Unforeseeable situations may arise where a change in circumstances mean you need to terminate your car lease before it has come to an end. Take a look at our guide below to understand what early termination of a lease entails and other options you may be able to consider if terminating isn’t the right option for you.

What is Early Termination?

Car leasing is structured with monthly payments to cover the depreciation of the vehicle while you’re in possession of it, across 2, 3 or 4 years typically. Deciding to terminate early means you’re effectively asking to terminate your contract before the end of the term you have agreed with your provider.

Cars depreciate more quickly at the start of the lease and the full schedule of payments are calculated to take various factors including this, into account. Therefore, if you choose to end the lease early there will be associated costs.

Can I End My Car Lease Early?

In short, the answer is yes, you can end a lease agreement early. However, in order to do so, the funder will charge you an early termination fee. If you are driving a company car then this fee will be charged to your company and they will be the ones who have to authorise the early termination. 

What Factors Affect the Early Termination Fee?

Charges will be calculated based on factors including remaining term length, mileage and additional costs. Factors which will influence the fee will include:

Remaining Payments Due

The remaining balance on your lease contract is likely to have a considerable impact on the cost of early termination, unless you’re close to the end.

Early Termination Admin Fees

You may have to pay a set administration fee for the work involved in processing your early termination request.

Wear and Tear Charges

These apply regardless whether you terminate your lease early or let it run to the end but are worth bearing in mind. Your car will be assessed against fair wear and tear guidelines and you will be charged for any wear and tear considered excessive.

Excess Mileage

Again, this is applicable at whatever point the lease ends. You’ll be charged only if you have exceeded the agreed mileage but bear in mind this will be recalculated pro rata if you end the term early.

Negative Equity

Depending on your contract, some leases may require a payment to cover the difference between the lease and the value of the car if you terminate the lease early.

Transportation and Storage

Early termination of some car leases may include an additional fee for collecting the car early and storing it while it's processed.

Road Tax

In some cases, the leasing company may charge you any outstanding tax left in the agreement.

How Much Will it Cost to End My Lease Early?

There is no single rule of thumb regarding how much you will have to pay to terminate a car lease early since some leases charge an early termination fee of 50% of outstanding rentals, while others work on an individual case basis to calculate the fee. It is however most often based around the number of instalments you have left and the mileage allowance.

Paying 50% of the instalments you have left in your agreement can be fairly costly if you still have a considerable time left on your lease, especially when factoring in additional early termination fees such as admin charges. Some leases may require all of the outstanding payments left on the lease contract to be paid. It is often worthwhile considering the alternatives to ending your car lease early.

Early Lease Termination Alternatives

If you want to end a lease early but have had an early termination quote that isn’t affordable, there may be alternatives based on your circumstances worth considering:

1. Transfer the Lease

Transferring your lease to someone else is called lease trading and it may be possible, subject to your contract terms which you’ll need to discuss with your lease provider. Several third-party services provide lease trading at a likely cost to you of several hundred pounds but it will still normally be more affordable than paying the early termination fee. It will free you of your monthly payments and allow another driver to take over the remainder of your lease, benefiting from a shorter lease and nearly new car.

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2. Purchase the Vehicle

By purchasing the vehicle outright you buy out the lease. Whether this is an option depends on whether your lease provider allows it, but there will be associated fees and residual values to consider. However, in certain circumstances it could allow you to then sell the car, incorporating the costs without losing money.

How Do I Discuss My Options with Xcite?

If you have car lease with us and want to discuss any of the options above or end your lease early just contact us here or call us on 0330 221 0000. We can outline any solutions that might enable you to keep the car for the remainder of its term or begin the process of terminating your lease if that’s what you decide to do.

Car Lease Early Termination FAQs

How Do I Request an Early Termination from Xcite?

If you need to return the car before the end of your contract you will need to request an early termination quote. We can request this with your funder on your behalf, you will just need to get in touch with our Support Team with the current mileage and the date you want to return the vehicle.

Please be aware that early termination quotes usually only last for 30 days from when they are issued. If the quote expires, we can request a new one for you but the cost may change.

What if I Terminate within 14 days of Signing My Lease Contract?

All car lease contracts have a 14-day cooling-off period. There is no cancellation fee if you decide to cancel the contract during this time. However, early termination after 14 days is subject to a penalty charge.

What happens if I Default on Xcite Car Lease Payments?

We strongly advise against defaulting on your payments. If you're experiencing financial issues contact us straight away. We will work with you to address the issues and do our best to find a solution. Depending on your circumstances, extending the term and lowering the monthly instalments could be an option.

Defaulting may result in us taking the vehicle back, typically under voluntary repossession. You’ll still be liable for the lease payments or agreed outstanding balance.

If I Default Will it Affect My Credit Score?

Defaulting on your car lease will affect your credit score and may affect your chances of securing a lease in the future.

Will Ending a Lease Early Affect My Credit Score?

If you choose to end a lease early and follow the process, paying the termination charge, this will close your account and finalise your finance agreement. Your credit score will not be adversely affected.

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Check out one of our helpful guides or our explaination of leasing to get all your questions answered.

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