How to Cancel a Lease or Sell a Car with a Lease

Before looking at the specifics of how to cancel a lease or sell a car that is still under lease, we recommend reading our previous article on the basics of car leasing. Understanding the foundational aspects of leasing will help you navigate the more complex scenarios of lease cancellation or sale.

Reasons for Lease Cancellation

There are several reasons why you might find yourself needing to cancel your lease before its natural end:

• Exceeding the Mileage Limit: Most lease agreements have a maximum mileage limit, and going over this limit can incur heavy penalties.

• Relocation Needs: Moving to a new location where you no longer need a car or where it's impractical to bring the leased vehicle.

• Financial Strain: Finding the monthly payments unmanageable due to changes in your financial situation.

The Reality of Lease Cancellation

Canceling a lease isn't always straightforward. Often, it's at this juncture you realize that the initial deal might not have been as favorable as it appeared, particularly if you find out that you've paid too much for the car compared to its actual market value.

How to Cancel a Lease

If you are at the end of the lease period, there is not much you have to do; just hand the car back to the Financial Institution (the lessor) or opt to buy it at its residual value, then sell it on the market. In this sense, selling on the market is just a benefit and you can opt for this option if for some reason the market price is higher than the contractual residual value. 

If you find yourself in a situation where you have to cancel the lease before the lease ends, things are slightly different. You still have several options:

• Transfer the Lease: If you find someone interested in taking over your lease, this can be an effective way to exit your agreement. This involves transferring the lease agreement to a new buyer, subject to the Financial Institution's approval. While this option exists in theory, having the Financial Institution approval especially for very favorable interest rates conditions (that are usually a disguised purchase discount) is often close to impossible. On the other hand, selling a car is already a pain; doing with an existing lease on top will most often make your task even more difficult.

• Buyout and keep the Car: If you believe you will have a use for the car and you have enough cash to do so, purchasing the vehicle from the Financial Institution at its current residual value may be a good option. This is especially the case if your projected mileage is exploding and keeping the leasing as it is would create huge penalties at the end. 

• Just paying the remaining monthly installments, while effectively forfeiting the car in advance. While this may not seem as the best option on paper, it may prove to be the only viable one in some cases. Calculating the financial impact of this option will help you benchmark the alternatives.

• Last but not least, many opt to buy out and resell the car. In this scenario, you will purchase the vehicle from the Financial Institution at its current residual value and immediately sell it to a new buyer. While this is a great option to just terminate the lease (especially if you don’t need the car or cannot afford it anymore), there are some important aspects to consider that we will analyze in the next sections.

Calculating the Residual Value

The residual value noted in your lease contract represents the agreed projected value that your car will have at the end of lease period; however, in this case we’re interested in buying back the car before the lease expires, so the intermediate residual value will be greater than the residual value (because the car is younger and potentially with less mileage). Your lease contract will include a formula to calculate this residual value; you can (and should) also ask your dealership with a written confirmation of the intermediate residual value in case you’re considering a leasing cancellation.

Contractual vs. Market Value: 

Remember that the car residual value is a contractual agreement and does not necessarily reflect the reality of the market. Often, there's a mismatch between the car's residual value stated in the contract and its actual market value at the time of lease cancellation. If the market value is lower than the intermediate residual value, you will buy back your car at the intermediate residual value and effectively sell it at a lower price on the market. 

While this may seem unfair, the reality is that the price you “would like to get” to avoid “losing money” in this transaction, the reality is that there is not much you can do at this point. Unfortunately, many leasing contracts allow for extremely high residual values, but this is something that should be negotiated at the lease contracting time, and on which you have little to no leverage at the moment of canceling your lease. Unfortunately, the market (and your potential new buyers) will not take in consideration your loss while determining the price they’re ready to market. But I will just look at similar cars in the market. Moreover, remember that similar cars in the market will likely be:

• Listed by professional dealers, who can expect to charge a premium compared to the price that you, as a private, can ask

• If they are “listed” it is because they’re not sold yet. In other words, they represent a “maximum” or “beyond maximum” price ; the reality is that these cars are not yet sold, nor at that announced price at least

Market value mismatch:, HERE ARE your options:

• Fight the reality and postpone your sale: some people just find it hard to accept that they will lose money in the transaction. It is hard indeed, but postponing the decision will just make the situation worse, as the market price will decrease over time making the gap even bigger.

• Try to sell the car on web portals to individuals; while this may seem an option to increase the sales price, in reality selling a leased car to an individual is a complex and lengthy process. Eventually, extending the sale and forcing a later and worse sale.

• Sell to a professional dealer: although professional dealers usually pay less for cars (which is normal, considering that they have to cover the risk, logistics, repairs, and their margin), they can make the lease transfer option a breeze (more about this later)

If you’d like to sell to a professional dealer, Sellyourcars will ensure you maximize your selling price by putting dozens of car dealers in competition one against another through a blind bid.

How to transfer car ownership:

As we have mentioned, selling a leased car to a private individual is close to an impossible mission and requires a huge amount of coordination and paperwork, therefore we will concentrate on the transfer of a leased car to a professional buyer.

First of all, you have to notice that in Switzerland you are not allowed to sell a leased car without the written authorization of the lesser. The code 178 on your vehicle registration document means that a change of ownership is prohibited. At the end of the lease, if you keep your vehicle, or before you can sell it, the code 178 must therefore be removed by the vehicle owner (the financial institution).

An easy ownership transfer process with Sellyourcars

Here are the steps that you will follow when dealing with a professional Dealer who is a partner of Sellyourcar

1. You have found a Dealer at the best-selling price on Sellyourcars

2. The Dealer will contact you and organize for the “final buyback invoice” to be delivered to the Dealer

3. Depending on the agreed price and residual value, there are 2 possibilities

   1. If the agreed purchase price is higher than the residual value, the Dealer will settle the invoice with the financial institution on your behalf and transfer to you any difference between the agreed purchase price and the residual value

   2. If the agreed purchase price is lower than the residual value, the Dealer will ask you to transfer the difference to him, and he will then settle the invoice with the financial institution on your behalf

4. With the proof of the settlement, the dealer will agree with you on the terms for picking up the vehicle

5. As soon as the financial institution has received the settlement, they will remove the code 178 on the vehicle and the Dealer will be able to transfer the ownership to themselves.

We hope we were able to show that canceling a leasing contract is feasible, and rather easy when dealing with professional and certified dealers. Using a platform like Sellyourcars to sell your leased car to a professional dealer, not only enables you to sell your car at the best price but provides you unbiased help throughout the process, from the definition of an acceptable market price to the final moment of the transaction.