If you're looking to replace your car but the prospect of a down payment on top of high monthly payments is making you sweat, it's time to consider the alternatives. One of these alternatives is to take over a car lease. With all the personal listing sites out there like Craigslist and Facebook Marketplace, plus dedicated lease transfer sites like Swapalease, it’s easier than ever to find someone looking to get out of their lease. How can you benefit from this increasingly common practice and what are the drawbacks? We’ll cover these questions to help you decide if it’s right for you.
What is a Lease Transfer?
Car leases are usually offered for a timeframe between two and four years. A lot can change in that time. The original leaseholder may not be able to afford their payments or the vehicle may no longer fit their needs. Instead of struggling to make payments on a car that no longer works for them, the lessee can instead choose to transfer their lease to someone looking for a car. When a lease is transferred, the party taking over the lease will be responsible for all of the original terms such as the monthly payments and the remaining duration. At the end of the lease term, the vehicle will need to be returned in good condition and with the agreed upon mileage determined at the start of the lease.
Benefits vs. Drawbacks
Most people keep cars for three to five years so if you're looking for a used car that is only a couple years old, you are limited in your options. Taking over a lease will allow you to drive a newer used vehicle, without paying the high price for it. It also offers more flexibility than a traditional lease or used car purchase since both are long term commitments. You'll get the opportunity to test out a car for a shorter time than a regular lease allows and see if you like it.
When you take over a car lease, the monthly payments you will be responsible for are typically lower than on a new lease, This is because the down payment or trade-in by the original lessee has reduced the total amount the payments are meant to cover. Usually the longer the lease term is, the lower the monthly payments will be. Unlike when you buy or lease a new vehicle, your monthly payments won't be determined by your credit score. You'll simply take over the pre-determined payments from the previous lessee.
An added perk is that the lessee is often desperate to get out of their lease and may throw in some incentives to sweeten the deal. For example, they may offer cash or even cover one or two full monthly payments. There are typically transfer fees associated with the transaction, but you can negotiate with the seller to have them take these on.
As with most transactions that sound like a bargain, there are some drawbacks and risks involved. As previously mentioned, there are usually transfer fees as high as a few hundred dollars. If the previous lessee refuses to pay, you'll be responsible for the cost.
You'll also want to be aware of the mileage restrictions on the lease and the condition of the vehicle you're considering. If the mileage is too high or if the vehicle has noticeable damage, you could be paying the price at the end of the lease. If the current lessee is trying to get out of the contract due to not being able to make payments, it's possible that they didn't keep up with vehicle maintenance. Your safest bet is to arrange to get the vehicle inspected by a professional mechanic before taking over the lease.
Although your credit score will not impact your monthly payments, this doesn't mean the leasing company won't look at your credit history. If your credit score is not in the 'good' or 'excellent' range, be aware that you may not qualify to take over the lease.
How to Take Over a Lease
There are multiple routes for finding a lessee looking to transfer their car lease. You can take over a lease from a friend or family member, look at personal listing sites like Facebook Marketplace and Craigslist or go to sites dedicated to lease transfers like Swapalease and LeaseTrader.
Facebook Marketplace and Craigslist are good starting points if you don't have any friends and family looking to get out of a lease. These services are free and let you connect with sellers in your area. The drawbacks to using these popular listing sites are that scams are prevalent and if you live in a remote area, there may not be any available lease sellers near you.
Dedicated lease transfer sites like Swapalease allow you to set up a free account as a buyer and look at national lease listings. You'll be able to contact the seller to ask questions and Swapalease walks you through the entire process with the leasing company. The potential fees include a fee to begin the transfer, credit application, vehicle inspection, transportation (if the vehicle is not local) and vehicle registration. While this route is certainly hassle-free, there is a convenience fee for using a lease swap site.
No matter which route you take, make sure you do your due diligence by checking the car's mileage, condition, and vehicle history report. You don't want to be unpleasantly surprised when you go to turn the car in at the end of the lease and get hit with penalties that were not your fault.