How to Get Out of a Car Lease in British Columbia
You might wonder why someone would want to take over your car lease. The primary consideration is that it can cost considerably less than a new car lease. For example, you may have already made the downpayment on your car. Another reason someone may want to take over your lease is to buy the vehicle outright when the lease is complete. If there’s one thing the pandemic has taught us, it is that life is unpredictable. You never know when circumstances might change.
Big changes often put a strain on your finances, which could mean needing to get out of your car lease before it is over.
If you are ever in such a situation, you need to know all the options available to you. Here is a handy guide to everything you need to know about getting out of a car lease in British Columbia:
5 Ways to Get Out of a Car Lease
Getting out of a car lease prematurely can seem tough or expensive, but if you choose the correct method for your particular situation, the whole process will go over much smoother.
You need different amounts of time, effort and money for getting out of your car lease through each of these methods. There can also be implications for your financial decisions in the future.
Make sure to weigh your options carefully and consider all scenarios before choosing how to get out of your car lease.
Transferring the Car Lease
This is the most common and often the best way to get out of your car lease early. Transfer the car lease to someone else who wants it, and you will have gotten out of your lease at no cost.
This option saves you the most money and doesn’t impact your finances. However, finding someone willing to take the car lease off your hands does take some time and effort.
Once you have found a willing buyer, you need to go through the following steps:
- Ensure that the buyer is willing to take over the car lease for the remaining term and pay the subsequent installments.
- Get the buyer approved for credit so that they can take over the lease with the leasing company’s approval. Your dealer should handle this for you.
- Submit the lease transfer fee to the concerned authority. Again, your dealer will help with this.
- Make sure the buyer obtains the necessary licensing for your vehicle.
- Draw and sign all the lease transfer paperwork.
Sometimes manufacturers place limitations on lease transfer—you might be liable if the buyer defaults on payments, or there might be a clause restricting you from transferring the lease within the first year.
Go through your existing lease paperwork thoroughly to ensure there are no conflicting clauses and no restrictions on lease transfer.
Fortunately, many websites and online services make the whole process much easier for you. They help you find a buyer and guide you through all the legal paperwork too.
Buying Out the Car Lease
This option is available to you at any point in the duration of your lease. You can buy out the remaining term and cost in the lease. You are essentially prepaying the remainder of your lease payment. If desired, you can also purchase the vehicle by paying the residual value.
Total out-of-pocket cash will be more as you need to pay for the value of the car and the remainder of the lease.
First of all, you need to call your lease company and tell them that you are considering buying out your car lease. Have them explain all the costs involved.
If your down payment was significantly large, you will pay a smaller amount for buying out your car lease. The early termination fee can cost you anything between $200 and $500.
There is also the depreciation cost and the remainder of your lease term. Buying out means owning the car, so you don’t need to pay any damages or penalties.
Once you have an approximate idea of what it will cost to buy out your lease, look into loan options for financing your purchase. Consider the cost of the loan and the resale value of your car based on online estimates.
Analyze all the data you have gathered and figure out if you can afford to buy out your car lease. Add all the costs involved and subtract the resale value of the car. You may have to pay a small part of the loan out of your pocket in the end.
Buying out the car lease is the quickest way to get out of it. However, it does cost considerably more than other options. Therefore, choose this method if you need to get out of the lease as quickly as possible.
Trading It for a New Car Lease
If you are far away from the end of your lease period, you can still trade-in your car and its lease and choose a new car and lease from the same dealership.
The process is quite simple and very quick provided there is a considerable amount of time left on your lease. This method will suit you best if you simply need a new car and don’t have any financial difficulties.
It helps you upgrade to a more expensive car as some dealers are less likely to charge penalties and termination fees on your current lease.
To find out if you can trade your current lease for a new one, just go down to your leasing company or car dealership and ask them if you can trade your current lease for a new one.
If they agree to a trade, any pending penalties, fees or costs on your old lease will transfer to your new lease. Say, if your current car’s value is lower than the balance amount on the lease, the difference will be added to your new lease.
The costs add up and you might end up paying more overall. However, these costs are spread out over time, and you don’t need to make any big payments.
It is okay to do this once, but it is not recommended that you trade in your lease more than once in a row. Doing so will land you in a cycle of increasing costs and bigger payments.
Car Lease Termination
If none of the above methods are feasible for you, you will certainly end up paying a lot more to get out of your car lease.
It is a rare occurrence that terminating the lease is better than any of the above options or just holding on till the lease period ends. If you are in such a situation, you should simply terminate your car lease.
This is different from buying out your lease because you don’t own the car in the end. You pay money to terminate the lease, and you don’t have any claim to the vehicle whatsoever.
It means that you will have to pay the remaining cost, all fees and penalties just for the sake of getting out of the lease.
There will also likely be a hefty termination fee.
Terminating the car lease is rarely the best option available. If you need to go this route, you can talk and negotiate with your leasing company and arrive at a slightly better solution.
You will still pay a lot of money for terminating your car lease, but they might give you some wiggle room in other areas. In any case, don’t go for terminating your car lease before trying out all your other options.
Terminate your car lease only if you have exhausted every other possibility and this is the only course of action left to you. Any of the other options will save you a lot of money if you can make them work.
Surrendering the Car
This is the absolute last course of action. Choose this option only if you have no means to make the remaining payments on your lease and you can’t afford any of the above options. If you have chosen to surrender your car, this is how you should go about it:
- Before you do anything else, check if you have any financial protection. If you are eligible for any plans like Walkaway protection or Job Loss protection, it protects you from adverse circumstances like these.
For example, if you lost your job suddenly or you had an injury that leaves you unable to work and it has made you unable to afford your car lease, your insurance will make it possible for you to surrender the car without paying any penalties or taking a hit to your credit score. - If you do not have any financial protection, inform your leasing company that you won’t be able to make any future payments and wish to surrender the car back to them.
Informing them straightway helps you avoid other fines they might impose on you if you default on payments without informing them. If they do recover the rest of the lease amount from you, you might pay a smaller amount. - Sometimes leasing companies have policies to sell the vehicle and reduce the selling price from the remainder of your car lease if you voluntarily surrender the vehicle.
You still have to pay the amount left, but it will be a lot less than before. It is always beneficial to inform them in time and surrender the vehicle on your own without them having to come after you.
This method costs you the most and has the worst impact on your credit score. Do not consider this unless you have exhausted all your options, and this is your last resort. Any of the above methods to get out of a car lease will serve you better than this one.
Things to Consider Before Getting Out of a Car Lease
There are a few consequences to getting out of your car lease before time. It might not be obvious at first, but there are some risks to getting out of your car lease early. Make sure you consider all possible ramifications before you decide to get out of your car lease.
Credit Impact
A lease is a kind of credit. Any action you take that concerns your lease will have an impact on your credit score.
This impacts your long-term reputation and credibility for lenders. In case you miss any payments, your credit score will certainly take a hit. Whether you plan on seeing the lease through or you have decided to get out of it, do not default on any current payments.
It will affect your credit score even if you get out of the lease later. Defaulting on payments might even get your car repossessed, which is even worse for your credit score.
Termination Fees
Other than the impact on your credit score, the impact on your finances is the other factor you need to consider.
Leasing companies make profits through the interest payments you make. When you choose to get out of your car lease early, it affects their profits. They recuperate the loss by seeking a penalty from you.
You usually have to pay the remaining cost of the lease anyway. Weigh all your financial options carefully before you decide to get out of your car lease.
Wrapping Up
There’s no telling when you might run into some trouble and need to get out of your car lease early. Luckily, there are a few methods to do that without suffering too much of a loss financially.
Go through all the five ways to get out of your car lease in British Columbia listed above and carefully pick the one that suits you best. Make sure you consider the consequences before you go ahead with getting out of your lease.