3 November 2026

The Early Termination Charge explained, with a worked example

How funders usually calculate the charge for ending a business lease early, a worked example, and five ways to reduce or avoid it.

The Early Termination Charge is what a funder bills you for ending a lease before its agreed end date. Here's how it's usually worked out, with an example, and how to keep it down.

How it's usually calculated

Each funder sets its own formula in the agreement. A common approach on contract hire is a percentage of the rentals you have left to pay — often around 50%. Some funders charge a higher share or use their own settlement calculation.

The charge is usually separate from:

  • Excess mileage — some funders cut your remaining mileage allowance in proportion to the time you're ending early
  • Damage outside BVRLA fair wear and tear
  • The rental for the month the car is collected in

A worked example

A business leases a car on a 36-month agreement at £400 a month plus VAT. After 16 months it needs to hand the car back.

  • Rentals left: 20 × £400 = £8,000 plus VAT
  • Early Termination Charge at 50%: £4,000 plus VAT
  • Plus any excess mileage or damage charges

That's £4,000 plus VAT for a car the business no longer has. The earlier you end the lease, the higher the charge.

Five ways to reduce or avoid it

  • Check if the agreement can be transferred. Many funders allow another business to take it over for an admin fee, so there's no Early Termination Charge at all.
  • Ask for a written settlement quote. Don't rely on the percentage alone: the quote is the figure you'll actually pay.
  • Time it right. The charge falls as rentals are paid, so if the date is flexible, each month you wait reduces it.
  • Look after the mileage. If your allowance will be cut, park the car or move it to a lower-mileage driver while you sort things out.
  • Get damage repaired first. A smart repair before collection usually costs less than the funder's damage invoice.

Estimate yours

Our Early Termination Charge Calculator at swap-a-lease.co.uk/calculator gives a quick estimate from your monthly rental, term and months remaining. Then compare it with the transfer fee in our funder table at swap-a-lease.co.uk/fees.

This guide is general information, not legal or financial advice. Charges vary by funder: always check your own agreement and get a written quote.

Want one?
Looking for your next business lease?
Post a Wanted request with your budget and term. Businesses already leasing one — and wanting out — can come straight to you. Free, anonymised, and you can withdraw it any time.