Do you want to cancel your car lease contract? You may be interested in the following information.
If you signed a leasing contract but refuse to take possession of the vehicle, it is often too late to change your mind without consequences.
Having to pay a penalty
The merchant may have the right to impose a penalty, according to a clause sometimes found on the back of the vehicle leasing contract. These fees are limited by regulations. They may not exceed the greater of these 2 amounts: $400 or 2% of the price of the vehicle.
Be required to lease the car
The merchant could also expect you to respect the contract (that you lease the vehicle) or pay compensation for the actual losses the merchant has suffered. The merchant could, for example, ask you to pay the interest charges for the additional month the vehicle remained on the lot available for leasing.
During the leasing period, you can end the contract at any time by returning the vehicle to the merchant. However, doing so usually means the merchant will make a claim for damages, often for several thousands of dollars.
This practice is called "rescission." This means that you are terminating the contract, but you will not be reimbursed for the previous instalments paid.
Fees that cannot be charged by the merchant
The merchant cannot keep the security deposit. This deposit is fully refundable at the end of a lease, unless it was used to fulfill a late payment.
Moreover, the merchant cannot charge you for:
- cleaning fees to put the vehicle back up for lease or sale;
- towing services that you did not require;
- fees to transport the vehicle to an auction sale;
- sale and commission fees for an auction sale.
None of these fees are incurred as a result of the contract rescission. The merchant would have incurred those expenses at the end of the contract in any case.
When you return the vehicle before the end of your contract, the merchant is not allowed to file a bad report in your credit file. For example, the merchant may not send any information about the contract rescission to a credit assessment agent (businesses such as Equifax or TransUnion). Nor can the merchant send them any information concerning the amounts that can no longer be collected because you have cancelled the contract.
Balance of the lease contract
You can use a calculator (in French only) to determine the balance of your lease contract (the amount you have left to pay).
If you can afford it, and if the contract or the merchant allows it, you can purchase the vehicle you leased. To do so, you must pay any remaining balance indicated in the leasing contract. You will then be able to resell the car.
This option can be profitable in the following 2 situations:
- The vehicle has a higher market value than the balance of your contract (the amount you still need to pay).
- The actual loss is lower than are the cancellation fees you would have to pay if you were to return the car to the merchant.
You can use a calculator (in French only) to determine the balance of your leasing contract.
You can assign the contract to someone else. This practice is called an "assignment" or, in common parlance, a "lease transfer." An assignment releases you from any liability.
You can also sublease the vehicle. If you choose to do so, you remain liable for the vehicle.
How to transfer a lease or sublease a vehicle
You must obtain the merchant's consent and provide the name and address of the person to whom you want to assign the contract or sublease the vehicle.
If the merchant has not advised you of their refusal within 15 days following the receipt of the notice of assignment or sublease, it means the transfer has been accepted.
If the merchant refuses, you can dispute their decision in court. It will be the merchant's responsibility to explain the reasons for the refusal.
When the contract prohibits assignments or subleases
Some merchants use long-term leasing contracts that prohibit assignments or subleases. Others ask for unreasonable fees to carry out an assignment or a sublease.
These conditions can be considered unfair, especially if they force you to return your vehicle to the merchant and to pay prohibitive cancellation fees as damages. If you have a problem with a merchant regarding this matter, only the courts can settle it.
Last update : November 6, 2023
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The information contained on this page is presented in simple terms to make it easier to understand. It does not replace the texts of the laws and regulations.