Leasing a car can be a great alternative to other financing options if youâ??re not quite ready to buy. It essentially allows you to borrow a vehicle for a short-fixed duration with lower monthly and down payment costs. To avoid spending more money in the long run, itâ??s important to do your research and pay attention to the fine print. To help you out, weâ??ve compiled a guide outlining the disadvantages and be difference between the actual cash value of the vehicle and the remaining lease balance if the car is totaled or stolen.
Insurance premiums for leased vehicles can be higher compared to those for financed or owned vehicles because of the higher coverage limits required.

Itâ??s crucial to maintain the required insurance coverage for the duration of the lease term. Failing to do so can result in penalties, additional charges, or even termination of the lease agreement by the leasing company.Â

Can you return a leased car early?

Yes, you can return a leased car early in Canada, but it often comes with additional costs and considerations. Here's what you need to know:

Early Termination Fees
Most lease agreements include penalties for early termination. These fees can be substantial and might include:

Negative Equity
If the car's current market value is less than the remaining lease obligations, you may have to pay the difference, known as negative equity.

Lease Buyout
Some lease companies allow you to buy out the lease early. This involves paying the remaining lease balance plus any early termination fees. You can then sell the car to recoup some costs, but this depends on the carâ??s market value.

Lease Transfer
In some cases, you can transfer the lease to another person through a lease transfer or lease assumption. However, there may be fees associated with this transfer, and the new lessee must be approved by the lease company.

Trade-In
Another option is to trade in the leased car when you buy or lease a new vehicle from the same dealership. The dealer might roll the remaining lease balance into the new lease or loan, but this could result in higher monthly payments.

Steps to return a leased car early:

Buying out a car lease in Canada

Buying out a car lease in Canada involves purchasing the leased vehicle either at the end of the lease term or, in some cases, before the lease term ends. Hereâ??s a detailed guide on how the process works:

1. Review your lease agreement
Check your current lease agreement for the buyout terms, including the residual value (the car's estimated value at the end of the lease). This is the amount youâ??ll pay to buy the car.

2. Determine the buyout timing

3. Evaluate the carâ??s market value
Compare the residual value with the carâ??s current market value. If the residual value is lower or comparable to the market value, buying out the lease could be a good financial decision.

4. Arrange financing
If you donâ??t have the cash to buy the vehicle outright, youâ??ll need to arrange financing. You can: Apply for a car loan from a bank or credit union or you can check if the leasing company offers financing options for the buyout.

5. Notify the leasing company
Inform the leasing company of your intention to buy out the lease. They will provide you with the necessary paperwork and the final buyout amount, which may include taxes and fees.

6. Complete the paperwork
Fill out and submit all required paperwork, which may include: Buyout form provided by the leasing company and loan documents if you are financing the buyout.
7. Make the payment
Pay the buyout amount as specified by the leasing company. This can be done through: A lump-sum payment if youâ??re paying in cash or financing through a loan if youâ??ve arranged one.
8. Transfer ownership
Once the payment is processed, the leasing company will transfer the title and ownership of the car to you. Make sure you receive all necessary documents, including: The vehicle title, bill of sale and lien release, if a