Breaking A Lease On A Car
As most of you know, breaking a lease on a car can have serious financial repercussions so before deciding to hand the key in, take into consideration that you have other options to explore when a car lease becomes a significant financial burden.
The worst thing that you can do is to return the car to the dealership. Even if the car is in perfect condition and with very low miles on the odometer and you decide to take it back before the terms of the lease are up, it is considered a “voluntary repossession.” Although “voluntary” might sound good, it definitely isn’t.
The first thing that you have to do when you start having problems with the monthly payments is to simply call and ask. Some of the companies are willing to make the necessary changes so that you will be able to continue the payments. However, don’t expect that they will knock much off your current monthly payments or settle for a significantly lower amount, but no harm in asking them.
If you get in touch with the lender and tell him about your situation, and the monthly payments are still an issue, before walking away from the lease you should take into consideration several less-damaging alternatives to get out of the car lease, like: paying it off, buying it out, trading it in or finding somebody to assume the rest of the lease.
Your first option would be paying the lease off. Although this might sound a little bit silly to recommend, it could be beneficial. If you do think that you will have a job 12 months from now, your car lease is just a few months from ending, and your credit card limits are high, you might want to think about simply paying off what is left of the lease on a credit card. Of course, over the long run you will be paying considerably more in interest, but you will be free of costly insurance payments on the newer car and provided that you can maintain your credit card payments you will not lower your credit as you definitely would by giving up on the lease.
The second option that you have is buying out. In other words, paying off the lease and buying the car at a price pre-determined at the time when you signed the lease. However, even in most of the cases when you have not fallen behind on the monthly payments, it does not make much sense. Even in those situations in which you have just a few payments left, it will leave you in an “upside down” financial state. In other words, you will owe the leasing company far more to purchase the car and end the lease in comparison to selling it.
Only for some people, another option to take into consideration would be to go back at the car dealership and trade the vehicle for another one that is cheaper. This situation is mostly recommended for families with multiple vehicles. If you have not missed any payments yet and are consolidating from, two vehicles to one (one of which is a lease), you could qualify for a new one, and the car dealership will assume your existing lease. Of course, this is not set in stone, but it is worth checking out.
Your last alternative to breaking a lease on a car would be to find someone who will assume the rest of the lease. This is considered by many financial experts the best way to get out of a lease without destroying your credit. However, you need to know that even if you find someone to take over the lease; you will still have to pay for the procedure. Officially, the person that takes the lease should pay this tax, but in order to encourage the deal, you should pay it. Add to this the fees due to the DMV and the state. Nevertheless, it is your best option.
Post tags: Tags: assuming a lease, breaking a lease on a car