How to Get Out of a Car Lease (Without Paying a Penalty)

A car that seemed like a good idea last year may no longer fit with your lifestyle or budget, but are you stuck with that set of wheels until your lease runs out? Not necessarily.

There are many benefits to leasing a car. A car lease will often result in a monthly payment that’s lower than if financing a vehicle. Leasing also makes it easier to have a new, maintenance-free ride every three to four years. Sometimes though, the new car lease that seemed like a great idea at the time becomes a burden. Because situations in life can change, often suddenly, there may be a need for you to break your lease. Here’s how to get out of a car lease without paying a penalty.

Transfer a lease

If you can no longer afford your lease or if you simply want to get out of your lease early without a penalty, transferring your car lease, via a lease transfer company like Swapalease, might be an option for you. Also called swapping a lease or subleasing, Chane Steiner, CEO of Crediful. notes, “The most challenging part [of sub-leasing] is finding someone interested in your specific make and model of vehicle, and on top of that, they need to have sufficient credit to be approved.” If you think sub-leasing might work for you, Steiner recommends that you, “Make sure to read the legal agreement carefully because in some cases you might still be responsible for damage which occurs when the sub-lessee is driving.”

A swap lease could be an easier alternative than trying to work with your financial institution which may attempt to penalize you for getting out of the lease early. Be sure you know the 11 things car dealers won’t tell you about leasing a car before signing on the dotted line.

Early buyout

Most lease agreements contain an option to buyout the lease early. “If you have cash on hand to purchase the vehicle for something close to private party Blue Book value you can buy the car, then sell it and break even or close to it,” suggests Steiner. He adds the caveat that, “If you need to sell your car immediately following the early buyout purchase, you can shop it around to dealerships [instead of doing a private sale].” If you do opt to sell to a dealer, however, for speed or ease of transaction, you’ll likely make less on the sale.

New car lease dealer promotions

One unique way to get out of your car lease early without paying a penalty or messing up your credit is to keep an eye out for local dealer promotions, says Laura Gonzalez, the marketing manager at AutoNation Volkswagen of Las Vegas. To get consumers into new cars, dealerships sometimes offer to pay off car leases early and also pay any early termination fee that may be applicable, as part of their auto financing specials or new car lease promotions.

It’s a lemon

It’s going to be quite the hassle to hire a lawyer to deal with it, but as Gonzalez points out, “if the car you are leasing is a lemon and if your state’s lemon laws cover leased cars, you will likely not have to pay a penalty to get out of your lease early.”

Make a deal

Sean Pour of SellMax has seen a lot of individuals recently making arrangements with their leasing company to take back their cars. He adds that this is particularly true, “In cases where [the consumers] are not able to afford the lease any longer and dealerships or leasing companies will make a deal with you to take back the car, because people tend to treat their vehicles poorly when they aren’t able to afford them.”

Declare bankruptcy

Bankruptcy is probably no one’s first choice but it is an option to get out of a car lease early. “You wouldn’t file bankruptcy for this reason alone, but a lot of times people have an accident, and they don’t have insurance, or they are otherwise so deep in debt that a high-rate auto lease they can no longer afford is the icing on the cake,” says Bradley R. Bailyn, Esq. of The Bailyn Law Firm, P.C. He goes on to note that, “When you file for bankruptcy, you have the right to keep or cancel all of your executory (unfinished) contracts, including auto leases.”

Something to consider when utilizing the bankruptcy option to get out of a car lease early without paying a penalty is that, once you do you will not be able to get a new car lease quickly and/or may need to have a co-signer. As Bailyn reminds his clients, you will need to decide if you’ll, “Be able to live with public transit or buy a cheap used vehicle outright [after filing for bankruptcy to get out of your car lease early]”.

Jeff Bogle
Jeff Bogle is an Iris Award–winning photographer, avid traveler and English football fanatic who regularly covers travel, culture, cars, health, business, the environment and more for Reader's Digest. He is the proud dad of teen daughters.