Also known as a car lease swap, a car lease transfer is a situation where a car (that is subjected to a car lease) is transferred to another willing driver. It’s becoming increasingly popular among drivers who’ve leased vehicles and are having some financial difficulties or are looking for transportation alternatives, say, for instance, a bigger car or a car that gives them better mileage for less. Most people consider it a win-win situation since it benefits both the parties involved. The original lessee can foot all the financial liabilities on the vehicle and the driver to whom the lease is transferred to, gets to enjoy the comfort of driving a new car of their preferences for a short-term basis without having to spend an arm and a leg.
There are various reasons why people opt for a car lease transfer. Some car lease holders choose to terminate the lease contract early because they are no longer able to afford the maintenance costs of the car or they’ve experienced lifestyle changes such as an added family member or two so the car can no longer meet their needs. On the other hand, most recipients opt for lease takeover as a way of getting a car of their dreams for less, whereas some go for it as a way of getting a car for short-term use without having to incur too much cost. Whichever the case, there are of course some considerations to put into perspective before making the transfer. In this article, we’ll be looking at some of the most important aspects surrounding car lease transfers. Without further ado, here are the important things to know about car lease transfer and how it works.
The Basics: How A Car Lease Transfer Works In a Nutshell
Just to jog your attention a little bit, we’re talking about a leased car, whose current leaseholder signed a contract with a particular company or a car manufacturer to own the car for a specified amount of time (usually 24-36 months) while making monthly lease payments to the company. A lease transfer is where this leaseholder wishes to transfer the lease to someone else. Well, at this point, it is safe to assume we can proceed to decipher, how exactly does a car lease transfer work? Which is a frequently asked question all over the internet of things. So let’s get on with it, shall we?
Basically, if a current leaseholder wishes to transfer a car to someone else, the first and most important step is to confirm with their respective finance companies or car manufacturer’s if it’s possible. In this case, there are, of course, some administrative costs to consider when doing so, usually ranging between several to a few hundred bucks. It’s after confirming with your financing company and getting a green light that you, the leaseholder, would want to start looking for a potential individual to transfer the car lease. One thing to note is that not all financial institutions agree to a car lease transfer.
As the current lessee, it may also be of paramount importance to take into account, the other party’s current financial situation. This is because your leasing company or car manufacturer may run a background check into their credit history and other financial details to find out if they’re creditworthy and qualify as potential leaseholders. They may also consider things such as their reputation, overall conduct, and behavior, just to assess whether they’re suitable candidates for car leasing.
Finding Suitable Buyers And Sellers
This is one of the most important aspects of a car lease transfer. Finding a responsible person to sell your lease to or the best seller to do so on your behalf can be somewhat overwhelming. Most people opt to trade with their friends or family because of trust issues, as well as reasons to do with finances. However, if you can’t find anyone in your circle of friends to trade with, you can alternatively try searching the internet for sites that help to match suitable car lease buyers and sellers. From here, you can get information about the transfer fees associated with specific car models, lease validity the available prospective sellers/buyers, and so forth.
The Transfer Process
This is usually the only time-consuming factor, but it may vary from one country to another. But the major impediment is the time it takes to process the transfer papers and checking the other driver’s credit history. Nonetheless, working with a dealership company could help smoothen things out as they’ll do most of the work on your behalf. Once the financial institution is happy with the arrangement and all the paperwork completed, the new driver can breathe a sigh of relief for having their request approved. But it’s not over yet! They’ll need to take it up to their respective motor vehicle registration department to have the transfers finalized. Here, depending on their region, they may have their license plates changed to their names. This helps when it comes to taking care of car insurance and other relevant issues.
If you are considering taking over a car lease from someone else, it’s important to know the key requirements for assuming the lease. One thing to note, for instance, is that you’ll be taking over the lease payments as well as all the maintenance responsibilities. In addition to this, you’ll also be required to assume all the wear and tear repair costs or charges on the car just as the original leaseholder obliged in their initial agreement.
Factors To Consider Before Assuming A Car Lease Transfer
It’s easier to buy a new car than it is to sell it. The same applies when it comes to car lease transfers. Like we had earlier mentioned, a car lease swap or a car lease transfer can be a great deal for all the parties involved in a car swap. However, one needs to tread carefully and weigh all their options before signing on the dotted line. There are a few factors to consider before assuming a car lease transfer. Some of these include:
1. Financial Companies
Before you consider either buying or selling a car lease, it’s imperative to consider how the financing company treats car lease transfer matters. This is because some banks and car financing companies may have restrictions on the same. In this case, you’ll need to find out what the restrictions are and how they can impact your deal. As a prospective lessor, you may also want to carefully reexamine your credit. Most, if not all, financial companies will need to run a credit check before they can approve you for a lease swap as hinted out earlier.
2. Car Mileage
A car lease swap comes with its own set of limitations. Among them are mileage limits. Before you go ahead and assume a car lease from a previous lessor who is selling the remainder of their lease, it’s imperative to consider your daily driving habits along with the previous lessor’s mileage and compare this against the mileage limits set by the financing company. For instance, if the lease permits only 10000 miles per year, you’d want to ensure that the vehicle has at least less than 20000 miles depending on how long you intend to use the vehicle. Failure to do your math right could see you breach the contract by going beyond the mileage limit, which may lead to extra charges or render the lease invalid in a worst-case scenario.
Before taking on the lease, it’s overly imperative to assess if you’ll keep within the mileage limits or exceed them during your ownership. However, you’ll come across car owners who’ll be willing to offer some sort of cash incentives to help cover some costs when the mileage is already too high.
3. The Condition Of The Vehicle
One of the standard requirements for car lease transfer is that the car has to be returned in a reasonable condition. There is no easy way to get around it because the dealership or owner will have to carefully check and examine the vehicle for damages. So, for anyone seeking to take up a lease transfer, it’s imperative that they carefully check the condition of the vehicle before signing the documents and leaving with the car. Failure to do this could see the secondary lessor fork out money for repairs on faults they weren’t responsible for in the first place.
The condition of the vehicle is often defined in the lease agreement, with particular points such as the size of the scratches, the depth of the treads, and so on. While some damages may be easy to locate, some may need a third eye, such as hiring a professional mechanic to check on the car’s mechanical integrity and structural condition. Additionally, you don’t want to be one of the many unsuspecting buyers who takeover on the lease of a car that was involved in an accident and was patched up remarkably well to conceal the dents.
Most leases will require that the lessee takes care of the maintenance costs so as not to invalidate the vehicle’s warranty. When taking up on a lease, ensure to check for proof that the previous owner was regularly serviced the car. Take extra caution on vehicles leased out because the driver couldn’t afford the repayments. This is often an indicator that they were also unable to take care of the car’s regular maintenance needs.
5. Running Costs
Now, on top of the obvious monthly deductions and fueling the car, you may also be required to pay lease transfer taxes just like you would when selling or buying a new car. It’s imperative to check with your state if the same applies for a lease transfer and how it’s calculated whenever the payments are due. Additionally, car insurance is another significant cost to put into consideration. You may be required by the financing company to take comprehensive coverage for unforeseeable circumstances.
That having been said, it’s important to ensure that all considerations are taken into account before taking up a car lease transfer. Leaving out even the simplest of things in your checklist could mean additional costs or breach of contract. Let’s now take a look at the pros and cons of taking on a car lease swap.
Pros Of Car Lease Transfer
One of the perks of taking on a car lease transfer is the fact that you’ll be driving a car you would otherwise not afford. In addition to this, you have a wide variety of cars to choose from, ranging from luxury cars to economic ones.
2. The Time Factor
Most people are not looking for a car they’ll own for a lifetime. Factors such as work, medical conditions, and finances are but some of the reasons most people prefer car lease transfers. Most leases last for two to three years, a majority of which don’t get to full term.
Compared to buying or financing one, leasing a car means that you’ll only be committed to it only for some time. Vehicles, unlike real estate, do not appreciate in value. Buying a new car means that over time, it’s going to lose its value, making it an investment less worth investing in accord to some savvy consumers. To some, a car is a ‘basic’ necessity, whereas to others, it’s a necessity of the short-term.
4. Better Incentives
Car lease swaps have been on the rise over the past few years. This means that completion is high and thus the need to woo in customers. Lease sellers will often throw in cash incentives to sweeten the deal… say two or three months of lease payments taken care of. Come to think of it, it’s not only an upfront cost taken care of to the lease seller, but also to the person taking over the car lease.
The Cons Of A Lease Takeover
1. Extra Costs On Mileage
As earlier mentioned, one thing you want to always be on the lookout for when taking up a lease transfer is the mileage limit. Once exceeded, it translates into additional costs. The extra miles are calculated as additional repair and maintenance costs. Most car leases have a limit of 12000 miles attached to them and for every mile exceeded you pay a fee of 10% to 20% when you turn in the car. You’ll, therefore, need to always keep tabs with your odometer reading, looking at it every time you turn the ignition.
2. Wear And Tear
As earlier mentioned, one of the basic requirements for taking up a car lease transfer is that the car must be returned in good working condition. There is, of course, the acceptable wear and tear factor, but then, anything beyond this could mean additional problems. That’s why it’s recommended to have a reputable mechanic or vehicle service checking it during the period the car is in your possession. As a lessor, before you take over the lease, you need to also ensure that you’ve properly checked the condition of the vehicle.
As you can see, you have a lot on your plate to cover before you can decide whether to buy or lease your next car. We’ve simplified it for you by providing all you need to know about car lease transfer and how it works. Despite the few tough consequences, requirements, and limitations here and there, the benefits of leasing outweigh those of owning one for short-term use.