||Ask Dr. Don
Lease be gone
Dear Dr. Don,
I am leasing a '99 Isuzu Rodeo. I would like to turn it in and am
wondering what the penalties will be. I am 1.8 years in on a four-year
lease. I have also exceeded the included mileage. I understand there
will be a cost. Could you advise me of what to expect?
Your lease contract will be the final word on what you'll have to
pay and what options you have to get out of the lease, but here
are some things to consider.
Many lease contracts specify that the lease can be
terminated early by paying a termination fee -- usually around $250.
That's the easy part.
Here comes the hard part. The lessor then liquidates
the vehicle at a wholesale price. If the wholesale price is less
than the present lease balance, the lessee (you) is responsible
for the difference.
The determination of the wholesale value should be
spelled out in the lease contract. The lessee may have the right
to obtain an independent appraisal of the car's wholesale value
from a qualified appraiser. Or the lessor may be required to obtain
multiple bids to purchase the car at wholesale with the highest
bid determining the lessee's early termination responsibility.
With less than two years in on a lease where you probably
paid close to MSRP, owing the difference between the lease balance
and the wholesale value is a pretty stiff price to pay to get out
of the lease. Paying retail and selling wholesale is always an expensive
proposition, but you've got two years worth of depreciation to consider
that may not have been paid off with your lease payments and excess
mileage to boot.
You may be able to sell the SUV at a retail price,
trade it in or buy it outright for the present lease balance to
end the lease. Buying, selling or trading in the vehicle will also
mitigate the impact of the excess mileage or excess wear and tear,
but you have to consider the sales tax implications of the transaction.
Again, the lease contract will determine if you can sell the car
out of the lease.
You can try to find someone to assume your lease.
provide fee-based services that will help you market your leased
vehicle to people looking to assume a lease. But first read this
Bankrate story on how
to transfer a lease.
You might also want to take a look at this Bankrate
report on leasing.
The lease agreement will determine whether your lease
can be assumed, the costs associated with a lease assumption and
the extent of your financial responsibilities once the lease has
-- Posted: Nov. 8, 2001