Do you have a car lease that you want to get out of? It could be because you’re ready to move on to another vehicle. Or it could be because you can no longer manage the monthly payment, and you’re looking for relief. Whatever the reason, getting out of a car lease isn’t easy, but it is doable.

First off, though, do your best to avoid defaulting on the lease. A default is similar to the default on a car loan. Your credit will take a big hit, and you will owe thousands of dollars to the leasing company. You could face a court judgment if you’re unable to pay what you owe on the lease.

Needless to say, a default on a car lease will make it very difficult to get financing for your next vehicle.

But what do you do if you’re struggling with payments? Take these steps as quickly as you can to get out of the lease without defaulting.

The Costs of Terminating Your Lease Early

Depending upon the terms in your lease agreement, and on state law, you could face a number of penalties for terminating a lease early. Most car leases come with standard language that imposes an early termination fee. It could be a flat fee that’s in effect for the entire term of the lease, or it can be set up as a declining balance penalty.

Among the more punitive penalties, the car company could require that you make the remaining payments due on the lease. So let’s say you’re 24 months into a 36-month lease. If your monthly payments are $300, the company could require you to come up with $3,600 to get out of the lease. So that kind of shoots down the idea of getting out of those payments early.

Another big cost is the requirement to cover the negative equity. That’s the difference between the current value of the vehicle and the lease value at the time of early termination. That could amount to thousands of dollars.

The company could hit you with other fees, including any unpaid taxes on the balance of the lease, storage and transportation of the vehicle, as well as any costs incurred in preparing the vehicle for sale. The last one is where they might get you for exaggerated costs for dings, dents, and deferred maintenance.

Whatever the penalty structure is, rest assured that it won’t be cheap. That’s why you have to choose the termination method carefully.

Return the Car

You could return the vehicle either to the dealer who leased you the car or to the leasing company. This is generally the fastest way to get out of a car lease, but probably the most expensive.

The dealer or the leasing company may be fully willing to accept the return of the vehicle. But one or more of the penalties described above will most likely apply to the return. This can end up costing thousands of dollars. So it probably won’t solve your problem if the reason you’re returning the vehicle is because you can no longer afford the monthly payments.

If you have the necessary cash to terminate the lease, this will be the quickest and cleanest way to get out of the car lease. If you don’t, the dealer or leasing company may not cooperate. And that could lead to credit problems and a court judgment.

Buy the Car, Then Sell It

Many car lease arrangements have a buyout provision. They will allow you to purchase the vehicle at any time during the lease for a specified sale price. They will also usually credit a percentage of the lease payment toward that purchase. This can be the least expensive way to get out of the car lease.

In order for it to make sense, the resale value of the car has to be equal to or more than the buyout price of the car. For example, say you are three years into a five-year car lease, and the vehicle has a buyout price of $18,000. You can make the purchase and then sell the car. But only if the resale value of the car is $18,000 or more.

Find out what the buyout price of the car is, and then compare it to the resale value. You can determine the resale value by checking online sources, such as Kelly Blue Book or

If you go this route, plan to sell the car to a third party. Trading the car to a dealer will only get you the wholesale value, not the resale value.

Even if the car lease provides for a buyout, there may still be an early termination fee, unless the dealer or leasing company chooses to waive it. But it might still be worth doing a buy/sell of the car even if the cost of doing so is a few hundred dollars. That will likely be the least expensive way to get out of the lease.

Buy or Lease a New Car with the Same Dealership

This will be of no help if you’re looking to get rid of your monthly payment. But if you just want to get out of your lease early so you can buy a new car, this could be the way to go. Just understand that while this is an easy way to get out of your current lease, it does come with hidden costs.

Car dealers love nothing more than for previous customers to come back and purchase a new vehicle with them. It doesn’t matter that the current vehicle has a loan or a lease on it, or even if the owner owes more on the car than its worth. Dealerships have a neat workaround to deal with that.

Since you’re an existing customer through your lease, the same dealer can still put you into a new car. But they take any outstanding balance on your current lease and roll it over into the lease or loan on your next car. That means that you will owe more on the next car than it will be worth.

Here’s how it works: Say your remaining lease obligation is $20,000, but the car has a wholesale value of just $15,000. That means it would cost you $5,000 to get out of the lease with the dealer.

But instead, the dealer convinces you to buy a brand-new $25,000 car. You have nothing to put down, so your loan will be based on the $25,000 purchase price of the new car.

Or not.

Remember the $5,000 deficiency on your current lease? It’ll still be there. It will be added to the new loan. That means that instead of owing $25,000 on your $25,000 brand-new car, you’ll owe $30,000. The deficiency will be carried over to the new car.

In the car industry, that’s called being upside down on your car. But that’s how a dealership can resolve your lease deficiency with the purchase of a new vehicle.

Transfer Your Lease

There are companies through which you can transfer your lease to a third-party. First, make sure doing so is not specifically prohibited by the terms of your lease agreement or state law. But even if it isn’t, there may be language that requires that any transfer of the vehicle must first be approved by the original leasing company. It’s worth a shot.

A buyer may be interested in taking over the remaining term of your lease. It may be that they are only looking for a short-term situation. Since it’s extremely difficult to lease a used car (though Ally Bank does have a program that allows it), some buyers will consider taking over the remaining term of an existing lease.

It would be very difficult to find an individual looking for this type of arrangement. But there are websites that match current leaseholders with people who are looking to take over an existing lease. Examples of these services include and

This is not necessarily a get-out-of-jail-free card, however. The lease trading services charge a fee. And it is likely that there’ll be some sort of transfer fee paid to the current leasing company. You may also remain on the lease, almost like a cosigner. That means that if the new leaseholder defaults on the lease, the lease will revert back to you.

There’s also something known as post-transfer liability. Even though the lease is assumed by another party, you may still be held liable for any exit fees at the end of the lease. That can include paying to correct damage to the vehicle, or paying for any excess mileage charges.

Closing Thoughts

There are ways to get out of a car lease. But as you can see, none are free, and none are easy. That means that when you sign up for a car lease, you should be willing and able to see it through until the very end. If not, try one of these methods. It may still cost you some money. But it will avoid default, and all of the unpleasantness that comes with it.


  • Kevin Mercadante

    Since 2009, Kevin Mercadante has been sharing his journey from a mortgage loan officer emerging from the Financial Meltdown as a contract/self-employed slash worker accountant/blogger/freelance blog writer. He offers career strategies, from dealing with under-employment to transitioning into self-employment, and provides Alt-retirement strategies for the vast majority who won't retire to the beach as millionaires. Kevin holds a Bachelor’s degree in Finance, and worked in accounting and the mortgage industry before becoming a writer.