Ending a car lease early in the UK

If leasing a car, either as a business or a private individual, you enter a finance contract for an agreed period of time and total mileage. As you’ve entered a contract with the leasing company, you are legally bound to it until the end. Lease companies don’t encourage ending a car lease early, and it’s not always possible to do so.

There are a few different ways of ending a car lease, such as; paying an early termination fee to end the contract, or a lease transfer, if your contract allows it, so you can pass on the responsibility (and the car) to someone else.

Can I end a car lease early?

Some car leasing companies do allow you to end a car lease early, and some won’t. It is therefore important to check the terms and conditions of your lease agreement, preferably before you sign it.

If you do need to end your car lease early, and your leasing company allows you to do so, there may be more than one option available for you to consider, such as lease transfer, buyout or trade-in.

Unfortunately, you won’t get back any money you have already paid to lease the vehicle.

You should also be aware that ending a car lease contract early could affect your credit score.

How much does it cost to end a car lease early?

If your leasing company does allow you to end your car lease early, there will be costs involved in doing this, such as an early termination fee.
The actual amount of the early termination fee will depend on the terms and conditions of your lease, the value of the car and how much of your lease there is remaining.

You should expect to have to pay a proportion of the remaining lease payments. This will vary with each company, but as a guideline, you should expect this to be anything from 50% to 100% of the payments the lease company would have received if you’d continued until the end of the contract.

If you are able to transfer your lease to someone else who can continue the payments to the end of the agreement, then you will save yourself a lot of money, but there will be some admin costs involved to do this.

If you are terminating the lease to change it for a different car, then the lease company may be able to come to some arrangement with you, especially if it is providing your next car, but no promises.

Alternative ways to get out of a car lease

If you really want or need to get out of a car lease agreement, then there are some alternatives to consider rather than just handing the car back and paying an early termination payment. Here are some options to consider.

Lease transfer

As its name suggests, a lease transfer is when someone else takes over the legal responsibility for your lease contract – and the car. If your leasing agreement allows this option, then it is definitely one of the better ways to get out of your car lease contract.

Lease buyout

If you have enough money available, getting out of your car lease early by doing a lease buyout may be possible if your leasing company allows you to. A lease buyout means you offer to actually buy the vehicle at some stage before the end of the agreement. The cost will depend on the residual value of your car at the time of the lease buyout. The leasing company won’t want to be out of pocket from the least buyout, but the price of the car would be more likely a trade price that’s lower than buying it from a dealer.

Lease trade-in

It’s important to remember that when you lease a car you do not own it. This means you can’t trade it in at a dealership.

If you want to trade-in a lease car, you would normally have to do a lease buy-out in order to own the vehicle so you can then trade it in for your next car, or ask for an early termination fee to get out of your contract and then lease another car.

You may be wondering if you can trade-in your lease for another lease car. This isn’t a very likely option for the reasons outlined above about terminating lease contracts early, but it’s always worth asking the question, especially if you’re wanting to do so with the same leasing company. If you’re switching leasing companies then it’s less likely unless your existing car is something they think they can make some income from by selling it for more than the early termination fee.

If your contract allows you to end your lease, there will be costs involved

Pros and cons of an early termination of a car lease

There are some clear pros and cons of ending a car lease early to consider.

How to end my car lease early

If you have to end your car lease early, first of all, read through the terms and conditions of your contract so you know if there are any special terms relating to this situation.
If you are ending your car lease early for financial reasons, it is better to let them know rather than not paying the monthly fee and getting into arrears.

You need to contact the lease company as soon as possible to discuss the early termination arrangements, such as fees and the return of the car. Make sure you return the car in good condition, without any major damage, and complete with both sets of keys (if you have them) and load covers, charging cables, etc. If the car does need some repairs or is over the mileage allowance for its age, you are highly likely to be invoiced separately for this.

You may be able to transfer a car lease to someone else if the terms and conditions of your contract allow it

Ending a car lease early FAQs:

How can I get out of a car lease early without penalty?

Your lease contract should have a cooling-off period, usually 14 days. If you get out of your lease within that initial period, there shouldn’t be any penalty to pay. The only other way to end a car lease without paying a penalty is to arrange a lease transfer to someone else, but you will probably still have to pay some fees for the transfer and new contract in the other person’s name.

Does ending a car lease early affect my credit score?

Yes, ending a car lease early can affect your credit score, particularly if you default on payments or your car is repossessed. You have entered into a finance agreement so it will be on your credit file; however, if you pay the termination fee and any other charges, your account with the lease company would be cleared and your credit file will be updated, so your credit score would not be affected..

What happens if I default on my car lease?

If you default on the payments for your car lease, it will be recorded on your credit files and negatively affect your credit score. Your lease is a finance agreement so will be on your records for any credit reference company to see.

Your car may be repossessed if you default on your lease. If you are having financial issues, it’s best to discuss this with your leasing company before you get into a default situation to see if they can help.

How long does it take to terminate my car lease?

The process of terminating your car lease may take a few weeks to complete, so it’s best to start the process as soon as you think it’s necessary. The exact time it takes will vary from each leasing company depending on their internal processes and the arrangements they need to make with any finance company or the manufacturer that supplied the car.

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