Car Lease Ending and Your Credit Took a Hit? Your Options

You can return the car, buy it, or move into another one. AMVIC, the body that oversees vehicle dealers in Alberta, says: “Basically, you have three options under a closed-end lease when it expires.” They are to return the vehicle, buy it if the lease has a purchase option, or lease a new one. The Financial Consumer Agency of Canada (FCAC) says the same thing in its own words: “you may choose to buy the car, return it or lease a new one when your lease ends”. Two lessors’ own pages show the same three choices.

Which kind of lease you have changes the end. AMVIC says: “There are two kinds of leases: closed-end and open-end.” Check your contract to see which one yours is.

Start with three things in your contract. AMVIC’s page says: “Lease contracts must provide full disclosure of the following facts:” and lists them. Three of them matter now:

Call your lessor, or the dealer that handles the lease, and ask for the purchase price and an estimate of any end-of-term charges. Get both in writing.

You pay the buyout price in your contract, plus what comes with it. One lessor’s FAQ says of that price: “This amount on the contract represents the option to purchase amount due at lease end date and is non-negotiable.” It adds: “It is subject to taxes and excludes any amounts remaining due under the lease or costs associated with the transfer of vehicle ownership in your province.” Another lessor may word it differently, so read your own contract.

The same FAQ says: “Yes, you may purchase your vehicle at any time before your lease end date.” A payoff quote is available from the dealer or the lessor.

Ask about paperwork before you commit. That FAQ also says: “A safety certification or any certificate of mechanical fitness and/or emissions certificate may be required in Canada when purchasing your vehicle depending on the province.” AMVIC says: “All AMVIC-licensed businesses must provide customers with a completed Mechanical Fitness Assessment (MFA) form before entering into a sales agreement/purchase contract for any used vehicle—it’s the law.” Whether either one applies to your buyout is a question for the dealer or lessor handling it. Ask what it is and what it costs.

If you borrow to buy it out, today’s file decides. A lender looks at your credit and your pay now. The buyout price may be higher or lower than what the same car sells for used, so compare it with listings for the same year, model and kilometres. If the buyout is higher, the difference is money you pay to keep the car.

Usually you hand it back and settle any charges. AMVIC says: “You usually have no more payments to make at the end of the contract, unless the vehicle has been damaged by excess wear and tear. You may also have to pay a kilometre charge if you have driven a greater distance than the limit set out in the lease contract.” One lessor’s guide spells out more: “If you turn in your leased vehicle, you are responsible for any excess wear and tear charges, remaining payments, excess kilometre charges, fees, taxes and/or citations.”

• Look at the car before the return date. One lessor’s page says: “A pre-return inspection is optional, but beneficial to get ahead of any repairs that may need to be addressed prior to returning the vehicle.”
• Return it on time. The same lessor’s FAQ says: “Yes, you could be charged additional payments if your vehicle is returned late.”
• Keep your repair receipts and the check-in paperwork, so you can match them to any final invoice.

Once the car is back you need another one. That is where a financed used car comes in. The next sections show how the two paths compare.

It depends on the file. AMVIC says: “Lease terms may differ from one consumer to another based on credit history.” FCAC lists “car-leasing companies” among the businesses that may request your credit report.

FCAC puts it plainly: “Leasing a car is like a long-term rental.” “You aren’t buying the car and won’t own it when the lease ends. However, you may be able to buy the car at the end of your lease term.” We are a used-car dealer, so our focus is financing a car you will own. If you are weighing the two, read leasing vs financing a car in Alberta. A rent-to-own plan is a different contract again; see lease-to-own car financing.

A lease can show on your credit report. Equifax Canada’s credit report guide lists lease accounts as their own type: “L: Lease Account”. Like any account, it carries a rating for how it was paid. Our glossary explains how the letters and numbers on a credit report work.

A payment is only part of the cost. Add up what each path includes.

To try your own numbers, use the payment calculator. For how your score sets the rate, see car loan rates in Alberta.

Early exits are costly. AMVIC says: “Terminating a lease early is usually extremely costly. The leasing company may require full payment of the lease.” FCAC lists as a drawback of leasing that “breaking a lease before it ends may be very costly”.

Before you decide, ask your lessor for the early-termination amount in writing. Then compare it with the same two paths above. If the lease is nearly over, waiting for the end date may cost less than leaving early.

When you are ready, the quickest start is the online application. Tell us about the lease when you apply. We review every application and call you back. Or call us at (825) 736-4438. If your pay is not the usual kind, see what car lenders verify when you work.