Can I Back Out of a Car Lease After Signing?

A car lease is a binding contract that enables you to rent a vehicle for the long-term using a down payment and monthly payments. When you put your signature on the dotted line, it typically means you’ve got a deal. But can you back out of a car lease before it starts? Alternatively, can you back out of a lease within ​24 hours​ after it begins?

Well, it depends. If you get cold feet after signing a car lease, you’ll need to weigh your options carefully to see whether you have a way to back out of the contract.

​Read More​: How Does a Car Lease Work?

What is the grace period for a car lease? If you don’t know what it is, you will not look out for it in your contract. The grace period usually refers to the set period during which you can return a leased car and obtain a full refund.

Your lease contract should have a section or clause covering the details of cancellation. While not guaranteed, you might find a clause in the small print of your lease that gives you a cancellation grace period at the beginning of the lease. This short period – maybe ​24 or 48 hours​ – could be the only time you could back out of the lease and return the car without penalty. If your lease doesn't mention a grace period, you don't have this option.

Sometimes, a lease might be subject to contingencies on the part of the dealer. Contingencies generally have a specific period, and if the party doesn’t satisfy the contingency, the contract isn’t binding.

Check your lease to see if any contingencies exist during the first four days of the contract. If you find a contingency, and the dealer doesn’t meet it, the dealer needs to notify you of the voided contract. This means that you return the car, and the dealer returns any money you paid. If you don't find contract contingencies, they aren't part of the contract.

​Read More​: Leasing a Car vs. Buying a Car

Can you return a leased car with damage? If a defect occurs with the car, explore the lemon laws of your state. A lemon law would protect you and give you recourse with your lease to help you back out of it.

If you successfully sue the lessor of your car under a lemon law, you would get the lease voided, and you would get a refund of all money paid for a down payment and any monthly payments you’ve made.

If you really want to back out of the lease, it’s probably possible, as long as you’re willing to pay any fees associated with canceling the lease. Check your contract to find out what the lessor requires of you to cancel.

You might have penalty fees and you may also need to pay a specific number of monthly payments before you can end the lease. A typical penalty fee is usually based on the remaining balance on your car lease. But if you don’t follow through with the requirements of the lease contract, your account could move to collections, and you'll get a negative hit to your credit score.

​Read More​: Is It Cheaper to Lease a Car or Rent One?