Is it possible to cancel a car lease deal after signing?

There is no clear answer to that question because it depends on when you want to cancel and under what circumstances.

Let’s look at some of the possible scenarios under which you might want to get out of your car lease deal:

1. You just signed but have not taken possession of your car.

In most states, if you have not taken possession of a new car in a purchase or lease, the deal isn’t complete and can be reversed. That’s easily said, but harder to make happen.

Dealers don’t want to lose the deal on the car, so they will resort to almost anything to try to save the deal, including telling you some untruths (lies). If you have made a down payment or traded a car, you will have difficulty getting them back as the dealer tries his best to go through with the deal. In the best case scenario, the dealer will quickly agree with your request, realizing he’s not going to save the deal, and return your down payment and trade-in vehicle. In the worst-case, you may have to get a lawyer to convince the dealer you are serious and don’t want to do the deal.

2. You have already signed and taken possession of the vehicle

Many people mistakenly believe that there are laws that allow 24 hours, 3 days, or some such period in which a car deal can be canceled. It’s simply not true unless that provision is provided to you in writing (not common) or if you live in California and have specifically purchased a “return option” as part of your purchase or lease. There are no laws that allow a car deal to be canceled in any amount of time after signing and possession.

Otherwise, you have few options. One is to beg and politely plead with the dealer to cancel the deal, understanding that he has absolutely no obligation to do so. You must do it quickly because the dealer normally sends the paperwork to the finance company within hours or no more than a couple of days after the deal is signed. Afterwards is too late.

The remaining option, of course, is to simply stick with the deal and enjoy your new car.

3. It’s been weeks or months since you signed your lease and now you want out of the car and the lease

Leasing is not renting, so it’s impossible to simply return your car and walk away from a lease. Leasing doesn’t work like that. Leasing is a long-term legal financial agreement that assigns a specific car to specific conditions to a specific person in a legal contract.

There is also a common misunderstanding that to get out of a car lease means simply paying a penalty fee, returning the car, and walking away. Not true. Ending a lease early can be very expensive, depending on how far along in the lease you are. Every lease contract spells out how the cost of early termination is determined, although it’s a bit difficult to understand. Here’s essentially how it works:

The lease finance company looks at the sum of all your remaining payments, minus tax and finance charges, and deducts the “realized value” of the car, which is the value of the car at wholesale car auction. The result is the amount you would have to pay, in cash, which could easily be thousands of dollars, especially if you’re still in the early part of your lease term.

If you are in this situation, you should contact your lease company and ask for the “early termination” payoff amount for your lease. Make sure they understand you’re not asking about a “buyout” to purchase the car. You’ll then have the information you need to make your decision.

If you are in an unfortunate situation in which you can no longer afford your lease payments and cannot afford to terminate, your options are 1) to default, which means returning the car and suffer from the agony of being sued by he lease company, or 2) considering a lease transfer (see next paragraph).

There might be a much less expensive option available to you, which is called a lease transfer. For more details, read our article How to Get Out of a Car Lease.

4. I want to change my car lease to a loan

It’s a bit hard to understand why, but occasionally people who are leasing a car want to get out of the lease and convert to a conventional auto loan.  There are no benefits to such a move, even if the customer is exceeding his allowed mileage. In fact, the overall costs are higher than 1) continuing the lease, or 2) purchasing the vehicle to begin with.

Doing such a conversion means “buying out” the lease, which is not inexpensive, and, if you are not paying cash, getting a new used-car loan which may have a hefty down payment requirement and a higher interest rate (than a new-car loan). Monthly payments will almost certainly be higher than for the lease.

If you think this is a solution to your leasing problem, think through it thoroughly before you make a final decision.

5. I’m over my lease mileage allowance and I want to cancel my lease and buy my car — to avoid lease-end mileage fees

This is a strategy that almost never works except in very rare cases. The simple truth is that when you drive a lot of miles in a car, leased or purchased, you will end up paying for those miles in one way or another. It’s unavoidable and there’s no way around it. Extra miles cause the car’s value to depreciate by a greater amount than otherwise. In a lease, you pay for those miles in lease-end excessive mileage fees. In a purchase, you lose the money in reduced resale or trade-in value. So, it’s better to simply begin putting money aside to pay for the lease-end mileage fees. See Over Mileage Car Lease for more details.

The only case where this strategy makes some sense is if you plan to drive the car for many years beyond the end of the lease, in which case it would be better to wait until the end of the lease to purchase the car at the guaranteed price specified in your lease contract, rather than let the lease company set a new price if you try to end the lease earlier.