If you can't pay your vehicle lease payments any longer, call your leasing bank as soon as possible. Otherwise, breaking your lease contract results in repossession, which significantly damages your credit rating. Other lease-end options, besides breaking your contract, may prove a better option. Break your lease contract only after you've exhausted all other options.
Contact Your Lender First
Before you decide whether or not to break your car lease, call your lender as soon as you know you can't make your lease payment. Many banks prefer to work out a payment plan with a distressed borrower rather than repossess the vehicle. Ask your bank about deferring your payment, which allows you to miss one or more payments without penalties or late fees. Or, your bank might lower your lease payment amount for a period, allowing you to catch up on past-due payments.
Other Options
If you've already talked to your lender and still can't pay your lease payments, explore other lease-end options. You can purchase your vehicle from the leasing bank at any time, allowing you to sell your car or trade it to a dealer toward another purchase as long as you pay the bank the lease buyout amount. If your car sells for less than the lease buyout amount, you'll have to satisfy the remaining buyout balance yourself. Consider a lease assumption, which is transferring your lease to another person. If your bank allows this, another person can take over your lease but must abide by the terms of the original contract.
Repossession
Only after you've exhausted your other options should you break your lease and return your car to the bank. If you haven't paid your lease payment, expect your bank to seize the vehicle from your home, place of employment or a parking lot. You can also arrange to return the car to the bank or a dealer. After repossession, the vehicle will be resold at an auction or privately. You must pay your bank for its loss if the sales price does not cover the car's total cost, not just the lease amount.
Repercussions
Repossession is not an option that comes without consequence. Your credit score will drop significantly. Any loans or lines of credit you apply for in the near future are likely to be declined or warrant a high interest rate or sizable down payment. A repossession remains on your credit report for at least seven years. You'll also still have to pay the bank for its loss. If you don't make arrangements to pay the bank, it can sue you. If the bank wins its lawsuit, it can pursue a judgment and garnish your wages.
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