Advertising Disclosure

How to Get Out of a Car Lease Without Ruining Your Credit

Leasing your car can be an expensive way to get around. And if you suddenly find yourself unable to afford your existing auto lease, you can’t just put your car up for sale or run to the dealer to trade it in. But what most don’t know is: Yes, you can get out of a car lease without hurting your credit. Here’s how.

Car dealers calculate the cost, term, and mileage of leases carefully to ensure they earn a healthy profit.

Their profit depends on you keeping (and paying) the lease to its full term, so you can’t expect a dealer to be sympathetic to your situation if you return with your leased car keys asking to get out.

While most leases include an early-termination clause, the penalty fees for ending your lease early are stiff. It is unfortunate, but sometimes lessees will simply stop paying a lease until the car is repossessed. This ends the lease, but it also ends the lessee’s good credit. Additionally, the car dealer has the legal right to collect termination fees and other costs from the lessee.

The Alternative Way to End a Lease

Some leases (thought not all) allow you to transfer the lease to a new signer. In a lease transfer, a new lessee assumes the car, and the lease payments, and you are released from any responsibility for the lease.

While a great idea in principle, executing a lease transfer is not always a smooth process, and generally can’t be done between two private parties.

There are, however, companies that specialize in assisting with transferring car leases — one example is Lease Trader

Sellers pay a fee (around $100) to list a lease for trade. When a buyer bites, the third-party company checks their credit and income to ensure they can afford to take on the lease. Once a trade is approved, the lease transfer company assesses a transfer fee of several hundred dollars. Who pays this fee is typically negotiated between the buyer and seller.

Both parties then sign documentation transferring the lease, and documents are sent to the buyer so her or she can obtain insurance and registration for the vehicle. Finally, arrangements are made for the seller to pick up the leased car, and the former lessee is free of the lease, with good credit to boot.

Proceed With Caution

While leasing a car isn’t the best financial move, terminating a car lease is an even worse one. That’s because most leases have high down payments (called capital cost reduction) which you have already paid, but you won’t get the full lease term’s use of the vehicle. Plus, you’ll be paying more fees just to get out of a car, and you’ll still be stuck needing new wheels. Still, if you find yourself in a car lease that you truly can’t afford, it’s better to get out of it, save your credit, and find a car you can afford than to rack up new debt to continue paying your lease.

And, if you ever find yourself in a situation where you need a new car for just one to two years, taking on a transferred lease might be worth checking out. After all, you won’t pay any down payment other than the lease transfer fee.

Of course, for the perfectly penny wise, calculating the total lease cost and spending that lump sum on a reliable used car still makes the most sense.

Published or updated on May 28, 2008

Want FREE help eliminating debt & saving your first (or next) $100,000?

Money Under 30 has everything you need to know about money, written by real people who've been there. Enter your email to receive our free weekly newsletter and MoneySchool, our free 7-day course that will help you make immediate progress on whatever money challenge you're facing right now.

We'll never spam you and offer one-click unsubscribe, always.

Know Before You Go to the Dealership

Find Car Incentives & Rebates at Get Free Dealer Price Quotes in 5 Minutes
Let the dealers fight for your business; pick your car and find the best price before you leave home.
Get Financing Online Before You Shop
Easy 3-minute pre-approval. No obligation. Past credit problems OK.
About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


We invite readers to respond with questions or comments. Comments may be held for moderation and will be published according to our comment policy. Comments are the opinions of their authors; they do not represent the views or opinions of Money Under 30.

  1. Finances are low and i feel that this article should be seen by many to incourage them to try and look for any other alternative to quickly begin to drive on the roads. There a cheap cars out there that can save you alot of money.

  2. Speak Your Mind