What Happens If You No Longer Can Afford Auto Lease Payments
We just found a great article from David at Boston Motorcars in Pasadena, California on the topic of what to do when you no longer can afford car lease payments. Here is his article:
When out shopping for a vehicle, you may have learned about the cost-savings that can come with car leasing. Entering into a lease can be a rewarding experience, as you still get to drive the new car of your dreams, only you don’t have to worry about all the hassle that comes with vehicle ownership.
When leasing a car, you can experience all the latest car features and technology for a low monthly price. However, somewhere down the line your lease terms may have become a little too much to handle. If you are in a car lease and you can no longer afford the payments, there is help. First, you should know that terminating a vehicle lease too early could cost you.
A car lease is a long-term contract and those low monthly payments are calculated based on the assumption that you will fulfill all of your monthly payment obligations. If you fail to pay as required, your lease agreement likely lists the penalties and legal ways the leasing company can get the money they expect.
Here are a few things you should know before breaking your car lease before completing the terms in your agreement.
Don’t Default On Your Car Lease
The worst way to get out of a car lease is to stop making your payments by the required due date. Paying late or not paying at all could cause the leasing company to jump into action, and you won’t like the results.
First, the leasing company will ruin your credit by reporting to the credit bureaus that your leasing account is in default.
You also face repossession of the car, as the leasing agency reserves the right to come pick the car up at any time. The cost of repossession will then be added onto the total amount you owe, costing you even more money in the long run.
The costs will then continue to ramp up, with early termination fees adding to the already expensive bulk sum of all your remaining monthly payments added together.
If you fail to pay once all the payments and fees are calculated into a final bill, the leasing company can sue you for the balance, ensuring they collect, and putting your credit and financial history into further jeopardy.
Instead of taking that route, here are some legitimate and more affordable ways to get out of a car leasing agreement.
Ending your lease before the terms are up may still damage your credit, but not nearly like you would if you managed to go into default. It is important to read the termination clause in your lease agreement so that you can identify the best way to return the car and stop the payments with as little cost and inconvenience to you.
In most cases, you will be required to pay hundreds of dollars in early termination fees on top of the thousands of dollars you might still owe on the car lease.
Keep in mind that there are some cases were early termination becomes impossible, such as when you put too many miles on the car or when there is damage to the vehicle or excess wear and tear. For those issues, you may end up owing even more in repair costs.
If, upon the signing of your lease, you paid a security deposit, that money will be absorbed by the leasing company to cover at least part of your early termination costs.
Obviously, if making the payments proved to be a tough hurdle to climb, early termination might be a tad costlier than it’s worth.
For this option to get out of your car lease before the terms have ended, contact the leasing company and ask them for the buyout amount on your car. As you make payments, the amount to pay off your vehicle will decrease. That number is referred to as a buyout number and will include the termination fee and any other associated costs, along with any credits from the security deposit you paid.
This may be a more affordable option than early termination, but again it requires you to have the funds on hand.
You can sell the car to another private individual for the payoff amount, which will allow you to pay the leasing company all the money you owe while simultaneously offloading the car. You will need to handle the sale on your own, which can be tricky. That’s because you’ll be required to take the money from the buyer before you’re able to furnish them with the title, which some buyers may not want to wait for.
The next best option is to contact an Auto broker and let him or her know what your objective is and they can assist with getting you top dollar for your car and buy the car from the bank. If the market value is less than the buyout amount with the bank you would be required to pay that difference or roll in that balance into another vehicle if you plan to purchase or lease a replacement vehicle.
Passing the Lease to Another
It is possible in some cases for another individual to take over the lease if you can no longer afford the payments. The person would need to qualify for the lease just like you did when entering into the agreement. If the person does qualify, they can resume payments on the vehicle until the end of the lease term, and you’d be off the hook.
Leasing a car can grant you many benefits over car buying, and it’s much cheaper, especially if you’re only going to lease for a period of three to six years. Being approved for a lease means that you have good credit and that the leasing company trusts you to fulfill the monthly terms, including all associated fees and payments.
When those payments prove to be too much, you have a few options. You can default, which could destroy your credit and put a damper on your financial future.
You could opt to pay for early termination, but that method can also lead to immense costs before all is said and done.
You could request the buyout price and attempt to sell the car to a private individual, contact an auto broker that can assist you with buying out your car with the bank or you can trade the lease with another, as these three options might be the most affordable for someone in your situation.
Making the right decision can help you save while also alleviating you of the responsibility of fulfilling the lease terms.