Terminate car lease early after big change in circumstances?

ollysavingmoney

Hi. I hope you all had a nice Christmas in the unusual circumstances.

I wanted to get some opinions. I have got 9 months left on a 2-year Personal Car Lease. When I started the contract, I drove 100 miles per day to work and back, so got a diesel. After just a few months, I changed jobs for the first time in over a decade and now work 10 miles from work, so 20 miles per day. Also, I am becoming increasingly conscious of wanting to be green, possibly thinking plug in or electric.

The lease company says I can either decrease my contracted mileage and pay 25% less each month, which will save me £125 a month until September. Or I can pay £1,000 now to terminate the car lease early, "saving" me paying 9 x £500 (the current amount without the mileage being reduced).

My Mrs says terminating early is a waste of money but it's a 3 liter BMW diesel that costs me £100 a month in diesel and it's also bad for its DPF filter doing all this short mileage, especially under Covid with no leisure journeys.

Does it sometimes make sense to pay a penalty to exit a contract early to then be able to save money or get a better product or service for your circumstances?

Grumpy_chap

You currently pay £500 per month and can reduce the mileage to get that to £375 per month.
Alternatively, pay £1k upfront and pay nothing else by returning the car early, so "saving" £4.5k (or £3.5k nett).
With the latter option, what will you then do for a car?  The "saving" is reduced by whatever the next car will be in payments plus, if you choose to lease again, a deposit (3 months?).

NottinghamKnight

Seems like a lot of diesel useage for a short commute. 
It can make sense to pay a penalty to exit a contract early, what would you replace it with. Once you know that you can do the comparative sums. 

ollysavingmoney

Hi there. I've found several plug in or electric car leases for £350 a month for 2 years with no deposit, or I've seen a few used petrol or plug in cars a few year's old that I can get on PCP for £250 per month plus insurance. I could alternatively get a banger I guess, but if I lose this job and have to look for another possibly further away, I would rather secure a good all-round car now than lose money on a potential money pit.

Grumpy_chap

So, the options are:

• Do nothing and just pay the £500 per month until the lease ends in 9 months.  Cost £4.5k
• Take the discount on the current car and pay £375 per month for 9 months.  Cost £3,375
• Pay to terminate early and take the new lease electric at £350 per months for 9 months.  Cost £4,150

Based on the above, take the discount and keep the current car until end of lease then go for the new car electric / hybrid. 

There are other variables that will save or cost more with the new car, particularly fuel but it is probably just simpler to just take the discount and keep the current car.  I do not know, but there have been people comment on here that ending a lease early can be bad for future finance - may be a "red herring" but probably not worth testing to find out.

Also, I cannot see any reason why costs for hybrid / EV will change substantially over the next 9 months (I may be wrong), so ensure you get the hybrid / EV you want lined up for delivery right when you need it.  Some cars, particularly EVs, have been on long lead times though others on here indicate that is largely resolved now.

Will the EV have sufficient range if you do, indeed, change jobs?

I do not like leases generally, but the deal of an EV / plug-in hybrid at no deposit and £350/month seems attractive...

ollysavingmoney

Thanks again and your opinion sounds sensible, all things considered.
Reflecting honestly, I would probably be taking out some Covid frustration on my lease car getting rid of it early.