The Advantages of Turning a Leased Vehicle in Early

In 2009, about six million Americans owned an underwater car -- a vehicle that is worth less than the money owed on it -- according to Bankrate.com. However, it is possible to turn in a lease vehicle early and escape a car with negative equity, or one you just don't want. At the very least, talk to your auto dealer about your options, because walking away from the lease usually is the worst thing you can do.

Benefits

Turning in a leased vehicle early lets you get out from an obligation you might not be able to afford. A new car might be especially helpful if you currently lease a car with problems such as low gas mileage and outdated safety features. Depending on how you turn in the leased vehicle, you might not have to pay any more charges. If you cannot afford the car at all, turning it in early means the dealer does not need to repossess the vehicle and bill you for it.

Disadvantages

If you just give the dealer the keys to the car and stop making payments, he will report it as a delinquent account on your credit report, which can lower your credit score by dozens of points. Turning in the leased car does not necessarily relieve you from the legal liability to pay the remaining balance due. You could even pay an early termination fee.

Misconception

You could owe far more on your lease than what you anticipated. Each dealer has its own policy on how it calculates early termination costs. Returning a car early might mean you have to pay a penalty equal to the remaining monthly payments on the car -- plus extra money for the dealer to take it back and charges for excessive wear and tear.

Tip

You can get out of a vehicle lease early without making further payments on the car. One option is to turn in the vehicle and lease a new car. The dealer usually adds the remaining payments to your new lease, but he does not report the account as delinquent to the credit reporting agencies. Most leases come with the option to buy the car, which might be less than the resale value of the car -- meaning you make money in this situation. Another option is to transfer your lease to someone else -- called a lease assumption.

Dealers may work with you when you have certain hardships, such as divorce or relocating to a new state, and allow you to make partial payments.