An early car lease termination is not bad for your credit, as the early lease termination requires you to pay an agreed-upon amount to end the lease ahead of its scheduled maturation date. However, if you simply stop paying your lease payment instead of formally terminating the lease with the lender, your credit score will fall, and the vehicle could even be repossessed.
Remaining Lease Payments
The largest component of a lease early termination that must be satisfied is the remaining lease payments. Per the lease agreement, if you choose to end the lease early, you will be held responsible for all remaining lease payments. This makes it difficult to get out of a lease in the early months, as very few payments have been applied to the account. For example, on a 36 month lease with payments of $400, the remaining balance after a year is $9,600, and this amount must be paid to terminate the lease early.
Excess Mileage
Additional charges will be levied if you have driven the vehicle more than the total allowable contracted mileage. The cost per mile varies between leasing companies but is normally between 15 and 25 cents per mile. In the case of high overage charges, it is sometimes cheaper to do an early lease termination and get out of the vehicle before the mileage gets out of hand, especially if you drive a lot. If you make long trips and have to pay 25 cents for each mile driven in addition to your monthly payment, the cost of not doing an early termination could be higher than ending the lease.
Disposition Fee
The disposition fee, also known as a disposal fee, is charged by most leasing companies. Although some consumers consider the fee a needless charge, it is included in the lease agreement, and the monies are used to offset the expenses encountered by a leasing company when handling leased vehicles that must be taken to the auction and sold to other dealerships.
Early Lease Termination Considerations
If you choose to end your lease early and get a new vehicle from a dealership, have the salesperson contact your leasing company to verify the early termination amount. If the remaining early termination charges are to be rolled into a new loan or lease and the dealership is handling the payoff, be sure to get a written guarantee that the dealership will handle the payoff. Dealerships often have payoff confirmation worksheets or similar forms that can be given to a client in order to put promises in writing.
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