Can I get out of my lease?

August 16, 2006 10:09 AM

Does terminating a lease on a car early negatively affect your credit?

On July 3, 2006, I leased a car in the state of California for a 36-month period. I have just been notified by my office that I am probably going to be transferred overseas for a period of 3-6 months, maybe longer, in mid-October. I would like to terminate the lease early, but am wondering if it will negatively affect my credit. (I owe nothing on my credit cards and have no other bills.) I am aware of lease trading programs, but most of them seem sketchy, and my finance company doesn't allow lease transfers besides. My only other option would be to buy the vehicle and then sell it, which I'm not really sure I'll be able to do. Has anyone ever had any experience with this? Did returning the car early affect your credit? The car is a 2006 Audi, if that makes any difference. Thanks in advance...

posted by Lillitatiana to travel & transportation (5 answers total)

You absolutely owe all payments on the lease. The only "correct" way to exit the lease is either by having someone else assume the payments (trading), or buying it out by purchasing the car. Theoretically, the finance company could offer early termination for a fee, but I'm not sure any do; this would basically be equivalent to buying out the lease and selling the car to a dealer.

Most leases end up with you "upside-down" on the car; it would cost more to buy it out than the car is worth. This is because your payments stay the same over the course of the lease, but the car's value drops most quickly right after purchase.
posted by trevyn at 10:26 AM on August 16, 2006

Returning the car early should not affect your credit, provided you have fulfilled your contractual obligation, such as through an early return clause, which do exist -- check your contract. If it's contractually allowed, you usually pay a fee.

It probably is contractually allowed -- from the dealer's perspective, they get to sell the car again, earlier than expected, and collect a tidy sum from you.
posted by frogan at 12:32 PM on August 16, 2006

You picked it up a month ago, it's now second hand, and the question is can you return the car and cease lease payments without ruining your credit?

I have no idea about the credit but isn't the real problem depreciation? Look at it from the lessors perspective. The car is second hand now and so what you're returning is worth less than what you picked up a month ago. Who's gonna cover that? Nobody can legally lease it out or sell it as a new vehicle anymore. Were you thinking of just taking the car back to wherever you got it, dropping the keys and papers with reception, and leaving? Will the lessor be satisified with just filing a bad credit report on you or are they gonna take you to court? What effect might that have on your travel plans?
posted by scheptech at 5:49 PM on August 16, 2006

I understand the car will be worth less to the dealer at this point, and I'm willing to pay all the cost of the depreciation plus any early termination fees. My question is whether it will negatively affect my credit, since I will be terminating the lease early.
posted by Lillitatiana at 8:17 AM on August 17, 2006

Oh, no, if you do everything in agreement with your contract, that won't affect your credit. All a credit report states is if you have met your contractual obligations. If your contract has an early termination clause or a buyout clause, and you take advantage of it, that's no problem.
posted by trevyn at 11:31 AM on August 17, 2006