Can I end a lease early?

Usually not without paying for it. Business contract hire is a fixed-term agreement, so ending it early normally means paying the funder a termination sum, which is often a large share of the remaining rentals. Terms vary, so check your agreement.

The short answer

You generally have no automatic right to hand a contract hire vehicle back early. Any early exit is set by the funder under the terms you signed, so the first step is to read your agreement and ask the funder for a written termination quote.

The detail

Contract hire is a rental, not a purchase. The funder prices the agreement on the assumption that you will keep the vehicle for the full term and return it at the end. If you stop early, the funder is left with a vehicle it expected to be on hire for longer, and the early termination clause is how it recovers that.

• Termination sum. This is usually based on the rentals still to be paid, sometimes with an allowance for the funder's savings from receiving the money early. The calculation differs between funders.
• Fees. Administration charges, collection costs and sale costs may be added.
• Condition and mileage. The vehicle is still assessed on return. Damage beyond fair wear and tear and mileage over the agreed limit can be charged on top.
• No consumer-style right to walk away. The voluntary termination rights that apply to some personal finance agreements generally do not apply to business contract hire. Your agreement is the reference point.
• Other routes. Some funders will consider transferring the agreement to another business, or swapping into a different vehicle. This is at their discretion and is not something a broker can promise.
• Special events. If the vehicle is stolen or written off, the agreement usually ends under a separate clause. A shortfall between insurance payout and the funder's settlement figure can arise, which is what gap cover is for.

Swiss Vans Ltd is a credit broker, not a lender. We arrange agreements with funders, but the funder sets and applies the early termination terms.

A worked example

Imagine a business has a van on contract hire and, partway through the term, loses the contract that needed it. No figures are invented here, but the steps are the same whatever the numbers are.

1. Check the agreement. Find the early termination clause and note the contract end date, the mileage limit and the return conditions.
2. Request a written quote. Ask the funder for the termination figure and how it was calculated, and ask what is included and what is not.
3. Break the quote into parts. Look for the remaining rentals, any rebate or allowance, administration fees, and a note that condition and mileage charges may follow the inspection.
4. Compare the options. Set the termination quote against simply carrying on to the end of the term, since you would pay those rentals anyway. Also ask whether the funder would consider a transfer or a vehicle swap.
5. Decide and confirm in writing. If you go ahead, get the final figure and the collection arrangements confirmed before the vehicle leaves.

In many cases, running the agreement to the end, or moving it to another user if the funder allows, costs no more than terminating, and sometimes less. The only way to know is to get the actual quote.

Related questions

• What counts as fair wear and tear on a contract hire return?
• What happens if I go over the agreed mileage?
• Can I transfer a contract hire agreement to someone else?
• Is gap cover worth having on a leased vehicle?
• What should I check in the terms before signing a contract hire agreement?

Questions people ask

Can I just hand the vehicle back and stop paying?

No. Stopping payments without agreeing a termination with the funder is a breach of the agreement and can lead to collection action, charges and problems for your business credit record.

Is there a standard early termination charge?

No. It depends on the funder and the terms of your agreement. Ask for a written quote showing how the figure is worked out.

Can a broker end my lease for me?

Not by itself. The agreement is with the funder, and any early exit is agreed with them. We can help you understand your options, but we cannot promise an outcome.

What if I need a different vehicle rather than no vehicle?

Ask the funder whether a swap or restructure is possible. Some will consider it, usually with a new agreement and the termination costs of the old one taken into account. It is not guaranteed.