The Realities of Car Leasing
Now on to the realities of leasing a car. First off, all leasing finance companies are different and keep in mind that the leasing finance company IS not the manufacturer. For example, if you enter into a Ford lease, it is through Ford Credit which is a total different organization than Ford Motor Company. All leasing companies work this way, so if you’re unhappy with your lease or leasing terms, don’t blame the manufacturer.
To answer the question, what is the best way to break a car lease, unless your contract specifically states you can enter into a lease assumption, you really can’t break the car lease, but you do have some options.
Walk Away – You can turn the lease back into the dealership who will in turn call the leasing company to repossess the vehicle. This is the same as a repossession of a financed vehicle, so it will damage your credit score and be listed as a repo.
Refinancing Options – Some lease companies will allow you to go back to the dealership and turn the vehicle in as a refinance. This basically means you are using just a portion of the residual value and using that as a down payment on a new car in a traditional finance contract. Keep in mind that very few leasing companies will do this so ask upfront first before you sign the lease.
Combine a Lease/Purchase – Not all, but some car leasing companies will allow you to roll your lease payments into a new car purchase. If you can do this in our $15,000 dollar scenario above, not only would you be paying the monthly nut on that lease, but also the monthly payment for the new car all in one traditional contract—meaning essentially a double payment.
Pay the Penalties – Again, some but not all car leasing companies will allow you to return the vehicle if you pay all the penalties listed on the contract. These penalties can be hefty so make sure you know what they entail to determine if you have the cash.
Loan Options – If you have good credit and some equity in your home and you are truly dissatisfied with the leased vehicle, you can opt to enter into a home equity line of credit and use those funds to pay off the lease early. You will still have a loan, however.
Finally, keep in mind that even if you have lemon laws in your state that cover car lease, those lemon laws won't extinguish that lease. If you are able to win a lemon law case, you will get into a new car, but your lease will remain the same and you must continue making your lease payments during the lemon law process.
Image Credit: 2011 Ford Fiesta (Jean Scheid is a registered user of the Ford Media Room)