Can You Refinance a Car Lease?

Leasing a vehicle can be a good option if you love driving a brand-new car every few years. As an added benefit, lease payments are often lower than auto loan payments. However, one of the downsides of leases is that you can’t refinance like you can with an auto loan.

Your lease agreement is locked in for the duration of the lease period, so you aren’t allowed to swap leases for a better interest rate or a lower monthly premium. The only way you can technically refinance your lease is to purchase the vehicle outright.

Can You Refinance a Car Lease?

Because a lease isn’t the same as an auto loan, you can’t refinance the existing agreement with a new agreement. The only way to refinance a lease is to buy the leased vehicle outright, either early on in the lease or when the lease period ends, and use an auto loan to fund the purchase. That may help you get a lower interest rate or a lower monthly payment.

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If you want to get out of your lease, however, buying the vehicle is only one option. Here are a few other ways to get out of a lease:

Return the Car Early

Some lease agreements allow you to return the vehicle early, but this option typically comes with high fees. You may end up paying an early termination fee of several hundred dollars or more. However, if you’re truly unable to make the payments, an early return might be a better financial option than waiting it out.

If you choose this option, you also have to decide what vehicle you plan to get next, as you probably still need a mode of transportation. You may be able to enter into a new lease, potentially on a vehicle with a lower monthly payment. Another option is to take out a loan and buy a less expensive car.

Transfer the Lease

If your lease agreement is still in effect, you might be able to transfer it to another person. Not all lease agreements include the option to transfer, and those that do often charge a fee. However, if you can find someone who wants to take over the lease, it’s worth looking into whether your agreement allows for this option.

Third-party companies can connect lessees with individuals who are looking to take over lease agreements. You don’t have to know the person who takes over the lease, as long as they can qualify with the dealership and provide their personal and financial details.

Terminate the Lease

You may be able to terminate your lease entirely, although this generally comes with a lease termination fee. Your lease contract will state whether it’s an option to terminate, as well as what lease termination fees may apply.

How to Buy Out a Lease

If you want to refinance your lease via a buyout, follow these steps to complete the process:

Find Out if a Buyout is an Option

Not all lease agreements allow you to buy the car early, so check your lease paperwork to see if it’s allowed. Some lessors also restrict buyouts during certain times of the lease term, such as within the first several months or the last several months. Check your lease agreement to see if any restrictions apply.

Confirm the Lease Payoff Amount

The next step is to determine the payoff amount. This figure is based on the residual value of the vehicle. Look in your lease paperwork or ask your lender to confirm the payoff amount. Then, you can look for auto loans based on how much you need to pay for the car.

Get Approved for Financing

Getting approved for an auto loan typically involves filling out a form, either online or in person, and providing your personal and financial details. You might need to submit:

Your driver’s license or another form of identificationYour Social Security numberPay stubs or other proof of incomeVehicle information, including the vehicle identification number (VIN) and mileage

Determine Your Down Payment

When you finance a vehicle, you typically need to put down cash to cover a portion of the car’s price. This reduces the risk taken on by the lender and helps you by lowering the amount you have to pay each month. Figure out how much you can afford to pay as a down payment, and use that to calculate your estimated monthly payment.

Finalize the Loan

The last step in a lease buyout is to finalize the loan. The lender may issue payment directly to the leasing company or they may issue payment to you, which you can use to pay for the car.

After you finalize the loan agreement, your lease will end and you will start making payments to the new lender. At the end of the loan term, you’ll own the vehicle outright. Plus, you may be able to refinance your new auto loan if you want to change your loan terms in the future.

Finance & Insurance Editor

Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia, Reviews.com, Forbes, and Bankrate.