You leased a car, and now have decided that you no longer need it? The first thing to come to mind would be terminating a car lease. That is not a good option; in fact, it’s an awful financial decision. There are other ways to go about getting rid of a car lease. Like, you can transfer a lease to someone else. You will find many car lease trading websites, including Quitalease. These help you in transferring a lease to someone else in a secure and reliable way.
Whatever your reason for terminating a car lease is, whether you’re moving out of the country, you can’t afford the car lease, or other reasons, terminating a car lease is never a good idea. There are two ways to end a contract. You can either terminate a lease by making payments and other fines or stop making payments altogether.
Terminating a car lease has negative consequences financially. There are several fees that you have to pay when you end the lease. The fines that you pay for terminating a lease are hefty. And if you do not make any payments, it can cause your credit score to worsen. So when you decide to end a car lease, it can cost you in more ways than one.
Several factors go into calculating a lease, including the cost of the vehicle, term, and mileage. Car dealers make sure that they make profits from a car that they lease. Each lease that you pay, makes a profit for a car dealer. So it is understandable why terminating a car lease has hefty fines.
Penalties associated with terminating a car lease vary from one dealership to another. According to DMV, these include the following:
- Remaining payments to be made on the lease
- Early termination fee
- Costs for repairs and preparing the vehicle for sale
- Storage and transportation cost
- Taxes associated with leasing
- Negative equity between lease amount and the value of the car
The termination fees can vary depending on the car dealer, the time for which the car was under lease, etc. However, the termination fees can also depend on the time you decide to terminate the lease. So, if you paid the lease for the first 12 months, you will have to make several payments. If you paid the lease after the first 24 months, you will have to make slightly less number of payments.
If you decide to end the lease, you may have to pay money to the leasing company for the rest of the leasing period. For example, for a lease period of 36 months, you only paid the lease for 24 months, you still have to pay the lease for the rest of the 12 months. Hence, if the monthly payments for the lease were $300, you need to pay $3,600 to end the car lease.
This is obviously not a good decision, because you are paying off the lease for the time when you are not using the car. The negative equity is the difference between the value of the car and the lease value when the contract was terminated. This value amounts to thousands of dollars. The only way a lessee would benefit is if the car’s value improved over time. However, there is a very rare chance of this happening since a car’s value usually depreciates over time.
The penalties mentioned above depend on the agreements in the leasing contract, so all of the payments may not apply. However, the termination fees are mandatory in all of the cases that you decide to terminate a car lease.
Ending a contract does not affect your credit score if you pay the termination fees. If you cannot afford to make a car lease or pay the penalties, you have the choice to default your lease. However, failure to make payments can lead to losing credit points and repossession of the vehicle. This affects your credit scores, in case the payments such as the termination fees and damage fees are not paid. Therefore, to lessen the damage on your credit score, it is essential that you make the necessary payments.
When we say that terminating a car lease is the worst mistake you can make, we are not kidding. There are other options that you have in the case you plan to get rid of your car.
What other options do you have?
The good news is that you have other options to choose in the case that you no longer want to continue payments for the car lease.
Transfer the lease
Terminating a car lease can cause a financial burden on you. When you decide that you want out, there are better options for you. Through a lease trading website, you can find the right customer. This takes off the financial burden off you. You do not have to pay the termination fee and other charges. Most people who no longer want to lease a car, transfer it as it is the easiest option.
Buy the car
If you can, buying the car will help you get rid of the lease. Once you own the car, you can then decide to sell it. The previous leases are credited towards the payment for buying the car.
When these options exist, why would anyone want to choose the option that costs the most? As we have seen, terminating a contract is the worst choice that can be made. You can instead transfer the lease or buy the car.