Losing Your Job During a Lease: Your Options

Losing your income during a lease is frightening, but you are not stuck. Contact your finance provider straight away - before you miss a payment - and ask what support they can offer. Under FCA rules they must treat you with forbearance, which can mean reduced payments, a short deferral or a restructured agreement. Early exit exists, but it's usually the priciest option.

What should you do first if you lose your job?

Call the finance provider named on your lease agreement - the funder, not the dealer - and tell them your circumstances have changed. Do this before your next payment is due. Then work out what you can genuinely afford each month, and gather your redundancy paperwork and benefit entitlements so you know the real numbers before you agree anything.

Two things worth being clear on. The funder is the company that owns the car and collects your rentals; the broker who arranged the deal (us, in many cases) doesn't hold the agreement. Both can help, but the funder is the one who can change your payments.

And the timing genuinely matters. The FCA's Consumer Credit sourcebook says a firm should regard a customer as approaching arrears when the customer indicates they're at risk of not meeting a repayment. That means you get the protection of the forbearance rules by picking up the phone early - you don't have to wait until you've defaulted, and you shouldn't.

While you're gathering figures, check what's actually coming in. For redundancies on or after 6 April 2026, statutory redundancy pay is calculated on a weekly pay cap of £751 with a maximum payment of £22,530, and the first £30,000 of a genuine redundancy payment is normally tax-free. New Style Jobseeker's Allowance for the 2026/27 tax year is £75.65 a week if you're under 25 and £95.55 a week if you're 25 or over, payable for up to 182 days. Those are the figures to build your budget from - not a guess.

Do you still have to pay your lease if you're made redundant?

Yes. A lease is a fixed-term contract for the use of the vehicle, and redundancy doesn't cancel it or pause it automatically. What changes is the support you're entitled to ask for. The obligation stays; the payment schedule around it can often be adjusted, and that's the conversation to have.

This is the honest bit that some guides skate over. There is no clause in a standard personal contract hire agreement that says "if you lose your job, the contract ends". Nor is there an automatic right to hand a leased car back halfway through. The 50% hand-back people often mention - voluntary termination - comes from sections 99 and 100 of the Consumer Credit Act 1974 and applies to hire purchase and conditional sale (and PCP, which is built on hire purchase). Contract hire is a hire agreement, and it works differently.

So the realistic question isn't "how do I get out of this for nothing?" It's "what's the cheapest way through the next six months?" Very often that's keeping the car on adjusted terms rather than exiting it - particularly if you'll need a vehicle to get to interviews and to a new job.

What support must your finance provider offer?

Under the FCA's rules in CONC 7.3, a firm must treat customers in or approaching arrears with forbearance and due consideration, taking your individual circumstances into account. The handbook's examples include accepting reduced or token payments for a reasonable period, allowing a longer period for repayment, and suspending, reducing, waiving or cancelling further interest or charges.

The FCA strengthened these protections with rules that came into force on 4 November 2024, requiring firms to offer a wider range of forbearance options, to engage earlier with customers who may face difficulty, and to be transparent about the options they'll consider. Firms also have to point you towards free, impartial debt advice from not-for-profit bodies - Citizens Advice and MoneyHelper are the usual starting points, and neither charges a penny.

What forbearance is not: a fixed menu. There's no rule entitling you to a three-month payment holiday on demand. The temporary pandemic-era payment deferral guidance has long since expired. What you have is a right to be treated fairly and individually - which in practice, in our experience of these conversations, most often produces a reduced-payment arrangement for an agreed period, sometimes with the shortfall added to the back of the agreement.

Your options compared: which one fits your situation?

There are five realistic routes: a short-term forbearance arrangement, reducing your contracted mileage, extending the term, transferring the agreement to someone else, or early termination. They vary enormously in cost. Broadly, the more of the contract you keep intact, the cheaper it is - and early termination sits firmly at the expensive end.

If you take one thing from that table: check the free and low-cost changes before you ask for a settlement figure. We've seen plenty of cases where cutting the annual mileage from 20,000 to 8,000 after a commute disappeared did more for the monthly budget than any dramatic action would have.

How much does ending a lease early actually cost?

It depends on your contract and how far through the term you are, and only the funder can give you the number. As a guide, What Car reports early termination charges commonly landing somewhere between 50% and 100% of the outstanding balance. Ask for a formal settlement figure in writing before you decide anything.

A few things shape it. How many rentals remain, what the vehicle is worth against its forecast residual value, and the funder's own early termination formula - some calculate a percentage of the remaining rentals, others work from the difference between the settlement and the disposal value of the car. Two people with identical cars and different funders can get very different numbers.

One detail that catches people out: since 1 April 2022 HMRC's policy treats early termination fees as further consideration for the original supply, so VAT applies to the charge on a personal lease. The BVRLA published a member fact sheet on exactly this point. If a settlement figure looks lower than you expected, check whether it's shown inclusive or exclusive of VAT.

You'll also still be responsible for the condition of the vehicle. Under BVRLA fair wear and tear standards, damage beyond the published thresholds is chargeable when the car goes back, along with excess mileage pro-rated for the time you've had it. Our guide to ending a lease early sets out how those charges are built up.

Can you change the lease instead of ending it?

Often, yes - and it's usually the better answer. Funders will frequently look at reducing your contracted annual mileage, extending the term to lower the monthly figure, or restructuring payments for a period. None of these end the agreement, so none of them attract an early termination charge. All of them need the funder's agreement.

Reducing your mileage

If your job involved a long commute or business miles, losing it can cut your annual mileage dramatically. Mileage is one of the two biggest inputs into a rental, and some funders will re-rate an agreement mid-term. It won't be a huge reduction, but it's a permanent one and it costs you nothing to ask. See changing your mileage mid-lease for how the re-rate is calculated.

Extending the term

If you're within the last few months, an extension can be the neatest solution of all - it keeps a car on your driveway, often at a lower monthly rate, and postpones committing to anything new until your income is settled. Our guide on extending your lease at the end covers formal extensions and informal month-to-month arrangements.

Transferring the agreement

Passing the lease to another person is possible with some funders and flatly refused by others - it's a contractual permission, not a right, and the incoming hirer has to pass the funder's credit checks. It's worth asking about, but don't build your plan around it until you've had a yes in writing. The detail is in transferring your lease to someone else.

So is it ever right to just end it?

Sometimes. If the car is a genuine luxury you can't justify, if you have a second vehicle, or if a long period out of work looks likely, paying a settlement now can beat bleeding cash for two more years. But run the arithmetic on paper before you commit, and speak to a free debt adviser if the wider picture is difficult - they'll look at the whole household, not just the car.

What if it was a company car or a salary sacrifice car?

If the vehicle was provided by your employer, it usually goes back when your employment ends - the agreement is between the employer and the funder, not you. Salary sacrifice cars are the exception worth checking: many schemes include early termination protection covering redundancy, which means the employer or an insurer absorbs the exit cost rather than you.

Ask HR, in writing, for the scheme's early termination terms and whether redundancy is a protected life event. Where protection applies, you hand the car back and walk away. Where it doesn't, you may face a deduction from your final pay - so establish which it is before your last day, while you still have someone to ask.

Benefit in Kind (BiK) - the tax you pay on a company car as a taxable benefit - stops when the car is returned, and your employer should adjust your P11D reporting accordingly. According to HMRC's published company car tax rates, zero-emission cars are taxed at 4% of list price for the 2026/27 tax year, while petrol and diesel cars sit on a scale running roughly from 15% to 37% depending on CO2 emissions. Losing a heavily-taxed company car takes a chunk of BiK off your tax code, which softens the blow slightly. If you're weighing up a scheme with a future employer, our salary sacrifice page explains how the arrangements work.

Business contract hire is different again. If you're a director or sole trader and the business took the vehicle, the agreement sits with the company, and personal guarantees - if you gave one - can still bite. Worth a proper conversation with your accountant.

What happens to your credit file - and can they take the car?

An arrangement agreed in advance is usually reported differently from a missed payment, though most forbearance arrangements are still visible to lenders. Repossession is a last resort: the FCA's rules say a firm must not commence or continue repossession action while a forbearance arrangement is in place and you're meeting its terms.

The FCA has also confirmed that repossession action shouldn't begin until other reasonable attempts to resolve the situation have failed. That's a meaningful protection, and it's another argument for engaging early - a customer in an agreed arrangement is in a completely different position from one who has gone quiet.

Ask the funder directly how each option will be reported. "Will this show as an arrangement to pay?" is a fair question and they should answer it clearly. If you don't think you've been treated fairly, the funder's complaints process comes first, and after eight weeks - or a final response - you can take it to the Financial Ombudsman Service free of charge. Our complaints procedure sets out how that works with us.

Frequently Asked Questions

Written by the leasing team at First Vehicle Leasing, a BVRLA member and FCA-authorised broker with over 25 years' experience arranging personal and business vehicle leases across the UK. Reviewed and maintained by our team - if something here has changed, tell us and we'll update it.