Get Out of Lease?
Mike asks Dave how to get out of a car lease.
QUESTION: Mike has had a lot of debt problems, but currently has no credit card debt. He has a leased car and wants to know if he can get out of the lease.
ANSWER: You can’t just turn in the leased car – that’s considered a voluntary re-possession. You can sell it, though.
Just call the lease company and get the early buy-out amount. That’s different than the remaining payments, plus the residual value. Residual value is what you can buy it for at the end of the lease. That amount plus the remaining payments is your total financial exposure. The early buy-out should be less than that because you won’t be making interest payments for the remaining time.
Next, go to Kelly Blue Book and find out what the car is actually worth.
Finally, decide how you’re going to come up with the difference and get rid of the leased vehicle.
For example, if the early buy-out is $20,000 and the car is worth $16,000, you’d be $4,000 in the hole. You would have to have that money – either saved up or borrowed. A debt of $4,000 instead of $20,000 means you’re heading the right direction even though you’ve just taken out a new loan.