Can You Get Out of a Car Loan With Military Orders?

Written by: Pat McManamon

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A deployed servicemember may find it a heavy burden to continue to pay for a car lease. Thankfully, the servicemember has the option to break a vehicle lease – provided certain conditions are met.

The Servicemembers Civil Relief Act (SCRA) allows an active-duty member to terminate a lease agreement without paying early termination charges or penalties. The SCRA even allows the servicemember’s dependents to break the lease. The conditions that allow this step primarily deal with the amount of time he or she is called to serve and where he or she is serving.

The local JAG office can help advise a servicemember on how best to handle the situation.

What Is the SCRA and Who Is Covered?

The SCRA was enacted by Congress in 2003 and has been amended several times since. According to the U.S. Department of Justice, the act is “designed to ease financial burdens on servicemembers during periods of military service.”

The act covers active-duty members of the military – which includes members of the Army, Navy, Air Force, Marines and Coast Guard. It also protects members of the National Guard serving more than 30 days and commissioned officers of the Public Health service and the National Oceanic and Atmospheric Administration in active service.

Dependents of servicemembers – a spouse or child – are also given protections in certain situations.

Protections are in areas related to rental agreements, security deposits, prepaid rents, evictions, installment contracts, interest rates on credit cards and mortgages, insurance, income tax payments and car leases. Courts have supported the Service Members Civil Relief Act and interpreted it to mean it should be read in favor of servicemembers.

The idea of the law is to allow servicemembers to concentrate on their mission. To accomplish that, it allows military members to postpone, suspend or get out of certain financial obligations that might cause distractions or monetary problems.

Military Car Loan Forgiveness Eligibility

The specific conditions that allow a servicemember to terminate a lease are:

  • You must have entered into the lease prior to active duty and be called to active duty for at least 180 days. OR ..
  • During active duty, you must have received orders that transferred you from the continental United States to outside the continental U.S. In military terminology this is called Permanent Change of Station (PCS) inside the U.S. (CONUS) to outside the U.S. (OCONUS). (Example: If you are transferred from Fort Bragg in North Carolina to serve in Afghanistan, you could cancel the lease.) OR …
  • A permanent change of station outside the U.S. to another location. OR …
  • You’ve been deployed with a military unit in support of a military operation for at least 180 days.

Think OCONUS to mean outside the continental United States – that is, the 48 states other than Hawaii and Alaska. Think CONUS to mean the lower 48.

If you are transferred, say, from Texas to Hawaii or Ohio to Alaska, that is CONUS to OCONUS and you can get out of the lease.

If you are transferred from OCONUS to another location – be it a state or another country — you also can get out of the lease. Examples include being transferred from Alaska to Texas or from Hawaii to Germany.

However, you cannot get out of the lease if you are transferred within the lower 48 – CONUS to CONUS. Being transferred from California to Texas or North Carolina to Wyoming would not qualify.

The Consumer Financial Protection Bureau cautions that if you think you might enlist, it’s wise to read and understand the lease terms before signing a contract. Because transfers within the lower 48 do not allow you to terminate the lease, it’s important to ask the company you are leasing from if you are permitted to take the vehicle out of state. That is key information if you believe you will be stationed primarily in the lower 48.

How to Terminate Your Lease

Terminating a lease is not a simple matter of calling and saying, “I’m out.” You have to follow specific steps, and while some may be annoying, carrying through on them ensures success.

To cancel the lease, you must provide the lessor (the people you got the car from) a written notice and a copy of your orders. To ensure the notice gets to the right people and to ensure you know it did, have the notice delivered by hand — perhaps your spouse or a relative or friend you trust could take it to the lessor – or by certified mail with return receipt, or electronically via e-mail or a communications portal set up by the lessor.

The vehicle then must be returned with 15 days after the date the written notice was delivered.  Do not miss this deadline.

If all is done properly, the lease should cease the day the vehicle is returned. You cannot be charged for terminating the lease early. Also, if you paid any lease amounts in advance, the leasing company must refund that money to you within 30 days after the end of the lease.

However, there are charges you may be responsible for. They include the prorated payment for the month you canceled, as well as taxes, title and registration fees and other obligations spelled out in the lease. Taken together, though, those likely will be far less than the remaining lease payments.

Legal Help for Military Members

If needed, help is available from military and non-military sources for writing a termination notice and getting legal advice.

The first step would be to contact the local Judge Advocate General (JAG) office for help. These are military lawyers who are available on almost every base, ship or installation. To find your local JAG office, use this search tool. Another place to get help is the state attorney general. The JAG office can even refer you to a local lawyer, if one is needed.

It would be especially important to contact the JAG office if there is an issue terminating the lease and you have followed all the proper steps. Under the SCRA, a lessor cannot terminate the lease if you have done thi ngs properly, though they can challenge the termination in court. However, during this period, a lessor cannot repossess the vehicle and could face fines or imprisonment if found to be in violation of the SCRA.

About The Author

Pat McManamon

Pat McManamon has been a journalist for more than 25 years. His experience has mainly been in sports, but the world of athletics requires knowledge of business and economics. He also can balance a checkbook and keep track of investments with Quicken quite adeptly. McManamon’s experience includes covering the NFL for ESPN, LeBron James for the Akron Beacon Journal and AOL Fanhouse, and the Florida Gators and Miami Hurricanes for the Palm Beach Post.


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