Can you? Should you? How?
One of the questions we are asked most frequently is if and how a lease can be broken. The short answer is that a lease can always be broken. It may cost nothing, it may cost something, or you could even be able to pull equity out of your car by breaking your lease!
So, what does that mean? Simply, there are two ways to break a lease:
1) Sell the car. Even though you are not technically the owner, you can (almost) always sell your leased vehicle. During the course of any lease, there is always a payoff. So long as that payoff is satisfied and your lease holder is paid in full for the vehicle, you can sell the car. Doing so requires your knowing what the car is worth and your having the ability to sell it.
In this process, you’d look at the value of the car and weigh it against the payoff. If you can sell it for a value equal to the payoff, breaking the lease costs you nothing. If you sell the car for a value lower than the payoff, you have to pay the difference between the payoff and what you sold the car for. And, on the flip side of the coin, if you sell the car for a value greater than the payoff, you may be able to profitably dispose of the car.
If you’re not selling the car to a dealership or an auto-buying service that knows how to properly manage this process, the paperwork involved in selling a leased vehicle, transferring title, working with the DMV, and collecting/paying sales tax can be complicated and confusing. Be sure to ask your lease holder tons of questions before you engage in any kind of transaction.
Some transactions can leave you responsible for paying taxes on your lease payoff, with the buyer of your vehicle also paying tax on the price they pay you for the car. Others allow you to avoid paying taxes. Yes, we’d be happy to answer all of the questions you should have about that last statement.
Know that whether leased or not, DriveWise Auto can always buy your car from you. If you are looking to break your lease, we will (at no cost) appraise your vehicle to help you figure out where you stand relative to your lease payoff, and then help you through the process of breaking your lease if it makes sense for your situation.
2) You can (80% of the time) have someone take over your lease and engage in what’s called a lease assumption. This means that someone else takes over the lease and assumes all of what would have been your responsibilities in fulfilling the original lease contract. Lease assumptions require that the person who is assuming the lease apply through the Lessor (the bank you are making your payments to) who has the right to charge a lease-transfer fee, an early lease termination fee, and other processing fees.
Note that not all leases are 100% transferable. Some leave the original lessee with some of the responsibility for the lease, even if the lease has been assumed by a third party. And, some Lessors do not allow lease assumptions at all.
Of great importance here is to know that you cannot let anyone just start making the payments on your leased vehicle, and think you are ‘off the hook’ with the car. As the contract holder, you are always responsible for all terms of the lease contract, unless those obligations are transferred in full to someone else.
Right now, though we are happy to advise our clients about lease assumptions, they are not a part of our business model or a service that we are able to provide. They might be some day. For now, and if you don’t want to manage the process yourself, websites like SwapALease.com and LeaseTrader.com (who charge a fee for their services on top of any fees collected by the Lessor) are great resources.