I Can’t Afford My Car Lease Anymore. What Do I Do?

Larry’s car lease payment is killing his budget. His monthly payment on the four-year lease for his Hyundai Santa Fe is $ 725.49. It’s too high, and he wants to know what his options are.

An increasing number of consumers are choosing to lease their vehicles; leased vehicles accounted for 31.4% of all vehicles financed in the first quarter of 2015, according to new data from Experian Automotive. Whether it’s for financial reasons or due to lifestyle changes, though, consumers sometimes find they need to get out of a car or truck lease early.

Here are six options if you find yourself in that situation.

1. Terminate & Pay Off the Lease

Every lease will spell out details for terminating the lease in the fine print — lots of fine print. “It’s complicated,” says Ohio consumer law attorney Barbara Quinn Smith. “The earlier you terminate the more you are going to pay,” she says. And chances are, if Larry had the kind of cash that will be required to get out of the lease he probably wouldn’t have gotten into this situation in the first place.

While terminating a lease early may be an option in the case of a lifestyle change (such as a move to a new city where you can take public transportation), it’s probably not feasible if you’re having financial difficulties, unless you have good credit and can get an unsecured personal loan to cover the difference.

2. Roll Over the Lease Into a New One

Consumers who need to get out of their leases are sometimes able to “roll over” the balance into a new lease or loan. But it’s risky. New cars typically depreciate when you drive off the lot, and if you roll a balance into a new loan or lease, you’ll be even more underwater.

In fact, that’s what tripped up Larry. He rolled $ 10,000 in negative equity from his previous vehicle into this lease, leaving him with a high monthly payment relative to the type of vehicle he leased.

If you are considering this strategy, try to find a vehicle with monthly lease payments you can afford, even if it’s not your preferred make and model. And be realistic: you aren’t likely to be able to do this again. If you can’t afford the new lease payments, consider another option.

3. Find a Buyer for Your Lease

You may be able to find someone willing to take over the remainder of your lease payments, allowing you to exit gracefully without damage to your credit.

“Most leases are fully transferable,” says Scot Hall, EVP of operations for Swapalease.com. Consumers who assume leases often find these deals attractive for a variety of reasons, including the fact that the original buyer has already made a downpayment so the person assuming the lease usually doesn’t have to, and there may be a short time period remaining on the lease so it doesn’t require a long-term commitment.

If you go this route, you’ll have to find someone to take over the lease (sites like SwapALease.com and LeaseTrader.com can help there) and negotiate a deal. Then you’ll want to run it officially through the leasing company, which will check credit of the new lessee before approving it. Although the average credit score for those obtaining vehicle leases in the first quarter of 2015 was 718 according to Experian Automotive, you’ll likely need a credit score of 680 or above to qualify, says Hall. If the deal is approved by the leasing company, paperwork will be signed and the new lessee will take over all the responsibilities of the remaining lease.

Avoid a “handshake” or “under the table,” deal if you go this route. Not only can it create problems for you if the person driving the vehicle doesn’t make the lease payments, but if the vehicle is involved in an accident or traffic violation, you could be on the hook.

Unfortunately, in Larry’s case, Hyundai is one of the few companies that has restrictions on lease transfers, says Hall. So this option could prove challenging, even if he finds someone willing to take it over.

4. Give It Back

Leased vehicles can be repossessed. Giving back a vehicle without formally terminating the lease is considered a voluntary repossession. Both voluntary and involuntary repos usually appear on credit reports and will hurt credit scores. There’s a bigger issue though: there may be a deficiency (unpaid balance) and the consumer may wind up with a balance in collections, or worse yet, be sued. Do not assume that once you turn in the keys, you’re done.

5. Ask for Help

Before giving back the vehicle, Quinn Smith recommends Larry call the leasing company and see if he can’t work out more affordable terms.

The lessor isn’t required to modify the lease, of course, but if they do it will be cheaper for them than repossessing the vehicle, and they may get more than they would if the lease was included in bankruptcy. In this situation, the lessee needs to be prepared to document the hardship, and it will likely take patience and persistence.

Hall agrees contacting Hyundai is the logical next step in this situation, though he suggests he “provide a detailed account of the reasons why (he) needs out of the lease.”

6. File for Bankruptcy

Bankruptcy may also be worth looking into if you are worried about being stuck with a large debt for a vehicle you no longer have. “In bankruptcy, the car can be surrendered. In a Chapter 7, any amounts owed that exceed the value of the car will be discharged,” says Quinn Smith. “In a Chapter 13 (for those whose income is too high to qualify for Chapter 7), any unsecured amounts are added to the debtor’s payment plan. The lessor may be paid in full or part, or not at all, depending on the terms of the plan.”

Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.

If you are concerned that you’re not going to be able to continue with your lease, start exploring your options as soon as possible. Get your free credit reports and credit scores (you can get two of your credit scores for free every month from Credit.com), so you’ll know where you stand and so you’ll have a clear picture of your debts and payments. You can also get free annual credit reports at AnnualCreditReport.com. You’ll have more time and be able to make a better decision if you’re not falling behind and worried the vehicle will be repo’d at any moment.

And by the way, while a $ 725/month vehicle lease payment is higher than the average of $ 405 (in the first quarter of 2015, according to Experian Automotive ), it’s far from a record.

According to Swapalease.com, the most expensive monthly lease payment they’ve seen someone assume after being matched with a buyer via their site was for a Ferrari 599 GTB Fiorano. The monthly payment was $ 6,057.

Related Articles

This article originally appeared on Credit.com.

This article by Gerri Detweiler was distributed by the Personal Finance Syndication Network.