How To Get Out of Your Auto Lease Early As Trump’s Tariffs Kick In
Tobi Opeyemi Amure
5 min read
President Donald Trump’s recent tariffs on imported vehicles and parts are expected to significantly increase the cost of cars, impacting both new and used vehicle prices. These 25% tariffs affect major car-exporting countries like Mexico, Japan, South Korea, Canada, and Germany, creating ripple effects across the auto industry.
According to Fox News, industry analysts predict that these tariffs could drive up costs for both new and used vehicles, leaving many consumers scrambling to adjust their financial plans.
For those currently leasing vehicles, this shifting market landscape raises questions about whether exiting a lease early might be a smart financial move. Here are some ways tariffs will impact your auto lease and practical strategies for terminating an auto lease early.
Why Early Lease Termination
Auto leases are contracts that require fixed monthly payments over a set term, typically two to four years. Breaking a lease early often comes with significant penalties, including paying off the remaining balance and additional fees for depreciation or excess mileage. However, with tariffs driving up car prices, some leaseholders may consider early termination to adapt to changing financial circumstances or market conditions.
According to Tom Holgate, EVP of auto finance and insurance at Way.com, “Residual values and monthly lease payments are fixed and will not be affected by tariffs. If car prices rise, then consumers with leases will be in an equity position when the lease ends.”
This means that existing leaseholders are protected from immediate cost increases caused by tariffs. However, rising car prices could create opportunities for equity gains at the end of a lease term, making it advantageous for some to retain their leases until completion.
While existing leaseholders benefit from fixed monthly payments unaffected by rising car prices, early termination might still make sense in some cases. For example, financial hardship may make it difficult to keep up with payments, or changing needs, such as requiring a larger vehicle or no longer needing a car, could justify ending the lease.
Terminating your lease outright is one option, but it’s often the most expensive. This process involves paying the difference between the remaining balance and the car’s residual value, plus additional fees like taxes or late payments. For example, if your payoff amount is $18,000 and the residual value is $15,000, you’d owe $3,000 plus applicable charges.
Experts recommend reserving this option for situations where financial hardship or unexpected circumstances make monthly payments unmanageable. While costly, early termination allows you to avoid excess mileage fees or wear-and-tear penalties that might accrue later in the lease.
Lease Transfer
Transferring your lease to another party can be a more affordable way to exit your contract. However, not all leasing companies permit transfers, so it’s crucial to verify this option within your agreement. Holgate said, “Lease transfer is one of the most cost-effective ways to get out. Although it is difficult to do and will require the leasing company’s approval.”
Lease transfers often involve minimal fees compared to early termination. The new lessee assumes responsibility for monthly payments and other obligations, relieving you of financial responsibility. This strategy is one of the most cost-effective solutions for exiting a lease early without incurring substantial penalties.
Trade-In Options
Trading in your leased vehicle for a new lease or purchase is another viable strategy. If the car’s trade-in value exceeds its buyout price, you can use the equity toward a new vehicle or lease agreement. Conversely, if the trade-in value is lower than the buyout price, the remaining balance may be rolled into your new contract, resulting in higher monthly payments.
Experts caution that trading in a leased car works best for individuals with good credit scores since leasing companies prioritize creditworthiness for new agreements. Those with poor credit may face challenges qualifying for favorable terms. This option is ideal if you plan to continue leasing or purchasing another vehicle while managing existing obligations.
Lease Buyout
Buying out your lease involves paying off the remaining balance and purchasing the car outright. Once you own the vehicle, you can sell it or keep it based on your needs. This strategy is useful if the car’s market value exceeds its buyout price, allowing you to recoup costs through resale.
Holgate suggested, “If new car prices rise significantly, it will be in the lessee’s favor to retain ownership of the car at the end of the lease since they will be in an equity position.” However, this option requires upfront financial resources and careful market analysis to ensure profitability.
Negotiating With Your Leasing Company
Leasing companies may offer flexible solutions for individuals struggling with payments due to economic changes like tariffs. Options include extending the lease term to lower monthly payments or waiving certain fees under specific circumstances.
Open communication with your provider is essential for exploring potential compromises. Negotiating directly with leasing companies can reveal alternatives not explicitly outlined in contracts. For example, some providers may offer temporary payment reductions or deferments during periods of financial difficulty.
