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Is it possible to break your automotive lease?
By Jerry Van Raalte

I was recently asked by a customer how they could go about getting out of their existing lease.

The truth of the matter is that there is no clear-cut answer to this question, and case must be looked at individually. However, in order to answer this question in the easiest manner, I will try to give some general things to look for when considering breaking your lease.

The first thing that you will need to do is to contact the leasing company that is responsible for your lease. This may be the manufacturer's financing division, it may be a dealer's own leasing department, or it may be an independent third party leasing company. You will need to ask them exactly what your current payout is. You will need to make sure that when they quote you, that this payout amount includes all extra administration fees, and taxes.

Once you have determined this, the next step is to determine the actual value of your vehicle, either wholesale, if you are considering just returning it to a dealer, or retail, if you are considering selling your vehicle. Why? Simply because you are responsible for the deficit should there be one. Generally, there is a significant deficit between your payout and what the actual value of the vehicle is.

So there you have it. If you want to break your lease, it is not really that difficult. All you need to be prepared to do, is pay the difference of the amount owing. As an example, the

customer who asked me this question, was leasing a mini-van on a four-year term. They were two years into the lease already, and were hoping to get out of the lease without any additional costs. Unfortunately, the payout on the lease was close to $20,000 including taxes, and the actual value of the mini-van was somewhere in the neighborhood of $12,000. So the customer could have sold the minivan, taken the $12,000, added an additional $8,000 from their own pocket, and paid out the lease. I know, not practical, so the customer is going to continue driving their vehicle for the next two years.

This does not mean that leasing a vehicle is a bad thing. If this customer had decided to finance this vehicle instead, they would have had to finance for a much longer period in order to maintain the same kind of monthly payment, and should they try to pay off the financing company, it works exactly the same way.

Find out the payout from the bank, sell your vehicle, and make up the difference from what you received selling it, and what you owe to the bank. In the end, it will probably work out to be a very similar amount.

If you have a question for Jerry, email it to editor@caledoncitizen.com and we'll try to answer it for you.