How to get out of a Car Lease
It is No Different Than A Car Loan
Leasing skeptics and many financial advisers often warn people that if they lease a car then change their mind, they are stuck. There are a couple of problems with this reasoning:
- It is factually incorrect. You can always pay-off a car lease, just as you can always pay-off a car. You may even be able to get some to take over car payments or take over car lease.
- Whether you purchase or lease a car, there will be financial consequences for deciding not to keep it a few years or more.
The truth is you can get out of a car lease early.
Leaving a Car Lease Before it’s Term
Neither of these scenarios are desirable, and the sooner you try to get out of a car lease or car purchase, the more money you stand to lose. The problem is depreciation. To illustrate, let’s say you purchase a $30,000 car on a 60 month loan at 7.0% interest. A year later you decide you don’t like making those $600 a month payments and you no longer want the car. Sure, you can sell the car and pay off the loan; however you are going to lose money no matter how you look at it. For one thing, you’ve already made $7,200 worth of payments. The other problem is the car is not worth nearly as much as what it will cost you to pay off your loan. A car’s most rapid depreciation occurs in the first 2 years. One year later, even a $30,000 car with a very solid resale value like Honda is going to be worth $6,000 to $7,000 less than what it cost brand new. You can never get the money back that you’ve spent on a new car, even if you decide to sell it a few months later. Paying cash for a new car by far carries the most immediate risk. The $7,000 you will lose in depreciation after one year is a given, but what if you need to get rid of the car sooner? If you had bought the car on a 60 month loan, you’ve only lost your down payment plus the number of payments you’ve made to the bank. When you pay cash for a new car, the instant you drive it off of the lot, you’ve immediately lost thousands of dollars in depreciation. Should you lose your job or decide you really made a bad choice in buying a new car for this kind of money, you’d wish that you had only made a couple of monthly payments rather than blowing $30,000 all at once. Either way, you have to sell and cut your losses.
Don’t Take a Loss
Leasing is really the safest and lowest-risk way to finance a new car. In fact, getting out of a car lease has more options than with a car loan. With a lease, your worst case scenario is that you have to continue making low monthly payments which are about 33% lower than a purchase for a typical two or three year term. A car lease payment on the $30,000 example above would be in the $400 range, which is a good $200 less than the purchased monthly payment. After one year, you’ve only paid $4800 rather than $7200, or $30,000 all at once. With leasing, you are only paying for the portion of the car you use (Depreciation plus Interest). As with a car purchase, you can always pay off a car lease early. Your payoff will be the sum of the total number of payments remaining plus any unpaid interest and taxes, along with turning the car back into the bank or lender. Another option would be to sell the car for market price and use the proceeds, along with the extra cash required to pay off the bank and acquire the title. Though you will take a loss if you turn a car lease in early, you are not actually “stuck in the car” as leasing skeptics warn. As you will learn, there are plenty of people out there willing to take over a car lease. How do you find them?
Take Over Car Payments
Simply find someone to Take over the Car Payments is how to get out of a car lease. Today, there are some even better options for getting out of a car lease early. You can always transfer your lease to another driver. Lease Trader is an online service that brings lessees and leasers together. They make it a breeze for getting out of a car lease by finding people who want to take over car payments from you. Yes, there are people out there ready to take over car payments or take over your car lease. Lease Trader provides a free, full page color, 7 day advertisement with photo and buyer credit verification. For just $49.95 you can get your ad renewed for 21 days or for $89.95, your ad will be listed until your car lease is transferred. The paid listings also give you web statistics. Personally, I wouldn’t hesitate to pay for the $89.95 service, if I needed out of a car lease. It’s a small price to pay compared to the sum total of the monthly payments you will risk making if your car lease listing does not gain favorable results in the first several days.
The bottom line is that depreciating assets cost money to own or borrow. Buying a car we wish not to keep will cost us some money. On the other hand, leasing a car preserves our cash and keeps our options open should we find ourselves in a tight spot.
Getting Out of a Car Lease is easy.