If you drive away from a lease, prepare to pay the price
By Lucy Lazarony • Bankrate.com

Consumer experts have three words for people thinking about ending an auto lease early: Don't do it.

"You have no bargaining strength at all. They hold all the cards," said Mark Eskeldson, an auto expert and author of CarInfo.com, a consumer information and advocacy Web site. "If you're thinking about terminating a lease. Don't do it. Don't do it -- period. Because it's not going to be cheap."

How much it will cost all depends on the lease and the finance company.

An obligation to pay

"It really is dependent on the paper you signed on how bad a situation it is. The common experience is if you terminate early you're in for a world of hurt."

When calculating early lease termination amounts, finance companies look at a number of factors, including the number of payments made, the amount still owed on the lease and the fair market value of the car.

Termination fees
Sometimes customers are required to make all the remaining lease payments, even though they are turning in their cars. In addition, some finance companies charge an early lease termination fee and/or disposal fee.

And don't forget about charges for excess mileage or wear and tear. How a finance company handles an early lease end is all laid out in the fine print of the lease contract.

"Unfortunately, the language is usually confusing," wrote Albert D. Hearn of Leaseguide.com, a lease information Web site. "It is usually not clear, for example, that the method of computing the remaining amount owed on the lease is different from the method originally used to calculate monthly payments, which results in the lessee owing more than they may have thought."

Because of the steep costs, experts urge people to stick out a lease as long as possible. The earlier a person tries to end a lease, the more it's going to cost. People in the first two-thirds of a lease agreement are very likely "upside down," which means they owe more on the car than it's worth.

Prompt notification
If a person must end a lease early, consumer experts urge them to contact the finance company directly.

"Explain the situation as clearly as possible," Nerad said. "Be willing to take your medicine. Be prepared to pay for the privilege of breaking your word."

Making that call to the finance company is especially important if a person can no longer make monthly lease payments due to job loss or illness.

"Most finance companies would come to some accommodation rather than take a total loss on the thing," Nerad said.

For example, Ford Motor Credit offers payment extensions on a case-by-case basis.

"It's not an easy time for them and we work with them the best we can," said Tim Gates, manager of the Red Carpet Lease Program at Ford. "It can be worked out without hurting a person's credit. (But) it doesn't always work that way."

Experts urge people who are looking to end a lease early to avoid working through the car dealer as much as possible because the dealer's main interest is getting the customer into another car.

Legal consequences
There simply is no easy way out of a lease. People who return the car to the dealership early and leave without paying may find themselves in court. Finance companies will not hesitate to sue.

"If they just try to walk away from their obligation, you bet," said Jim Kobus, a spokesman for General Motors Acceptance Corporation.

Eskeldson said, "People are getting sued every day all over the country for early termination. In many cases people are being sued for five to 10 times the amount of the remaining payments."

The best way to avoid the financial pain of ending a lease early is to study the terms of a lease carefully before signing and make sure it fits the household budget even in lean times. Too many people know their monthly lease payments and little else, Ford's Gates said.

-- Updated: Oct. 22, 2001