Finally, you have come to the realization that you can no longer afford to pay your car lease payments. This may be a result of a financial crisis, job loss or you may have determined that you are spending way too much on your car every month. So what are your options? What can you do to get out of the car lease you can’t afford?
Let’s weigh the options:
- What If You Decide to Quit Your Car Lease Early?
Walking away from the car and lease contract is perhaps your worst option. Why? An early termination will prove more costly because most leases have high down payments. Meaning, you may have already paid a large chunk, but now you won’t get the full lease term’s use of the car. In addition, you will end up paying more fees just to get out of the lease. Yet, you still need a new vehicle.
- How About Voluntary Repossession of Leased Auto?
Repossession is the last thing any dealer or lender may want because every time they take back a car it means they are guaranteed to lose some serious dough. As a result, repossession proves more expensive for the lessee and it will gravely hurt their credit scores for years to come. In case, you haven’t shared your financial problems with the lender, they will most probably repossess the leased car after 90 to 180 days.
- What Happens If You Cut a Lease Contract Short?
First of all, you do not have the cash to do this. Even if you do, typically the lease contract requires you to pay all the remaining payments along with the termination fee and a lease-disposition fee (it is usually collected from the lessee when the car isn’t purchased at the end of the lease contract). Also, the leasing firm can increase the costs of extracting yourself from the contract early by charging you for the wear and tear on the vehicle. At the end of the day, you are likely to spend more than the vehicle’s actual worth just to end the lease early.
- How About Lowering Your Lease Payments?
If you have already signed a car lease contract, the monthly payments as specified in the agreement cannot be changed anytime during the lease tenure. Let me put it more plainly, it is simply impossible to change the terms of the lease in any way that might reduce your monthly payment amount. Unlike a car loan, leases cannot be refinanced. It is not feasible to end one lease and then begin another on the same vehicle.
- What Happens If You Stop Paying Your Car Lease?
If you stop paying your car lease, the finance company or the dealership you lease your car from, also known as the “lessor” will be entitled to repossess the car. Besides what constitutes a default of the lease, your lease contract also states if there is any “grace period” in making the lease payments. Generally, not making a monthly payment or missing an installment is considered a breach of the lease agreement and the dealership can then repossess the car from you. So it’s critical to contact your lender if you have failed to make your monthly payment within the due dates for some reason.
- What Happens if You Default on Your Car Lease?
Defaulting on your car lease has some serious repercussions. Thus, it’s better to avoid it in the first place if there is a possibility. Here are a few consequences of defaulting on your car lease:
Losing Your Transport: The most immediate consequence is the lessor will take your vehicle away. Technically, the lessor or the finance company still owns the car and it is just leasing it to you. So, if you fail to pay the monthly installments of your lease, they reserve the right to take back their asset. This is the same principle that landlords follow when their tenant fail to make their monthly payment, they will evict them and take over their property. You need to pay your installments within the due dates, or else the vehicle is as good as gone. Losing your car means, your financial misery is only going to get worse. Because a lot of us rely on our cars when it comes to getting to and fro from work. If you can’t get to your work, it means you won’t be able to pay off your bills too later on. Even if you find a way to get to and fro from the workplace, it is highly likely that it won’t be as convenient as a car.
Hamper Your Credit Score: Defaulting on any loan badly hurts your credit history. Default on your auto lease can significantly lower your credit score because credit bureaus don’t take defaults lightly. If you end up hampering your credit score you will have to do a lot of work to get your score back up to a respectable level.
Trouble Making Large Purchases: Once your credit score is hampered, you will face a lot of trouble in making large purchases in the future. Furthermore, you won’t be able to get any kind of mortgage or personal loan. And you will definitely get a regular auto loan under any circumstances. In brief, not only it will affect you in the short-term, but also in the long-run. Until you manage to get your score back up, you will have a hard time in securing any financing. Till then, you will have to deal on an all-cash basis.
No, we are not implying here that leasing a car isn’t the best financial move, but terminating a car lease is certainly, the worse decision one can make. If you find yourself in an auto lease you truly can’t afford, there are a few ways to safely quite a lease early. For instance, transfer your lease, pay off your lease, sell or trade the vehicle, or ask the leasing firm for help.