Can I End my Lease Car Early? The FAQs...

First and foremost, you need to understand which funding product you are using for your vehicle. If you look at the contracts/documentation, this will inform you if your vehicle is based on:

  • Contract Hire;
  • Personal Contract Purchase (PCP);
  • Hire Purchase (HP); or
  • Short-term hire/Flexi Lease (rental).

The two most common forms of leasing for individuals are Contract Hire (use and return) or PCP (use and buy). The other options highlighted above are not forms of leasing (HP and Rental) so you would need to go back to the finance company or credit broker in either instance.

Ending Contract Hire Early...

If you have a contract hire vehicle, this will be a fixed term agreement which is usually based on 24, 36 or 48 months. The nature of contract hire is that it is a fixed agreement and you are expected to fulfil the contract; consider that the monthly rental you are paying has been calculated

using the term you required. In instances where you wish to end the term early (known as “early termination”), you will normally have to pay a minimum of 50% (half) of the remaining rentals. With some finance companies you will have to pay all of the remaining rentals in order to early terminate the vehicle. As finance companies have different forms of contract you do need to check the contract, or with the credit broker, in order to receive an accurate calculation.

Can I end a lease car for free?

Can I avoid paying early termination charges or end the lease for free? While a common question, the short answer is no. Unless there are extenuating circumstances relating to illness, death or vehicle malfunction the opportunity to end a contract agreement with no cost is somewhat limited. One of the drawbacks to contract hire is that it is a fixed term agreement and is not always a flexible option. That being said, if you purchase a car with the intention of keeping it for 3 years but you in fact sell in year 1, you have to consider the disproportionate level of depreciation you would pay in year 1, compared to year 3.

If you have concerns about using a car for the long-term, ask the supplying dealer or credit broker to offer a 24 months agreement. In some cases, a 12/18 month agreement may be available to you BUT this is likely to cost more per month than a 36 or 48 month agreement. You have to balance cost vs risk.

Ending & Getting out of PCP Early...

A Personal Contract Purchase is a different form of lease to contract hire. At the end of the contract you will be either pay the guaranteed future value/balloon, sell the vehicle or return it. Should you wish to early terminate the vehicle, you will most likely be offered one of two options:

  • Pay an amount equivalent to 50% (half) of the remaining rentals, or more, to return the vehicle to the finance company; or
  • Pay the settlement which the finance company offer to you – with a view to you selling it or buying it.

Additionally, with a PCP you will be able to enter into a processes called voluntary termination, where you have the option to return the vehicle to the finance company when you have paid at least half of the total amount payable (or more). This is sometimes referred to as “the rules of halves and thirds”. In this regard, a PCP arrangement may offer you the opportunity to return the vehicle with no cost to pay.

If you have any early termination queries, speak to one of the CarLease UK team or contact us via this page for more information on ending a lease car early or read more car leasing help and advice in our help and advice pages here.

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