A Lease is a Legally Binding Contract
Simply put, yes. You can get out of a car lease, but it won’t be cheap. A lease is a contract, which means it’s a legally binding agreement. Some contracts contain loopholes or escape clauses. However, leasing companies pay attorneys big money for these carefully drafted, loophole-free agreements. Leasing companies are in the business of leasing cars. Technically, the dealership sells the vehicle to the leasing company. You then lease the vehicle from the leasing company, not from the dealership.
Acceleration Clauses & Early Termination Fees
Most agreements contain acceleration clauses stating that the remainder of your lease payments will be due immediately if you break your lease. If that’s not enough to deter you, the leasing company will also tack on a heavy penalty. Early termination fees generally range between $200 and $400. In general, that doesn’t mean you simply pay the fee and walk away. The leasing company may require you to make all of the remaining payments, whether you have 2 or 22 payments left. So be certain you understand the terms of the lease before you sign anything. You have a right to this information under the federal Consumer Leasing Act, and obtaining it from the leasing company should be easy.
Keep in mind that the leasing company bases your lease payments on the car’s expected decrease in value, known as its depreciation. The depreciation value is the difference between the manufacturer’s suggested retail price and the estimated residual value (i.e., the value of the car at the end of the lease term). The estimated residual value is usually stated in your contract. The cost of depreciation is spread out in equal payments over the term of your lease, but a car depreciates much more rapidly in the early years. So you can see how it would be to the company’s detriment to let you just walk away early from your lease. Therefore, it’s important to think about your leasing needs before you sign the contract. Once you sign on the dotted line, you could be in it for the long haul. You’ll pay dearly if you choose to terminate early.
If you have questions, contact the experts at Henssler Financial: