Automotive

Early Lease Termination/Return

  • Last Updated:
  • Aug 8th, 2017 12:29 am
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[OP]
Sr. Member
Jan 12, 2013
504 posts
432 upvotes
Halifax

Early Lease Termination/Return

Hey all,

I've been reading around the forum and doing some Google searches as well, but a lot of the info I found is either from the US or out of date by quite a few years. Wondering if anyone who has terminated a lease early and knows of the details can answer a couple questions for me.

I have a lease with Honda that is over at the end of February. If I wanted to return my current lease and get a new Honda early, I could do so without penalty as long as the current value of the vehicle is higher than the "buy-out" price right? Basically I need to be in a situation of positive equity I think. My understanding of this scenario is that the Honda Dealer would treat this as a trade-in for all intents and purposes and buy the vehicle from HFS.

If I wanted to move to a different brand, do I need to wait out the full term of the lease or can I contact HFS and see if they will allow an early return? If I went this route I would be on the hook for the remainder of my payment obligations I believe...? I know we don't own the vehicle, so it isn't as simple as taking it to a competing dealership of another brand and "trading" it in, like you can on a financed or owned vehicle.

Are there any other tips someone may have for me? Basically we are growing tired of our current vehicle, but the lease end is only a few months away at this point and we can ride it out until the end if it doesn't make financial sense to exit the lease early, or if it just simply isn't permitted by the leasing company.

**PS - I'm actively looking for my original lease documentation, but its harder to find than I anticipated... I would imagine a lot of this info would be on those documents?
35 replies
Newbie
Jul 30, 2017
91 posts
60 upvotes
I don't see how being a lease or finance would make a difference when it comes to trading a vehicle in. Right now, if you sign into your HFS account, there will be a pay out balance listed. That just needs to be wiped clean and you're free a clear of it. The dealer you trade the car into would just send the money to HFS, then any positive equity you could take in cash or just have it applied to your new loan, or in the case of negative equity it would be rolled into your new loan.
[OP]
Sr. Member
Jan 12, 2013
504 posts
432 upvotes
Halifax
FKEezy wrote:
Aug 4th, 2017 9:22 am
I don't see how being a lease or finance would make a difference when it comes to trading a vehicle in. Right now, if you sign into your HFS account, there will be a pay out balance listed. That just needs to be wiped clean and you're free a clear of it. The dealer you trade the car into would just send the money to HFS, then any positive equity you could take in cash or just have it applied to your new loan, or in the case of negative equity it would be rolled into your new loan.
This was my original assumption as well, but we visited a different dealer not too long ago who stated that since we don't own the vehicle (HCF does) that they cannot accept it as a trade-in. Maybe we should try another dealer and see if the response changes...
Newbie
Jul 30, 2017
91 posts
60 upvotes
TBBA29 wrote:
Aug 4th, 2017 9:30 am
This was my original assumption as well, but we visited a different dealer not too long ago who stated that since we don't own the vehicle (HCF does) that they cannot accept it as a trade-in. Maybe we should try another dealer and see if the response changes...
I don't understand that. If you financed it, you wouldn't own it either. And people trade financed vehicles all the time. Definitely check around. I would just call HFS directly:
https://www.honda.ca/lease-and-finance/contactus
Deal Expert
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Apr 21, 2004
51230 posts
15866 upvotes
For financed vehicles, we either pay the loan down and sell/trade or talk to the financing arm of the car manufacturer for potential transfer of ownership/trade in?
Deal Addict
Jan 15, 2017
2632 posts
1945 upvotes
TBBA29 wrote:
Aug 4th, 2017 9:30 am
This was my original assumption as well, but we visited a different dealer not too long ago who stated that since we don't own the vehicle (HCF does) that they cannot accept it as a trade-in. Maybe we should try another dealer and see if the response changes...
This was their back handed way of telling you that they didn't want the vehicle as a trade in. As mentioned already, you need the payout on the vehicle. The trade in dealer would simply need to pay out the vehicle and the "trade" would be complete. Any surplus would be credited to your new purchase and any deficit you would need to cover.

But, this can become complicated on a case by case basis. What type of Honda did you lease? What is the condition of the vehicle? What is the mileage? Have you exceeded your allowable mileage? Has the vehicle been involved in an accident? Are you planning to purchase or lease another vehicle? The answers to these questions will affect your ability to get out of the lease early. If, for instance, the current value of your Honda is significantly less than the payout amount, this may create a challenge if your plan is to lease another vehicle.

If you truly want out, you can simply buy out the lease yourself. You will own the vehicle yourself. You are then free to sell it privately or to trade it on whatever you like.
Newbie
Jul 30, 2017
91 posts
60 upvotes
skeet50 wrote:
Aug 4th, 2017 9:56 am

If you truly want out, you can simply buy out the lease yourself. You will own the vehicle yourself. You are then free to sell it privately or to trade it on whatever you like.
Big problem there is he'd be on the hook for the 15% tax.
Best to just ride out the final 6 months if the trade doesn't work out to his advantage.
Deal Addict
Oct 17, 2010
1584 posts
304 upvotes
South Western Ontari…
If you want out early dealer will buy the car at wholesale value, if you have equity great, if its upside down you pay the difference and then negotiate for the new vehicle then either roll in the difference to new car payment or pay out of pocket.

Just find a dealer willing to work with yoi
Deal Addict
User avatar
Jul 5, 2011
1404 posts
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Toronto
Answer:

It is the same thing at any brand / dealer - the only difference is that the Honda dealer can buy the vehicle directly from Honda Canada, whereas a different brand dealer will need to complete a buyout through the Honda Dealer (who completes it through Honda Canada) - whenever dealers work with each other, they ALWAYS charge a mandatory admin fee. This can vary from $299 (minimum with a friendly dealer) all the way to $799 (premium brands, unfriendly).

What you need in order to do your proper due diligence:

1. Call Honda Financial directly and ask them to send your buyout to you. They may fax this to a dealer for you to pick up. Do not get a number on the phone and write it down... make sure you get the buyout sheet. This number will include your remaining payments - the one you want is your "Contractual Obligation" not including HST.

2. Take that buyout sheet with you to different dealers and shop your car just like you would a normal trade. It is my personal opinion that you are better off stating what you are looking for (ie. my buyout is $18000, I would like to get out clean without negative equity and I would like 3% over dealer cost on the new vehicle). You may want to keep quiet for a couple of visits to different dealers to get an idea where they position your deal (ie. negative equity, willingness to discount, etc). Every dealer / brand will be different.

3. The biggest difference here is how the vehicle applies to your bill of sale. For a vehicle that you "own" (ie. the registration is in your name) you receive the tax savings off of the total amount of the trade. So if the dealer says you get $10000 for the trade, with the tax savings it is more like $11,300. A leased vehicle works simply based off of the difference between the value and your obligation (buyout). If you owe $10000 and the trade is valued at $7000, you will have $3000 shown as negative equity in your deal. Similarly, if you owe $7000 and the trade is valued at $10000, you can use that $3000 positive equity as cash down, cash back, or whatever you like.

3. Find the dealer that gives you the best deal and do the deal as per normal.. the dealer will buy out the vehicle from Honda (3rd party buyout).

* Most brands do not have an early termination fee. I know Nissan / Infiniti do indeed charge an early termination fee - this will be listed in your contract. Typically this is not your issue anyway, but it's worth knowing just in case... If you do a deal and the dealer gets slapped with an early termination fee they may want you to pay it. This might not be a big deal if you've already picked up the vehicle (as you can easily say 'no'), but if you are scheduled to pick up the car and they call you asking for the money you will be in a tight spot being that you'll have left a deposit and have not yet taken delivery.

* You can make your payments and drop off the car whenever you like if you find the negative equity is too much. Stop in to the dealer and do a lease end inspection. You will have to pay any outstanding damages plus your remaining payments.
2013 Wins - $1320 - Woohoo!
[OP]
Sr. Member
Jan 12, 2013
504 posts
432 upvotes
Halifax
skeet50 wrote:
Aug 4th, 2017 9:56 am
This was their back handed way of telling you that they didn't want the vehicle as a trade in. As mentioned already, you need the payout on the vehicle. The trade in dealer would simply need to pay out the vehicle and the "trade" would be complete. Any surplus would be credited to your new purchase and any deficit you would need to cover.

But, this can become complicated on a case by case basis. What type of Honda did you lease? What is the condition of the vehicle? What is the mileage? Have you exceeded your allowable mileage? Has the vehicle been involved in an accident? Are you planning to purchase or lease another vehicle? The answers to these questions will affect your ability to get out of the lease early. If, for instance, the current value of your Honda is significantly less than the payout amount, this may create a challenge if your plan is to lease another vehicle.

If you truly want out, you can simply buy out the lease yourself. You will own the vehicle yourself. You are then free to sell it privately or to trade it on whatever you like.
It is hard to believe they wouldn't want it as a trade, but I suppose this changes based on a variety of factors as well. Its a 2015 CR-V with low mileage (well below the allowable kms ie. allowed 72000 and currently 52000 on vehicle with 6 mos. remaining). Vehicle is in great condition (new tires, no accidents, no damage, no paint defects, no dents, etc, etc.)
xjesterxx wrote:
Aug 4th, 2017 10:17 am
Answer:

It is the same thing at any brand / dealer - the only difference is that the Honda dealer can buy the vehicle directly from Honda Canada, whereas a different brand dealer will need to complete a buyout through the Honda Dealer (who completes it through Honda Canada) - whenever dealers work with each other, they ALWAYS charge a mandatory admin fee. This can vary from $299 (minimum with a friendly dealer) all the way to $799 (premium brands, unfriendly).

What you need in order to do your proper due diligence:

1. Call Honda Financial directly and ask them to send your buyout to you. They may require you to fax this to a dealer to pick up. Do not get a number on the phone and write it down... make sure you get the buyout sheet. This number will include your remaining payments - the one you want is your "Contractual Obligation" not including HST.

2. Take that buyout sheet with you to different dealers and shop your car just like you would a normal trade. It is my personal opinion that you are better off stating what you are looking for (ie. my buyout is $18000, I would like to get out clean without negative equity and I would like 3% over dealer cost on the new vehicle). You may want to keep quiet for a couple of visits to different dealers to get an idea where they position your deal (ie. negative equity, willingness to discount, etc). Every dealer / brand will be different.

3. The biggest difference here is how the vehicle applies to your bill of sale. For a vehicle that you "own" (ie. the registration is in your name) you receive the tax savings off of the total amount of the trade. So if the dealer says you get $10000 for the trade, with the tax savings it is more like $11,300. A leased vehicle works simply based off of the difference between the value and your obligation (buyout). If you owe $10000 and the trade is valued at $7000, you will have $3000 shown as negative equity in your deal. Similarly, if you owe $7000 and the trade is valued at $10000, you can use that $3000 positive equity as cash down, cash back, or whatever you like.

3. Find the dealer that gives you the best deal and do the deal as per normal.. the dealer will buy out the vehicle from Honda (3rd party buyout).

* Most brands do not have an early termination fee. I know Nissan / Infiniti do indeed charge an early termination fee - this will be listed in your contract. Typically this is not your issue anyway, but it's worth knowing just in case... If you do a deal and the dealer gets slapped with an early termination fee they may want you to pay it. This might not be a big deal if you've already picked up the vehicle (as you can easily say 'no'), but if you are scheduled to pick up the car and they call you asking for the money you will be in a tight spot being that you'll have left a deposit and have not yet taken delivery.

* You can make your payments and drop off the car whenever you like if you find the negative equity is too much. Stop in to the dealer and do a lease end inspection. You will have to pay any outstanding damages plus your remaining payments.
Thank you for the great info, this is exactly what I was looking for. I will follow your steps and see where I end up. Again, the 6 month wait isn't too far away so if things don't look favorable for me, I will hold off. Again, thank you.
Newbie
Jul 30, 2017
91 posts
60 upvotes
Do you have positive equity in the vehicle right now? If so, you could sell it privately as well. I don't know if the lessor would allow a third party to buy it out, but if they don't, a simple loophole would be to transfer the lease to the buyer, then they could buy it out themselves. I transferred a Honda lease last year and it cost a little less than $500 - which if you do have positive equity then the other party could cover that cost.
Deal Guru
User avatar
Jul 12, 2003
10477 posts
2750 upvotes
Markham
OP why are you looking to terminate your lease now rather than next Feb?
Retired Forum Moderator February 2009 - June 2015
[OP]
Sr. Member
Jan 12, 2013
504 posts
432 upvotes
Halifax
MP3_SKY wrote:
Aug 4th, 2017 11:07 am
OP why are you looking to terminate your lease now rather than next Feb?
I'm not necessarily looking to get out of it today, but I want to be able to monitor incentives and interest rates and make a move if they are good. I don't want to be restricted to only be able to shop around during the month of Feb.
Deal Guru
User avatar
Jul 12, 2003
10477 posts
2750 upvotes
Markham
Your lease ends at Feb, you can start looking at early as December?
By that time, you owing only 2-3 months of the lease payments. The amount you need to consider will be much smaller. For example, if your lease payment is 400$, that's only $400 X 2.

As per xjesterxx said, the admin fee is already costing you $299 to $799 alone if you really going to terminate your lease early.
Retired Forum Moderator February 2009 - June 2015
[OP]
Sr. Member
Jan 12, 2013
504 posts
432 upvotes
Halifax
MP3_SKY wrote:
Aug 4th, 2017 11:39 am
Your lease ends at Feb, you can start looking at early as December?
By that time, you owing only 2-3 months of the lease payments. The amount you need to consider will be much smaller. For example, if your lease payment is 400$, that's only $400 X 2.

As per xjesterxx said, the admin fee is already costing you $299 to $799 alone if you really going to terminate your lease early.
Yes that is definitely a good point as well. There will be a bit of balancing and figuring out if the numbers work out in my favor or not. All things mentioned above are good notes to have during this process.

Thanks to everyone again for their input.

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