Do you want to cancel your car finance agreement before the end of the term? Well, it’s possible, but there might be fees involved.
It all depends on your contract and the type of agreement you have with your lender. You can be dealing with fees that are meant to compensate the lender for the interest they will lose in this process.
And now you might be wondering, how to get out of a car lease early without penalty? Well, some agreements require you to cancel your contract 14 days ahead, and that way you can escape penalties. Others are not so simple.
With prices going up (even used car prices), we have to do our best to find good deals. In today’s article, you can find out how to get out of a vehicle finance agreement early, how it affects your credit score, and how much it could cost.
First, Breathe (You’ve Got Options)
Ending a car lease or loan early sounds expensive (and sometimes it is), but it’s not always a financial death sentence.
So if you feel like you’re the only one trying to unpick a car contract, you’re not. Studies have shown that 47% of people who take out car finance don’t know how much money they’ve actually borrowed.
How Do You Get Out of a Car Finance Agreement Early?
There are three most common ways you can get out of a finance agreement ahead of time:
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Early settlement: You pay the remaining balance, maybe with a small fee.
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Voluntary termination (VT): If you’ve paid at least 50% of the total payable (this includes interest and fees), you have the right to hand the vehicle back and exit the contract.
You can end the agreement with the Consumer Credit Act, which includes a “cooling off period” of 14 days.
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Lease transfer: This means that someone takes over your contract. It’s often the cheaper option, but you have to check if your contract allows it.
Does Ending Your Car Finance Early Affect Your Credit Score?
Yes, ending your car finance early can affect your credit score, but not always. It depends on how you end the agreement and whether you pay your dues.
When it doesn’t hurt your credit score:
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You settle the loan or lease early and pay everything you owe: This is called early settlement (for loans) or voluntary termination (for leases or PCP deals). If you follow the terms and make all of the payments, it can actually help your credit by showing that you’re financially responsible.
2.You do a lease transfer (someone else takes over the lease): If done properly and with lender approval, it won’t hurt your credit.
3.You refinance or trade in the vehicle through a dealership: As long as you make all of the payments and the transition is clean, your credit stays safe.
When it does hurt your credit score:
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You miss payments or stop paying: This is considered a default and can seriously damage your credit. Repossession will stay on your credit report for up to 7 years in many countries.
2.You return the car through voluntary surrender but still owe money: Even though you gave the car back willingly, if there’s a remaining balance you don’t pay, it could lower your score.
3.You break the lease without following the terms: If you don’t pay all of the fees (or even end up in a legal dispute), your credit may take a hit.
How Much Does Canceling Car Finance Early Cost?
The cost to cancel car finance depends on the type of agreement you have, how far along you are in your payments, and the terms written in your contract.
Car Loan (Hire Purchase or Personal Loan)
If you pay it off early (early settlement), you’ll need to pay the remaining balance of the loan. Some lenders charge an early repayment fee, but it’s usually small (often 1–2 months’ worth of interest).
Personal Contract Purchase (PCP)
There are usually two options:
Option A: Voluntary Termination (VT)
If you’ve paid at least 50% of the total finance amount (including fees and balloon payment), you can return the car without penalty.
If you haven’t reached 50% yet, you’ll need to pay the difference.
Option B: Early Settlement
You can request a settlement figure (what’s left to pay, including interest and fees). Then, you can buy the car or sell it to cover that amount.
Car Lease (Personal Contract Hire)
Lease agreements usually have strict terms for early termination. Cancelling early could cost you early termination fees and excess mileage or damage charges.
For example, if you have 12 months left at $350/month and an early termination fee of $400:
$350 × 12 = $4,200
$400 termination fee
= $4,600 total to exit the lease (if you stayed within your mileage and there’s no damage to the car)
Some leases offer a lease transfer option (you pay a fee, and someone else takes over your lease), which is usually cheaper.
Don’t Panic
Ending a finance agreement early isn’t a failure. You’re just changing your circumstances and doing what’s best for you.
So, do your research, read your contract carefully and find the right solution for you. We’re rooting for you.
Media Contact
Company Name: Lease End Department
Contact Person: James Davis
Email: Send Email
City: New York
Country: United States
Website: https://www.leaseenddepartment.com/