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How to end a lease early? All possible scenarios

12 December 2022

You can terminate a car lease contract at any moment, however, depending on the amount paid off and on the instalment structure. If you have difficulties regulating the payments, or your living situation does not let you use this form of financing any longer, maybe it’s time you learnt the available options of terminating the lease. How to end a lease early?


What is a car lease?

A car lease is a form of financing which entitles you  to use a new vehicle for a certain period of time. Basically, you can use the leased item for a determined time and fixed fee in the form of instalments paid in accordance with the agreed schedule. As a lessee, you’re responsible for the insurance costs and keeping the car in active use.

The leasing contract might resemble credit obligations, especially in terms of the monthly repayment, but it’s definitely easier to terminate. It doesn’t require so  many formalities to complete, because it involves lower risk for the lessee. Besides, its termination has less consequences than terminating the credit contract.

There are two main types of the car lease.


Operating lease

It’s the most popular form, in which the car is amortised by the lessor’s company. This is associated with lower initial costs. This contract shall only cover using the leased item for the contract duration, or using and then buyout after the termination of the contract. As this contract is legally considered as service, certain % of the VAT tax is added too each instalment, which also should be paid by the lessee.



Financial lease

This form of leasing is also frequently chosen, although it’s more complicated. In this case, the lessee can enter the vehicle to the fixed assets register, and then record current depreciation charges. It is legally considered as a supply of goods, so VAT must be paid in advance. Such contract always involves using and buying out the car after the termination of the contract.

Within the framework of both the financial lease and the operational lease, the customer/company might enter a special type of contract. As it has been already mentioned above in the first option, the lessee can decide whether they want to buy out the car after the contract after paying off the lease.


Other types of leasing

There’s another special type of leasing, the so-called sale-and-lease-back, in which the business person / customer sells the assets, usually parts of real estate, to the leasing company, and then leased them back.

In addition, there’s a type of leasing which is dependent on the lessee’s status. And although it’s usually business people, the consumer leasing is also very profitable. It’s a civil law contract, which combines features of the credit contract with the lease agreement. The consumer purchases the needed items, accepts the monthly payments form, and this way they regularly pay off the leasing price value. Such solution is much better than a loan, as it doesn’t require completing many formalities, and it’s also cheaper.


How to end a lease?

It happens that the lessee is not able to continue paying the monthly instalments for the leased item and they want to terminate the contract. It might not be very easy, but it’s also not impossible to do, and according to general information, the law allows that. There are a few ways in which you can terminate a lease.


Leasing assignment – how does it work?

Assignment is transferring a car from one customer to another one within the framework of leasing. There can be many reasons for which a customer may ask for assignment. Perhaps the personal circumstances have changed, a crisis in the company has happened, or the leased vehicles has become redundant.

In order to transfer the contract, the lessor must agree to it and accept the new lessee. Apart from that, they might not agree to the same contract parameters of the existing contract, e.g. monthly payments, the period of contract duration etc. Both parties must sign the leasing assignment and get information about the formalities which charge the lessee. After the termination of the contract, paying off all the instalments and buying out the leased item, the assignee becomes the full-fledged owner of the item.


Pay attention

The operating leasing assignment has also a huge advantage, as there’s no need to wait for the 40% of the completion of leased item depreciation. Changes can be done before that without any tax consequences.



How to extend a lease?

Many people claim that between terminating one contract and starting a next one they don’t want to function without a car, and sometimes business people are simply not ready yet to part with the already trusted cars. However, terminating a contract when there are instalments remaining, or resigning from the lease is not an option.

Regardless of the reasons, the leasing companies, for an additional payment, might agree to extend a lease contract. Often, the lessor does not agree to extend this form of financing, as the leased item is quite old.



How to end a lease early – early repayment

Another way of terminating the remaining leasing arrears is simply paying off the instalments earlier. Of course, the leasing company has to first agree to this, although it’s rare that this request is denied. Pre-term repayment of the leased item in the financial leasing is possible to do at any moment of the contract duration. The remaining amount of instalments is paid off decreased the discount, and sometimes the lessor might charge a range of additional payments for the pre-term repayment.

The procedure is a bit more complicated, when you want to resign from the leasing earlier in the form of buying out the operating leasing. In this case, what matters is the period of time which has passed since the day of entering the obligation to pay the instalments. In the case of the passenger cars, it’s best to terminate the contract after 2 years, which is after passing the 40% of the default depreciation period. Only then can the repaid instalments be included in the deductible expense.


How to end a lease early – lease buyout

Some lessees do not differentiate the pre-term leased item repayment from buying out the item. Meanwhile, the latter option is slightly more profitable than terminating the contract in order to resign from leasing. Of course, it still involves the obligation of the lessee to pay off the remaining instalments and incur additional payments. Right after buying out the item, the lessee becomes its full-fledged owner. They can even sell it. However, when the leasing contract is terminated by resigning from the contract, the leased item returns to the lessor.


Pay attention

It’s best to implement the option of pre-term buyout, similarly to the option of pre-term repayment of a leased passenger car, not sooner than 2 years into the contract, which is after passing the 40% of the default depreciation period.




Terminating a lease contract is possible contrary to the belief that it’s difficult or even impossible. Of course, in order to reach your goal, you need to prepare for a long journey and take into account all the possible consequences. However, sometimes this solution might be the only available option.

Usually, resigning from the leased item it pre-term repayment involves waiting around 4 weeks to complete all the formalities. It usually takes much shorter, but it’s good to be prepared for different situations and possible complications. There’s a lot of things to complete, but in cooperation with the leasing company it can be done quick.

There are many options to end a lease early, so depending on your / the company’s business situation, you need to choose the most suitable solution. In case of any doubts, contact a customer adviser at the leasing company of choice to make compromises and negotiate the best conditions for both parties. Sometimes, the lease termination is simply unprofitable, so it’s good to take into consideration such solution.


It is good to know

Did you like this article? Anything you’d like to ask in your comment? Feel free to share your feedback and comment at the bottom of the article. And remember – always before buying a car, motorcycle or even a trailer – check vehicle history with autoDNA based on the VIN number. Checking VIN is one of the most important things to do before deciding to buy a used vehicle. Thanks to this, autoDNA helps you make an informed decision.



How to end a lease early? All possible scenarios
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How to end a lease early? All possible scenarios
You can terminate a car lease contract at any moment, however, depending on the amount paid off and on the instalment structure. How to end a lease early?
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