If you want to get out of a car lease, proceed with great caution. Transferring your lease is the easiest way to rid yourself of a lease you can't afford. Here's how to do it.

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.

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.

But what most don’t know is: Yes, you can get out of a car lease without hurting your credit. Here’s how.

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’re released from any responsibility.

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. The documents are then sent to the buyer so he 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.

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.

Buy used instead

If the reason you’re leasing a car is because you don’t want to fork over a hand-full of cash to buy a new one, you should consider buying used instead.

Yes, Craigslist can be sketchy. But, it’s a great resource for finding your next car (that’s where I bought my last car). As long as you’re careful, you should have no problem finding a reliable used car for a few grand.

Summary

Leasing a car isn’t really the smartest move financially. Don’t believe us? Check out our Buy vs. Lease Calculator to crunch the numbers. If you want to get out of a car lease, your best bet is to transfer it.

There are also plenty of used cars out there that are still reliable.

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About the author

David Weliver
Total Articles: 304
David Weliver is the founder of Money Under 30. He's a cited authority on personal finance and the unique money issues he faced during his first two decades as an adult. He lives in Maine with his wife and two children.