We’re relocating back to Australia in three weeks but the lease on our 2021 Jaguar F-Pace doesn’t expire until November. We have nine payments (of $1,300 plus tax) remaining. It has 44,000 kilometres on it and is in good shape except for a crack on the windshield.
We’ve been asking the dealership for a few months whether we can return it early without making all the remaining payments. At first, they said we probably could – but to check back closer to when we were leaving. We were a little perplexed as to why they were reluctant to figure out the value of the car.
Now, they say they can reduce the amount we owe by just one payment – so we’d owe eight payments ($10,400) instead of nine ($11,700). Is there a point at dealerships where you can simply walk in and return the car? – Jackie, Ontario
While some dealers will take back your car before your lease is up – and even pay you extra for it – they don’t have to, experts said.
“The simple answer is that a lease agreement is a contract,” said Shari Prymak, a senior consultant with Car Help Canada, a Toronto-based non-profit organization that helps drivers find cars and negotiate purchase agreements. “When a consumer signs a lease agreement, they are committing to making the payments for the full term of the lease.”
Here’s how leases normally work. At the end of a lease, you have two options: You can either buy the car at the price stated in the original leasing agreement or you can hand over the keys and walk away.
If you walk away, usually there will be no extra costs, other than for excess wear and tear, as long as you’ve made your payments on time.
The leasing agreement usually specifies what sort of damage counts as more than just normal wear and tear, but it might include torn upholstery, a cracked windshield or poorly repaired damage from a crash.
The price to buy it was set when you signed the lease and it was based on a prediction of what your car would be worth at the end of it.
That prediction is called the residual value. It’s a percentage of the original suggested price.
Because of the new car shortage over the past two years and the surge in demand for used cars, many vehicles are now worth much more than the residual value, Prymak said.
Because used cars are worth so much more today, dealers can often afford to let you return your leased car early, even though you still owe payments.
“The past two years have been exceptional because the value of used vehicles skyrocketed,” Prymak said. “Because the values were often so much higher than the owing balance, many dealers were happy to terminate leases early with no penalties. They would have no problem reselling at a profit.”
Depending on the vehicle, some dealers will even pay you $2,000 to $5,000 in cash to end a lease early – and still not charge you for remaining payments, said George Iny, president of the Automobile Protection Association, a national pro-consumer advocacy group with offices in Toronto and Montreal.
“Almost any leased vehicle [in today’s market] will be worth more than its current payout value in the last year of a lease,” Iny said.
But there are exceptions. For instance, some high-end luxury vehicles depreciate faster than average and may be “tricky” for the dealer to resell because they’re not in high demand, Iny said.
Lease resistance?
But while some dealers may welcome your vehicle because they can make more money by reselling it, they’re not obligated to take it back early, said the Ontario Motor Vehicle Industry Council (OMVIC), which regulates dealers in Ontario.
“Usually, the leasing company is a separate business entity from the dealer … [but] in some cases, a consumer may be able to negotiate with a dealership who may be interested in purchasing the vehicle into the dealer’s inventory,” it said in an email statement. “A dealer is never obligated to take specific actions regarding an early lease termination, giving them the freedom to establish terms as they see fit.”
If you’re not happy with what your dealer is offering, you may be able to find another dealer who would offer you more, Iny said.
Your lease is usually with the carmaker, not the dealer you bought it from, Iny said, So, if you’re trying to break a lease early or get someone else to take it over, you’re free to take it back to other dealers. The dealer would buy out the lease for the value of the payout today.
“If you’re turning in a leased vehicle, either on time or early, [we can recommend] dealers in Montreal and Toronto who will make an honest current market value appraisal,” Iny said. “There should be no payout [expected from the consumer] in most cases.”
If you can’t find a dealer willing to give you enough to cover your remaining payments, you could consider finding someone else to take over your lease, Prymak said.
There are websites where you can advertise lease takeovers. Prymak said Leasebusters is the most popular.
“It is a hassle, but it is not much different than trying to sell a car privately,” Prymak said. “There is paperwork to assign a lease to a new person, and usually a transfer fee. The consumer must contact the manufacturer [or leasing company] to find out what is needed.”
If your ad isn’t generating interest, consider offering a perk, such as paying the next one or two instalments,” Prymak said.
“This will help attract a buyer who needs a short-term car for six months or so,” Prymak said.
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