Breaking your auto lease may be a necessary evil if you're compact vehicle no longer comfortably meets the seating requirements of your family size. Terminating your lease contract early can present several problems for you, including financial penalties and damage to your ability to lease in the future. The benefits of lease termination should be weighed against its disadvantages before you make a formal decision.
Entire Lease Due
If you break your auto lease, your lender may be within its rights to request prompt payment of the entire lease contract. This could cost you thousands of dollars depending on the balance remaining on the lease agreement. If you refuse to pay the amount outstanding on the lease agreement your leasing company may be able to sue you in an attempt to collect the debt. This is essentially a breach of contract lawsuit which could result in wage garnishment or the creditor obtaining a judgment for a lien on your home or other real property including a business. A lien entitles a creditor to a share of the profits from the sale of attached property before you receive payment.
Early Termination Fees
Your lender may elect to allow you out of your auto lease contract but not before charging you a slew of early termination fees. These fines are meant to act as a deterrent to exercising any early termination clause which may exist in your lease agreement. According to Bank Rate's website, early termination fees associated with ending your lease before the contract terminates on its own can range in the thousands of dollars. Making normal monthly payments in accordance with your lease agreement may end up being cheaper than the cost of terminating the agreement.
Credit Score Damage
When you elect to terminate a lease agreement you are effectively refusing to pay a creditor money that is owed. This can have a negative impact on your credit report if your leasing agency elects to report your contract default. An early lease termination on your credit report may make it very difficult to secure a new lease in the future and may even impact your ability to buy a new or used vehicle because of the overall lowering of your credit score.
Loss of Deposit
If a deposit or down payment was required when you signed your lease contract, your leasing agency may claim the deposit when you terminate your agreement early. This could mean you lose several thousand dollars. You may also be required to pay additional amounts for repairs to the vehicle if the car is damaged or has wear and tear which falls outside normal parameters for its current mileage. You could also incur extra fees if the vehicle is over the mileage limit as identified in the previous lease agreement.
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