FINANCE/LEASING Q&A: LCT's resident expert on all things finance and lease addresses what happens when a business owner either decides to or needs to break a vehicle lease.
QUESTION: What happens if in the middle of a lease I decide I no longer need a particular vehicle? Can I simply turn it in since I am technically renting on a month-to-month basis? Will this affect my credit?
ANSWER: You cannot "break" a lease in the middle of the term without a penalty, and the penalties can be steep. Usually, the early termination of a lease will require you to pay the remaining payments as a penalty. If you simply return the vehicle, it is likely the leasing company will report a voluntary surrender to the credit bureau. If you need to get out of the lease early, it's a good practice to contact the leasing company and see if you can negotiate a settlement. Most good clients with good pay histories will not have a problem, especially if they are reacquiring another piece of equipment called a payoff and replace.
Expert Don Coolbaugh, vice president of sales, Advantage Funding Inc., writes a weekly series of questions and answers for chauffeured transportation operators on all matters related to financing and leasing fleet vehicles. E-mail finance and leasing questions to: Martin@LCTmag.com