Can You Break a Car Lease Early?

Written by: Jacob S.

Published on: September 10, 2025

Car leases are designed to give drivers flexibility, but that flexibility doesn’t mean unlimited freedom. A lease is a binding financial agreement, and while you can get out of one early, it often comes at a price. Understanding how leases work, what “early termination” really means, and what alternatives exist can help you make an informed decision that minimizes cost and protects your credit.

Key Takeaways

Yes, you can get out of a car lease early, but it almost always comes with financial consequences. Expect to face fees such as early termination charges, negative equity, or liability costs.
Not all leases are the same. Closed-ended leases are more consumer-friendly, while open-ended leases can leave you on the hook for large resale value losses if you exit early.
Alternatives can save money. Lease transfers, buyouts, or rolling into a new lease may be less costly than outright early termination.
Credit can be affected if you don’t handle it responsibly. Paying all fees protects your score, but missed payments or defaults can significantly damage it.
Timing matters. Returning a lease in the first half of the contract is usually the most expensive option, since most of your payments are covering depreciation during that period.

What Is a Car Lease?

At its core, a car lease is a long-term rental with financial obligations built in. Instead of paying toward ownership, you’re paying for the depreciation of the vehicle during your contract term. The leasing company owns the car; you’re essentially paying to use it.

Your monthly lease payment is determined by three main factors:

Capitalized Cost: The negotiated price of the vehicle.
Residual Value: What the car is expected to be worth when your lease ends.
Money Factor: The interest rate, expressed differently than in traditional financing.

Unlike financing, leases carry strict conditions: mileage limits, maintenance requirements, and wear-and-tear standards. If you return the car early, the leasing company still needs to recover its expected value, which is why penalties exist.

Open-Ended Car Lease vs. Closed-Ended Car Lease

Closed-Ended Lease (Most Common): You return the car at the end of the term, and as long as you’ve stayed within mileage and condition limits, you walk away. Any loss in resale value is the lessor’s problem.

Open-Ended Lease: More common in commercial settings, this type leaves you financially responsible if the car’s resale value falls below projections.

This difference matters because an open-ended lease can expose you to higher costs if you try to terminate early.

What Happens When You Break Your Car Lease?

Early termination of a car lease means ending your contract before the agreed-upon end date. While possible, it’s rarely as simple as handing over the keys. In most cases, you’ll be required to pay:

Remaining monthly payments
An early termination fee
Any difference between the vehicle’s current market value and its residual value

In other words, the lessor is made financially whole even if you no longer have the car.

Why You May Need to Break a Car Lease Early

Life circumstances change, and leases don’t always fit new realities. Common reasons include:

Disability

If an injury or illness prevents you from driving, continuing to pay for a vehicle you can’t use doesn’t make sense. Some lessors may offer hardship programs or reduced penalties if you provide medical documentation.

Job Loss

Losing a steady income can make lease payments unaffordable. While most companies won’t forgive the balance, contacting your lender early may allow for modified terms or a more flexible solution.

Want a Different Vehicle

Your lifestyle may change, you might need a bigger vehicle for family use, or you may want a more fuel-efficient car for commuting. Leasing makes switching cars more complicated than simply trading in.

Moving

Relocating to another state or overseas can make it impractical to keep your lease, especially if the leasing company doesn’t operate in your new location.

Alternatives to Breaking a Car Lease

Before paying steep penalties, consider other ways out:

Lease Transfer: Many companies allow you to transfer your lease to another driver. This can be a cost-effective exit strategy, though transfer fees apply.
Trade-In for Another Lease: Some dealerships let you roll your current lease into a new contract. While convenient, it may increase your monthly payment due to negative equity.
Lease Buyout: Using a personal loan to buy the car and selling it yourself may minimize losses if the market value is higher than the buyout price.

Does Breaking a Car Lease Agreement Affect Your Credit?

Breaking a lease early can affect your credit score, but how much depends on how you handle it. If you pay all fees and obligations, the termination itself doesn’t harm your score. However, missed payments, collections, or defaults tied to the lease will be reported to credit bureaus, potentially lowering your score significantly.

How To Get Out of a Car Lease Early

If you decide early termination is the best path, here are the main options:

Buy Out the Lease and Sell the Car

Check your contract for the buyout amount. If the car’s market value exceeds this, you can buy the car, resell it, and possibly break even.

Roll Your Payments Into a New Car Lease

This keeps you in a leased vehicle but can increase financial strain if you’re carrying negative equity.

Transfer the Car Lease

Websites and brokers exist specifically to match people with lease transfers. Just ensure your lessor permits it.

Fees Associated With Early Lease Termination

Here are the fees you can expect when you terminate a car lease agreement early:

Early Termination Fee

A flat charge is outlined in your contract for ending early.

Negative Equity Fees

Owed if your car’s market value is less than the payoff balance.

Liability Fees

Includes unpaid payments, excess mileage, or excessive wear-and-tear.

Car Storage Fees

Occasionally charged if the dealer must hold the car until resale.

Dealer Fees

Administrative charges are tied to processing the termination.

Transfer Fee and Taxes

Applies if you’re transferring your lease to someone else.

Fee Type	What It Covers	Estimated Cost Range
Early Termination Fee	A flat charge is outlined in your lease contract for ending the agreement early.	$200 – $800 (some contracts base this on remaining payments)
Negative Equity Fees	Charged if the car’s market value is lower than the remaining lease payoff balance.	Can range from $1,000 – $5,000+, depending on vehicle value and timing
Liability Fees	Includes unpaid monthly payments, excess mileage charges, or excessive wear-and-tear costs.	$0.15 – $0.30 per mile over limit; wear-and-tear $500 – $2,000+
Car Storage Fees	Sometimes charged if a dealer must store the vehicle before resale.	$100 – $300 (less common, varies by dealer)
Dealer Fees	Administrative costs for processing paperwork and handling the early termination.	$100 – $500
Transfer Fee and Taxes	Fees and taxes that apply if you transfer your lease to another person.	$50 – $500 plus applicable state sales/use taxes

Getting out of a car lease early is possible, but it requires careful consideration. Terminating without a strategy can leave you with steep penalties and unnecessary credit damage. The best approach is to:

Review your lease contract carefully.
Contact your leasing company to understand your exact costs.
Explore alternatives like transfers or buyouts before paying full termination fees.

Leases offer flexibility at the end of the term, not necessarily in the middle. Knowing your options ensures that if life changes, you can adjust without putting your finances at unnecessary risk.