Leasing an automobile can provide you with a car for use on low-mileage trips and travel around town on a short-term contract, which is typically cheaper than an auto loan. Auto lease agreements can be filled with fees for turning in a vehicle over its mileage limit, with existing damage or for terminating the lease early. Early termination of the lease in particular can be financially damaging in the short and long term.
Fees and More Fees
Turning a leased vehicle early can cause the activation of early termination fees in your lease contract. These fees can cost several hundred dollars and may be charged in addition to other fees like vehicle re-stocking and detailing. It's important to check your lease contract to determine which fees the dealership charges for early termination of the lease, since these fees are due the moment you turn the vehicle in.
The Balance of the Lease is Due
Your auto lease is a legally binding agreement, which means the dealership is within its rights to demand full payment of the contract if you attempt to terminate your lease before its end date. This could cost you thousands of dollars depending on how far into the lease contract you are when returning the vehicle. If you refuse to pay the balance on your lease contract, the dealership or other lender could sue you in civil court to recover the debt owed to them.
Damage To Your Credit Report
According to financial information website Bank Rate, terminating an auto lease early is viewed by credit bureaus in the same light as a breach of contract or loan default. This can severely damage your credit score, making it more difficult to secure an affordable auto loan in the future and may altogether prevent you from securing some forms of secured credit, like a home loan. Once reported, this information can remain on your credit report for up to 10 years.
Rollover Payments
If you're unhappy with your current leased vehicle or simply wish to turn it in early for a more economical car, your dealer may be receptive to rolling your existing lease into a new contract for a car you'd rather drive. This can allow you to terminate your existing lease early without damaging your credit or being pursued for a debt. This will make your lease payments higher than with your previous contract, so employ this strategy only if you're financially stable enough to afford it.
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