Car finance really is amazing. 😍 It allows those who can’t afford to splash out a huge chunk of money in one go (which really is most of us) to buy a car, by spreading out the cost of it. This means by paying a fixed monthly amount for a set number of years, and cruising behind the wheel of your dream car while you do. Sounds idyllic, right?
In the best of worlds, it is. But we all know that sometimes things don’t go according to plan. If you find yourself struggling to cope with the monthly payments of your car lease, you have options. With the costs of living on the rise at the moment, we think it’s important to prepare for any changes before they get too hard to handle. Let’s explore whether or not you can refinance a car lease. 🔍
What Is Car Leasing?
Car leasing is a really popular way of getting a car because of how convenient it is. At first, you’ll have to put down a deposit, which will be of around 10% of the car’s sale value. You’ll then pay a fixed monthly amount which is often lower than with other forms of car finance.
However, at the end of your loan term, you won’t usually own the car - you’ll have to hand it back to your lender. You’ll essentially be renting the car for a fixed period of time, not buying it. The length of a car lease is usually between 36 and 48 months. But sometimes you may be given an option to purchase from the lease company if they are prepared to sell. Although this is often not the best option, depending on whether they can offer you a good deal - do check out the estimated value for yourself online before committing.
Is Car Leasing Right for You?
Car leasing may or may not be right for you. It all depends on your personal circumstances, both financially and in terms of your lifestyle. Car leasing is usually for those who want a car for a rather short term, usually for less than 48 months (which is 4 years). You’ll also only want to make sure you’re planning to drive your car less than 15,000 miles every year - otherwise, you’ll exceed the mileage stipulated in your contract and will have to pay additional fees.
Car leasing is also perfect if you don’t want the inconvenience of buying and owning a car, like all the costs associated with the purchase and the loan. It also makes sense to not want to invest in an asset that depreciates so fast. In fact, a new car will only be worth 40% of its sale price after three years - that’s an average loss of 20% every year. Car leasing is a great solution to that because you’ll be leasing a car according to its real value, with depreciation factored in. You might also simply want to switch cars regularly if you enjoy change and just want to try out new things!
Can You Refinance a Car Lease?
If during the course of your car lease, you find yourself struggling to afford the monthly repayment amounts, you’ve got different options. However, do bear in mind that car leasing is not like a car loan - you won’t be able to lower your monthly payments and spread out the cost further. The two options you have are:
- Put an end to the lease
- Transfer your car’s lease to someone else
Because car leasing is like a long-term hire of a car, you can’t change your monthly payments throughout the course of your lease. The monthly payment is completely fixed until you return the car.
Putting an End to Your Car Lease
If you want to terminate your car lease contract before the end of its course, which is known as early termination, you’ll be traditionally required to pay at least half of the remaining lease amount. Some finance providers will even ask you to pay the whole remaining amount before you can terminate your lease - feel free to check with your lender or look through your contract.
By the way, the best way of avoiding these types of situations is by doing a sufficient amount of research before committing to a car finance agreement. Some contracts are hard to get out of, and if you’re in a situation where your circumstances might change, it’s best to go for a more flexible option. You can check out our article about the best type of car finance agreement for more guidance.
Can I Terminate My Car Lease Without Paying?
If you’re wondering whether there’s any way of terminating your agreement for free, unfortunately, the answer is no. Unless you can prove extraordinary circumstances like death, illness, or your car is malfunctioning, you’ll find it extremely difficult to end your car lease without having to pay any fees.
You may even find that some car leasing providers will charge you other costs for terminating your contract early. These may include:
- The early termination fee
- Whatever costs are needed for the car to be presentable for sale (repair of any scratches, cleaning, etc…)
- The cost for the storage and transportation of the vehicle
- Any outstanding road tax left on the vehicle
- And in the worst of cases, you may even have to pay negative equity, which is the difference between the lease amount and whatever is left of the car’s value.
Transferring Your Car Lease to Someone Else
Lease trading is the act of passing your car lease onto someone else - this only works if it’s allowed in your car lease contract, which it often is, but it’s important to double check. You’ll find that a lot of buyers will be interested in a short-term lease for cheap, which is probably what you can offer if you’re looking to transfer an existing car lease.
If you want to do this you can use a website like Swap a Lease or anything similar - you’ll just need to create a listing for your car, just as if you were selling it, to find a buyer who wants your lease to be transferred to them. You’ll be charged a fee for listing the car - on Swap a Lease, for example, it costs £39.99.
The Bottom Line
If you’ve got to here, we totally understand if you’ve got the feeling that car leasing can be stressful. We get it - it seems like a lot to handle. Here at Carmoola, we offer 100% stress-free car finance by making every step of the process as effortless as we can. You can apply for car finance in a few seconds on our app, and get a decision within minutes. Hassle-free car-buying is the future! Get your dream car today. 🌈🚗