some leases contain options like the ability for early termination, but they include fees (early termination fees, transfer and registration fees, and taxes) all of these should be listed in your contract.

Some dealers also have conditions for extenuating circumstances, like job transfers. Caution, some leasing contracts also continue to hold you responsible if you transfer the lease and the new leaser default. Read your lease, and if you have questions, make a list before you meet with your dealership.

Determine the Value of Your Car

There are costs involved in terminating your lease, some of them include purchasing or selling your car. This makes it important to understand how much your car is, really, worth. One way to help to determine your car's value is to spend some time with the Canadian Black Book. You should also check local classified adds and dealer offers, it helps to give you a bigger picture of your car's worth.

Other factors to consider is that some cars are more popular, and therefore, easier to sell than others. If you are looking for a quick turn around this may be an issue.

You should also take a look at your car's Carfax report, anyone looking to purchase the car will do the same. It also provides more information on your cars, true value.

Talk to Your Dealership and Try to Work Out a Deal

If the reason you need to terminate your lease is financial, this may be a difficult conversation. However, the earlier you have the conversation, the more options available to you. In addition, the earlier you start the process, the less likely this current situation will affect your credit.

The dealer may be willing to lower your payments, for a period of time, or even give you a break on a couple of months payments. You can be sure that the funds will be added to the end of your lease, but this may be the relief you need for a short term financial hardship. Dealers are more likely to work with you if your payments are up to date.

If you are transferring as part of a job, talk to your Human Resource's office prior to meeting with the dealership. There may be resources or funds to help you terminate your lease if you are moving for the benefit of the company.

If you are part of the Military and are being deployed or re-stationed, there are also options to terminate your lease without penalty. 

If you stay current on your payments, you can get out of your lease without damaging your credit. So do your research, but don't delay action.

Explore Early Lease Termination

Now that you understand your contract, it may have a clause that allows you to terminate your lease early. In this situation, you will be responsible for any future payments until the end of the lease, and possibly the fees mentioned previously.

Depending on how close you are to the end of your lease this may be a substantial amount of money and will leave you without a car. Make sure you discuss this option with your dealership before making the final decision to ensure you know the full financial impact.

Explore a Lease Transfer to a New Lease

Dealers want to keep you as a customer. There are two ways that you can transfer your lease to a new one. If you need a different type or size of the car, this may be a good option.

If you are near the end of your lease, the dealer may let you out of the lease, if you sign up for a new lease with them. Depending on the popularity of the car you lease, they may do this for little additional costs to you. (Dealerships can then resell the car and make up any lost funds.) This is not always an option but it is worth exploring.

If they are not able to minimize the remaining payments on your current lease, they may be willing to add your remaining lease payments into your new lease. This will result in a larger lease payment over the length of your second lease but may be cheaper than other options.

With either of these options you should expect some fees, so make sure you clarify them upfront. 

Buy-Out Your Lease

If you like your car and want to keep it, you have the option of buying out the lease. At the end, you would own the car outright, however, there will still be fees involved. Those costs should be listed in our contract. You need to make sure to calculate all the costs. This is another reason to know the value of your car.

If you don't have the cash on hand for this type of buy out you will need to secure it. Explore financing through your personal bank and the dealership. 

If you have a highly marketable car, and the value is higher than the leasing dealership thought when they signed the deal, this may work out in your favor. The anticipated value of your car should be listed as the "residual value" on your lease agreement. If the current value of the car is higher than that residual value you can use that as leverage to buy out or terminate your lease. 

Should You Swap a Lease? Your Options for Ending a Car Lease Early - Driving Dash

Terminating a lease contract before the end of the term carries out very high penalties.

Most leasing contracts have excessive mileage charges. These charges can be as much as $0.15 to $0.30 per mile for every mile you drive over the limit. For example, if you are estimating that you will go over your mileage limit by 15,000 miles, the penalty may be as high as $2,250-$4,500. Terminating your lease early, even with the fees, maybe a better financial option. If you decide to lease another car, be sure to alter your milage calculations in the deal.

If you didn't maintain the car, it was in an accident, or otherwise damaged, buying out your lease and keeping the car or selling may be the best financial move. Again, it is important to know the amount your car is worth, in its current condition. Your lease should contain the cost of reconditioning your car or other penalties if it is not in the condition agreed upon in your lease. 

Sell Your Car

Some leases include a provision where you can sell the vehicle, to a private party, while it is still under lease. You can then use the proceeds to pay off your lease.

It is important to note that you can often sell your car for a higher price to a private seller than use it as a trade-in or sell it back to the dealership. Selling to a private seller, however, often takes time. Depending on the severity of your financial situation, this may be an option.

Before you make the sale, verify that the exact payout amount owed, as you should expect some fees in this situation too. You don't want to be left paying off a car you don't own.

Buy-Out Your Lease and Sell the Car

If you have a car in good condition and it is one that maintains its value, this may be a good option. Take care to note how much time it may take to sell the car through the private market. 

Trade-In The Vehicle

If you have good credit, are not behind on our lease payments, and near the end of our lease, you may want to trade in your leased vehicle and purchase a new one.

Dealerships are open to this option because it keeps you as a customer and they continue to make money. Take time to explore this to ensure that the car you are purchasing or leasing will meet your needs, and you don't have to repeat this process in the future. 

Swap a Lease

If after exploring the previous options, you find none of them work for you, consider swapping your lease. This has become very popular and there are now companies that can help you in the process. In this option, a third party takes over the lease you currently have on the vehicle. Before exploring this option ensure that your lease allows this option and that you will not be financially responsible for the new lease defaulting on the lease. 

If you are using a company to facilitate this process there are some things that you should expect. Typically, you will pay a fee to the transferring company when they list your lease and another to process the final paperwork. Even with these costs, this may be cheaper than the early termination of your lease. Some companies will even help you find a buyer.

If you have a car that is less common, and therefore has fewer purchasers, you might want to consider a Takeover Elite Membership. This high-end service is designed to connect the right lease seller to the right lease buyer. 

In some cases, you may need to offer additional incentives to entice the right buyer.

Regardless of the path, you take spend some time researching the financial implications of your actions. Be sure to maintain your lease payments until you have decided your next step to prevent damage to your credit.

Do You Need to Find a Lease or Transfer a Lease on Your Car?

If you need to swap a lease anywhere in Canada, we can help you navigate the process. We can also help you find a lease if you are looking to assume one. Car ownership and leasing can be difficult to understand, our team will help you find the right options for you. 

About the author

Jorge Diaz is a passionate car lover, winter driver & Software Engineer. For the last 10 years, he has built Online Solutions used by more than 5,000 companies across the globe. He founded LeaseCosts in 2016 with the purpose of simplifying and helping people to better understand the complex market of new vehicles in Québec and Canada. You can connect with Jorge in LinkedIn or send him a direct message.