Leasing a car is a popular alternative to buying one. Instead of paying the full sticker price, you’ll pay just for the depreciation. However, if you still can’t afford your monthly payment, or need better lease terms, you might be wondering if you can refinance a leased car.

You can “refinance” a leased car, but you are essentially buying out your lease. If you refinance a leased car, you are obtaining a loan to buy the car outright. While a lease refinance may be hard to find, you can refinance your lease with a car refinance loan. While the impact of doing this on your payment can vary, it will give you the benefit of owning your car and no longer having to worry about excess mileage or wear-and-tear charges.

Refinancing a leased car

You’re probably heard about refinancing traditional auto loans. Basically, you take a second loan to payout the first one. Then, you simply continue paying off the second loan which supposedly has better terms for your situation.

You can do a similar scheme with your lease. Once you know what your buyout amount is, you can find a lender who will extend the same amount to you, using the car as a collateral.

Then, you simply buyout your lease and continue forward, paying monthly installments to your new lender under the new terms you agreed.

What can you do if you want to get out of your lease?

So here are your options to terminate a lease early:

Lease transfer – If your contract allows it, you can find another person to take over your lease. They will get the car and make payments for the remainder of the contract. The new lessee must meet the leasing company’s qualifications, and you may have to pay a transfer fee.

Buy the car – If you like the vehicle and you want to keep it or sell it yourself, you can choose to refinance it or buy it outright at the end of the lease term. You can also either sell it to a dealership or a private party once you own it.

Lease pull ahead – If you have a few months left on your lease, you may be able to negotiate a new lease with the same company and get a new car early.

Pay a lease termination fee – This is the worst imaginable option. Basically you’re giving the car back and paying an eye-watering amount of money which is roughly equal to the value of your remaining monthly payments.

Leasing is great if you want to drive a new vehicle every two to three years. If you want a lower payment, you could lease a more affordable car the next time around instead of refinancing. Keep in mind that not only is it difficult to qualify for a lease when your credit is suffering, but your interest rate is going to be higher than average if you do qualify.