Does Breaking a Lease Affect Your Credit? What To Expect

Does Breaking a Lease Affect Your Credit? Key Takeaways

• Yes, it can hurt your credit, especially if you miss payments, leave a balance unpaid, or the account goes to collections
• Repossession or voluntary surrender stays on your credit report for up to seven years, severely impacting future loan or lease approvals
• Early termination costs can total $2,000–$10,000+, including penalties, unpaid payments, and damage/mileage fees
• Smarter alternatives like a lease transfer or lease buyout can help you exit without financial or credit damage
• The sooner you speak to your leasing company or explore alternatives, the more likely you are to protect your score and reduce exit costs

Thinking of ending your lease early? It might cost more than you expect.

Nearly 20% of leaseholders consider breaking their lease before the contract ends, often due to job changes, financial stress, or shifting lifestyles.

But here’s the big question: Will breaking your lease affect your credit?

The answer is: it depends on how you do it.

In this guide, you’ll learn:

• Whether breaking a car lease actually hurts your credit
• What happens to your score if you miss payments or owe fees
• The most common (and costly) mistakes drivers make during early termination
• Smarter alternatives that can protect your credit and save money

How Breaking a Lease Affects Your Credit

Your lease is a legal contract and a form of credit. When you signed it, you agreed to make regular payments over a set period, just like a loan.

Here’s how that damage can happen:

• Missed payments: If you skip payments leading up to or after the break, your leasing company will likely report them as late to the credit bureaus. Even one 30-day late mark can drop your credit score by dozens of points.
• Collections or charge-offs: If the balance you owe after terminating early isn’t paid promptly, your account may be sent to collections. This not only tanks your score but also leaves a lasting stain on your credit history for up to seven years.
• Default risk: In severe cases like voluntary surrender or repossession, the financial fallout is even greater. The leasing company may auction the car and bill you for any remaining balance.

Something most people miss: The earlier you communicate with your leasing company, the more likely you are to avoid serious credit consequences. Some offer structured early exit options that won’t ding your score.

What Happens if You Break a Lease Early

Ending a lease early often leads to financial consequences.

When you terminate your lease before the end of the term, here’s what you can expect.

1. Early Termination Fees

Most lease agreements include a fee for ending the contract ahead of schedule, and they’re rarely cheap.

Here’s what to expect if you break your lease early:

• Fees can range from a few hundred dollars to several thousand.
• Some are fixed amounts, while others are based on remaining payments.
• They’re often due immediately once you initiate termination.

2. Remaining Lease Payments

Just because you’ve returned the car doesn’t mean your financial obligation ends.

Even after returning the car, you might still owe money:

• You could be billed for all remaining payments as a lump sum
• Unused months typically aren’t refunded or credited
• Any unpaid balance may be reported to credit bureaus

3. Negative Equity From Vehicle Auction

If the leasing company sells your returned car at auction, and it goes for less than your lease payoff, you’ll be billed for the difference.

What this means for you:

• This shortfall is called a “deficiency balance”
• You’ll owe the remaining amount, plus possible service fees
• If unpaid, it may be sent to collections and reported as delinquent

4. Damage and Excess Mileage Fees

Even with early termination, you’re still liable for wear and tear and mileage overages.

These fees are assessed during the lease inspection and include:

Most leases charge 15–25 cents per mile over the limit

Scratches, dents, and upholstery damage add to your bill

These fees are due in addition to any early termination costs

5. Potential Credit Consequences

The financial fallout of breaking a lease can quickly spill into your credit report.

Your credit score can take a hit if there are:

• Missed payments or collection activity, which can stay on your credit report for up to 7 years
• Repossessions of the vehicle, which signals serious default
• Long-term credit consequences, making it harder to qualify for future leases or loans

Smart Alternatives to Breaking a Lease

Before you pull the plug on your lease, it’s worth exploring other options that can save you money and protect your credit.

These strategies help you exit your lease early without the heavy penalties.

Lease Transfer or Lease Swap

This option lets you legally transfer your lease to another qualified driver.

It’s a win-win if someone else wants a short-term lease without starting from scratch:

• You avoid early termination fees and remaining payments
• The new lessee takes over the vehicle, monthly payments, and lease terms
• Services like Swapalease or LeaseTrader make the process quick and online

Early Lease Buyout

If you love the car or just want to avoid fees, a buyout lets you purchase your leased vehicle before the term ends.

It’s often a smart financial move, because:

• You pay the current payoff amount (residual value + remaining payments)
• You avoid wear-and-tear or mileage fees at turn-in
• You may gain equity if the car is worth more than the payoff

Lease Renegotiation or Extension

Some leaseholders don’t realize they can renegotiate with their leasing company.

A short extension or adjusted terms may solve short-term challenges because:

• You may be able to pause or defer payments temporarily
• Lease extensions buy time until you’re financially ready
• In some cases, you can renegotiate mileage terms or buyout pricing

When Breaking a Lease Affects Your Credit Score

Breaking a lease won’t always damage your credit, but certain actions will.

Your credit score is most at risk when:

• You miss or stop making payments: This is the most common trigger for credit damage. Payment history makes up 35% of your credit score, and missing even one can hurt. Multiple missed payments can decrease your score by 100 points or more.
• You owe a balance after lease termination: If you terminate the lease early and don’t pay the remaining amount due, your lender may send the account to collections. That collection shows up on your credit report and stays there for up to 7 years.
• The car is repossessed: Whether voluntary or involuntary, repossession tells lenders you might be a risky borrower. It shows you didn’t fulfill a credit agreement, and lenders will consider your history as a higher risk in the future.
• Legal action is taken: If a collection attempt escalates to a lawsuit and judgment, things can get worse. Court judgments and liens become public records, which can further damage your ability to get approved for future financing.

Quick tip: The faster you act, the better your options. Waiting until missed payments pile up limits your ability to exit gracefully.

How Lease End Department Helps You Exit Without Breaking Your Credit

Thinking of breaking your lease? Before you take a hit to your wallet or your credit, see what Lease End Department can do.

We specialize in helping drivers transition out of leases the smart way, without penalties or dealership pressure.

Here’s how our process works:

• Personalized lease exit support: Share your lease and vehicle info, and our team will walk you through all your options, from early buyouts to credit-safe alternatives
• Fast, friendly financing: Get pre-approved in minutes for lease buyout loans tailored to your credit profile and budget, with no hidden markups.
• 100% online, no dealership visits: From paperwork to plate delivery, everything is handled remotely. You sign and we handle the rest, including title transfer and registration.

Why Lease End Department? Because you skip the stress and keep your finances and credit intact.

Breaking a Lease FAQs

Go through the most common questions so you can avoid penalties, understand your options, and make the smartest next move.

What does breaking a lease mean?

Breaking a lease means ending your car lease agreement before the scheduled end date. Instead of completing the full term, you return the vehicle early, often triggering fees, remaining payments, or credit consequences unless managed properly.

Does breaking a lease go on your record?

Yes, if you default or your account goes to collections, it can appear on your credit report for up to 7 years. However, if you resolve the balance responsibly, such as through a lease buyout or transfer, it typically won’t leave a negative mark.

Is breaking a lease bad?

It can be, especially if you miss payments or owe a large balance that goes unpaid. But not all lease exits are damaging. If you explore options like early buyouts or lease transfers, you can often avoid serious financial or credit consequences.

If I break my lease, what happens to my credit?

Your credit may be impacted if you fall behind on payments, owe a deficiency balance, or the account is sent to collections. However, proactively working with your leasing company or using a service like Lease End Department can help protect your score.

How does breaking a lease work?

You typically notify your leasing company, return the car, and settle any outstanding charges. This could include early termination fees, remaining payments, damage, or mileage overages. Your final balance must be paid to avoid credit harm.

We also have a general FAQ section if you have any questions about our process.