Does Breaking a Car Lease Hurt Your Credit? [Find Out Here] | FINN (2024)

Early termination fees are one of the many car lease fees to avoid if you can manage it. However, if you must choose between damaging your credit score and paying extra fines to get out of your lease, fines are almost always the better choice.

Depending on how far into your lease you are, your leasing company may offer to terminate your lease early if you agree to another lease. Any remaining payments are rolled into your new lease. While this solution can help you avoid hurting your credit, it sets you up to pay even more than you did with the first lease. If you could barely afford your payments previously, affording the new lease presents an even more significant challenge.

Transfer your lease

SwapALease and LeaseTrader connect individuals who want to swap or transfer car leases. If you want to avoid hurting your credit but need to get out of your lease, these websites can present a viable solution. However, before you look too deep into transferring your lease, you should consult your lease agreement for any stipulations about lease transfers.

When you transfer your lease, the person you’re transferring the lease to must meet the exact requirements you did when you initiated the lease. Often, this arrangement includes a three-way conversation between you, the new lessee, and your leasing company. You may have to pay a lease transfer fee. Some lease transfer arrangements also stipulate that you’re still responsible for any payments should the new lessee default.

Trade in your car

If finding someone to take over your lease sounds like too much of a hassle, consider trading your car in for another. Again, before you look too much into this option, consult your lease agreement to see how your leasing company handles trading in or selling your lease. Many leasing companies and dealerships expect to receive your lease back and sell it for a profit.

When you trade in your car, you’re responsible for any negative equity in your lease. For example, if the dealership gives you a $5,000 trade-in value on your lease and you owe $7,500, you must come up with the $2,500 difference. Often, dealerships require you to write a check for this amount to accept your trade-in.

Sell your car

Selling your leased car and coming up with a different transportation solution can help you get out of your lease and gain some breathing room. You can sell your car to a dealership or privately, though dealerships are often the more convenient solution. When you sell private party, you must disclose that the car is under a lease, similar to how you would disclose a car loan if that were the case.

If you plan on selling your car, identifying any negative equity you have in the vehicle before visiting the dealership can help in your negotiations. You’re still responsible for the difference between the sales price and what you still owe on the lease, whether you trade in or sell the vehicle.

Buy out the lease

Buying out your lease will not hurt your credit. Lessees often choose to buy their lease because they’ve grown attached to it and know most of the vehicle’s maintenance history. Buying out a lease can also offer the potential to profit from selling the car, depending on market conditions.

One of the first steps to buy out your lease is determining how lease payments are calculated. Consider the residual value, remaining lease payments, lease buyout fees, and any additional fees for buying out your lease (registration, titling, licensing, etc.). Many lease agreements list the buy-out price if the dealership or leasing company allows you to purchase your lease after the lease ends.