Although a car lease may seem like a contract that can be easily terminated, as it is only a rental, it is quite different. A car lease is a long-term contract where the lessee is committed to pay the rent until the end of the lease contract. In terms of long-term commitment, there is little difference between a lease and a loan.
There are several ways to terminate a car leasing contract early, but some are less financially burdensome than others. Here is a list of the different ways to terminate a car lease in Switzerland in advance, listing the most advantageous methods for the lessee first :
1. Lease transfer
Transferring a leasing contract means transferring the lease, as is, to another party. This can be a private person or a company. This new lessee will undertake to take over the payments and will become responsible for the vehicle. This is the cheapest method, as the only costs incurred are the leasing transfer fee, which varies between CHF 300 and 600 depending on the finance company. The person is therefore able to get out of the leasing contract without major financial consequences.
A very effective way of getting out of the leasing contract at low cost would be if the first leasing contract holder had made a deposit on the vehicle. This deposit will benefit the second leaser who will profit from the lower monthly payments. However, depending on an agreement between the transferor and the transferee, the transferee may return part of the deposit to the transferor.
2. Buying the leased car
In a car lease with a trade-in value, there is always an option to buy the lease back from the finance company in advance. The buy-back price of the lease is the amount of the lease payments, the residual value and, if applicable, the applicable taxes. It may be that the vehicle is worth more than what is left to pay for the car. In this case, the lessee is doing well, being able to sell the vehicle after purchasing it, cover its purchase costs and make a profit.
However, this situation rarely occurs at the beginning of the contract, as the vehicle depreciates too quickly in the first two years. Making a profit on a vehicle in the case of leasing tends to happen towards the end, or not at all if the residual value is too high.
3. Changing your leased car
You can end your car lease and take out a new lease on a new car. This option does not leave your situation on the first car unchanged. The amount still to be paid, the residual value and the taxes will be taken into account.
If the value of the vehicle on the second-hand market is less than what remains to be paid on the leasing contract, the difference will be transferred to the new car lease, thus having the opposite effect of a first contribution. This means that the price of the new vehicle will be increased by the loss of income from the old vehicle. The lessee therefore ends up paying for the depreciation of two cars.
4. Returning the leased car
This is the most expensive option. You stop the payments and the financial institution, which owns the leased car, takes it back. Or you take the leased car back and ignore the rules of the contract. The finance company will then take the necessary steps to charge you penalties for early termination of your leasing contract. These penalties are calculated according to a specific method and amount to several thousand or even ten thousand francs in some cases!
If you decide not to pay the amount due for the early termination of your car leasing contract, you will be prosecuted. The financial consequences will be very heavy and it will be very difficult to obtain a car lease with any institution in Switzerland afterwards. If you manage to be accepted in another financing company after that, you will be considered as a second chance leaser and the interest rate will be very high.
Which of these options is better ?
If you insist on ending the lease before the end of your contract, transferring the lease is considered the best option in most cases. It is to the lessee’s advantage to weigh up the first three options and avoid using the last option.
