Impact of Returning a Leased Car on Your Credit Score
Whether or not returning a leased car affects your credit score can often depend on the specifics of the situation. Here’s what you need to know to ensure your credit remains in good standing.
Conditions for a Credit-Clear Return
If you are returning a leased car before the contract is over and you have paid all the penalties and associated fees, then yes, you should be okay. Since this is part of the contract, as long as you adhere to the terms outlined, your credit should remain unaffected.
If you are returning the car at the end of the lease and have not decided to purchase it, this is typically fine because such situations are within the terms of the contract. However, if the leasing company informs you that you owe them money, fees, lease payments, or penalties and you fail to pay, this can have a significant impact on your credit score.
#8220;Lease Take Over#8221; as a Solution
There are scenarios where you might be unable to keep up with lease payments. In such cases, you can explore a lease take over. This involves another party assuming responsibility for the lease while respecting the contractual conditions such as Kilometers/Miles (KMs), lease term, and buyout value. By doing this, you can exit the lease without facing any credit repercussions. You can advertise this on platforms like Craigslist or Facebook Marketplace.
It’s advisable to approach the leasing company to discuss this option and explore alternative arrangements.
Consequences of Failing to Pay
If you sign a lease and do not make the required payments, the remaining amount will be charged off, negatively impacting your FICO score. Even if you attempt to negotiate a different arrangement with the lender or dealer, the return of the leased vehicle without fulfilling your obligations can still have a negative impact on your credit.
If you return the car in the middle of the lease term and owe money, the leasing company might pursue you for the difference and for breach of contract. This often leads to collection agencies getting involved, which can seriously damage your credit score.
Lease Termination Requirements and Credit Impact
When you return a leased vehicle early, you may need to pay any remaining monthly payments, any damages specified in the lease, any pro-rated mileage, and any lease termination fees. If you pay these amounts, your credit should not be impacted. However, if you simply return the vehicle or stop paying, credit bureaus will likely report a repossession. This will have a significant negative impact on your credit score.
Understanding these conditions and taking the necessary steps can help you minimize the potential impact on your credit score when returning a leased car.