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Early Termination of a Car Lease

What is an Early Termination?

Early termination is when a customer/hirer wishes to end their car leasing agreement before the contracted end date. With an early termination, the customer contacts the finance provider to return the vehicle for a set fee, calculated by the finance company.

Car leasing agreements aren't designed to be terminated early. Usually a funder expects you to take the full 24, 36 or 48 month term of the contract. Penalties and fees are associated with taking the vehicle back, loss of value and loss of revenue on the vehicle. Think carefully before cancelling the agreement and find out exactly what these costs and fees would be.

Why would an Early Termination be required?

There are many reasons you may want to early terminate a contract hire and leasing agreement, this could be down to a change in employment, maybe you've had a family and your current car isn't large enough. Could be relocation, redundancy or maybe you just want to upgrade your vehicle.

You may have seen a special offer on another car lease and want to take advantage of it!

The Early Termination allows you to break from the leasing contract early but as we have said above, be careful as the costs of the early termination can be costly.

If you are struggling to keep up the payments of a leasing contract, always speak to your finance company. They may be able to help by either extending the length of the car lease or an alternative arrangement, to try and help you.

What is involved when you Early Terminate a Car Lease?

Early termination of a car leasing arrangement is always at the discretion of the finance provider of the vehicle.

They will usually calculate the cost of the Early Termination charge and look at the customers product and contract details. They also check to see if the agreement is regulated by the Consumer Credit Act.

Where a termination is not details and not a legal requirement, the finance company may use an Actuarial Calculation where applicable.

Personal Contract Hire agreements cannot be terminated unless £1500 inc. VAT of the car lease rentals have been paid, again you can check this with the finance provider.

For Finance Lease agreements, it can be a little complicated. The sale details, vehicle mileage and payment for the amount equivalent to 2% of the gross sale price will be required in addition to the Early Termination charge and fee's.

You will only be eligible for an Early Termination quotation if you are up to date with your payments and you have no arrears older than 14 days.

No termination charge quotations or early settlement figures are valid whilst your account is in default or the you have become insolvent.

The funder will only terminate the vehicle agreement, once cleared funds are received in full.

The customer will be held liable for all payments whether or not made by a third party (such as a car dealer). It is always the customers responsibility under the terms and conditions of the contract.

How much does it cost for an early termination?

An Early Termination of a car lease is always down to the discretion of the finance company. You must also understand that its not available on all contracts with fee's varying from funder to funder.

Some finance companies will charge a fee of 50% of any outstanding rentals, whilst others calculate a fee on a case-by-case basis by looking at the length of the agreement and mileage allowance, but also considering outstanding rentals.

In every case, an Early Termination charge/fee will need to be paid by the customer or a third party. Payment can be usually paid by BACS, CHAPS or debit/credit card. You must always quote the vehicle registration number to ensure they match the monies against your agreements.

How long does the Early Termination process take?

The Early Termination process from start to finish, can take between 3 to 4 weeks depending in the finance company. Usually the funder willl arrange to collect and inspect your vehicle, this is to make sure that the vehicle will be returned to the correct standards.

To understand the return standards, please refer to the BVRLA fair, wear and tear guides which you can read by clicking the highlighted link.

If Cocoon Vehicles have arranged the lease for you in the beginning, we can request the early termination charge on your behalf for free. We may need your involvement at some points due to data protection.

Ways to avoid Early Termination

There are many ways to avoid paying early termination charges on a long term lease. There are companies who will look at negating your lease to another end user for a charge, however, you may still be liable for any costs and not all finance companies accept this.

If you are looking at taking out a new contract hire or leasing arrangement for a car, and you aren't sure that you will need to take the car for the full duration of the contract. It may be worth looking at Short Term Car Leasing alternatives. There are also Car Subscriptions and Flexi-rent products. Click on the highlighted links for more information.

However, here at Cocoon Vehicles, we do offer a wide variety of short term car leasing offers and flexilease vehicle contracts. If you are unsure, just give the team a call on 0800 802 1940

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Posted on 1st August 2018 at 12:18 PM

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