Selling or returning a leased car that's wrecked or broken

Returning it early is the other road, and it is rarely the cheap one. Before choosing, get the buyout figure and read the early termination section of your contract.

The car isn't yours to sell yet

The CFPB puts it plainly: a lease is renting. You agree to use a car for a set number of months and miles, and your payments don't build ownership unless the lease includes a purchase option. When the term ends, the car goes back.

So when the engine fails or a crash bends the frame halfway through, the question is not "who will buy this?" It is "how do I get out of this lease for the least money?" There are three answers, and the damage changes what each one costs.

Option one: hand it back early

This is the move most people think of first. It can be the most expensive.

The CFPB warns that ending a lease early can trigger early termination charges that are very expensive, and that you can't simply drop the car off and stop paying. Federal Regulation M makes every vehicle lease carry a written warning that this charge may run "up to several thousand dollars," and that the earlier the lease ends, the bigger the charge is likely to be (12 CFR 1013.4).

The same rule covers the math. If your lease makes you liable for the difference between the car's unamortized cost and what it brings when the lessor sells it, the contract has to explain how that difference is figured. Find that paragraph in your lease and read it before you call.

Option two: turn it in at the end of the term

If the term is nearly over, riding it out may cost less than an early exit. At lease end, the CFPB says, you either return the car and pay any end-of-lease fees, or buy it if the contract allows.

Damage is where those fees come from. Regulation M requires a notice that you may be charged for excessive wear based on the lessor's standards for normal use. The CFPB adds that the leasing company usually decides what counts as excessive. A dented quarter panel or a dead transmission is judged by its rulebook, not yours.

Mileage matters too. The CFPB says most leases cap you at 10,000 to 15,000 miles a year and can bill you for going over.

Option three: buy it out, or let a buyer purchase it from the lessor

This is the route that lets a broken car be sold at all.

The buyout price. The CFPB describes the residual value as the leasing company's estimate of what the car will be worth when the lease ends. If your lease has a purchase option, that estimate sets the price you pay to buy it. Ask the lessor for the current buyout figure, in writing, with the date it's good through.

Buying first, then selling. Once you own the car, it's yours to sell like any other. The catch, per the Federal Reserve: most states charge sales tax on both sales, your purchase and your resale, and inspection and registration fees can hit twice as well.

The buyer purchases straight from the lessor. The Federal Reserve says that on an open-end lease with a purchase option, the lessor may let you arrange a third-party buyer. That isn't a right written into the contract, but most lessors allow it. When the buyer purchases directly from the leasing company, there is only one sale, so you usually avoid the double tax and fees.

Whether your lessor will deal with an outside buyer, and on what terms, is set by your own contract. Call and ask before you promise anything to a buyer.

When the car is totaled, not just broken

If insurance declares the car a total loss, check whether you have GAP coverage. The CFPB explains that an ordinary auto policy covers no more than the car is worth, and that GAP coverage exists to fill that shortfall after a theft or a total loss (CFPB). GAP is an optional add-on a dealer will likely offer when you buy or lease, and when it's financed in, it raises the total you pay.

That CFPB description is written about loans. How GAP pays on your lease depends on the policy you signed, so pull out that paperwork and ask the provider. For the claim itself, see selling a totaled car.

Signing the title over, state by state

Whichever route you take, the leasing company or you, once you've bought it out, signs the title at the sale. Here is what each state's own rules ask of the owner who signs.

Fix it, turn it in, or sell it?

Put three numbers side by side: the repair estimate, the early termination charge your contract spells out, and the buyout figure.

• Fix it when the repair is modest and the lease has a long way to run. You keep driving, and you hand back a car that passes the lessor's wear standards.
• Turn it in when the term is nearly done and the damage is small enough that wear charges stay below what a buyout plus resale would cost you.
• Sell it when the repair dwarfs what the car is worth and an early return would trigger a large charge. A buyer who purchases it straight from the lessor makes it one sale. Buying it out yourself and then reselling is two sales, and most states tax both.

Selling the car to us

We buy whole non-running and junk cars. Once you have bought out the lease, or the leasing company agrees to sell to us directly, you can sell the whole car as it sits, with free pickup anywhere in the US. Mention the lease up front, with the leasing company's name, the buyout figure and the date that figure expires.

Questions first? Call (877) 421-6008.

Still paying on a financed car instead? Selling a car you still owe on walks through the payoff.