A lease takeover is one of the best ways you can have a new car while on a budget. A car lease takeover is basically as its name suggests: you take over the lease, which is like renting a car. An individual, known as the lease seller, sells their lease to you because they want to end their lease contract early for whatever reason they may have. As the one taking over the lease, you are known as the lease buyer. Hence, in this agreement, you are not only taking over the car itself, but you are also assuming the lease contract, and all its terms and conditions. In Canada (and the rest of the world, in general), this is a prevalent form of arrangement, particularly for those who are looking for the cheapest option to pay for their car.
Although a lease takeover can save you a few bucks the moment you take over the car, it can lead to costly mistakes in the future if you do not pay attention to the details of the vehicle and the contract as a whole. This article is here to help you out by giving you the nitty-gritty of everything you need to know about a car lease takeover.
To start, watch this video, which can give you an overview of everything that you need to know about a car lease takeover:
Different Types Of Lease Transfers
Car lease takeovers are not just limited to one kind. There are also specific details that can give various types of lease transfers. Before you even meet with the car lease seller, make it a point to be aware of the different types of lease transfers. Right then and there, you can decide the lease takeover you prefer. When you meet, you can then double-check with the lease seller if they are willing to go for the type of lease transfer you desire.
Three of the most common types of lease transfers include:
- Full lease transfer, whereby the lease seller walks away clear of any liability the moment you sign the contract to take over the lease.
- Transfer of equity, whereby the lease seller remains as a liable party on the lease contract. In this type of contract, the lease seller is generally referred to as the consigner.
- No lease transfer is permitted, except in certain conditions, such as the military deployment of the lease seller.
Advantages Of A Car Lease Takeover
To begin on a positive note, you must first be aware of the advantages you can gain from a car lease takeover. These are some of the following:
- You Will Enjoy A Wider Range Of Options
Car lease terms usually range from two to four years. Somewhere in between, lease sellers may decide that they want to end their lease contract, hence, sell the remaining of what is left from their broken lease contract. If you are looking for specific models—which are usually new yet not popular enough to be in used car shops, but are used enough to not be in a brand-new car dealer as well—you will find these through lease sellers. Generally, you are going to be presented with a wider variety of options you can choose from. If you are taking over a one-year-old or two-year-old car from a lease seller, and you find the particular make, year, and model that you are looking for, that is already a good enough deal.
- You Will Spend Less
This is also one of the most apparent benefits of entering into a lease takeover agreement. It is going to cost you less than other more traditional forms of owning a car, such as buying a brand-new or used one. In most lease takeovers, you won’t even have to pay for a down payment anymore. In effect, you are only paying for the remaining amount of the car or the depreciation, and the remaining years that you have it at your disposal, as stipulated in the contract you are assuming.
In addition, you get to enjoy lower monthly payments, aside from a lower purchase price, in a lease takeover.
To be a hundred percent certain, you can consult websites like LeaseCosts.ca about the costs that you will entail from taking over a car lease.
- You Have The Freedom To Own The Car For A Shorter Time
While there are car owners who hold on to their cars for a very long time, there are also those who want to own a particular car for only a short period. Most car owners want to first see whether or not they want to own a car. If you are that type of person, a car lease takeover is perfect for you.
For instance, if you are taking over a car during its halfway point, with only two years left on the contract, this is only a two-year liability on your part to hold on to the car.
The Disadvantages Of A Car Lease Takeover
As is the case with any form of contract, there are also disadvantages to a car lease takeover. After all, no deal is perfect. For you to avoid the pitfalls of a bad car lease takeover, it is best to also be aware of the potential disadvantages or risks of this type of agreement. Some of these risks include the following:
- You Are Going To Be Bounded By Distance Limits
Car lease contracts are usually bounded by a distance limit every year. For a leased car, there is generally a 12,000 mile-limit for a year, lest you be charged with a penalty of 15 cents for every mile that is over the limit once you return the car. Hence, before you take over a lease, you should always check the odometer. Be sure that you have enough mileage left for the number of years that you have on the lease contract that you are assuming.
- You Might Be Charged For The Wear And Tear Of The Previous Owner
In a lease takeover agreement, you are generally taking over a second-hand car. It is inevitable, therefore, that there might be damages on the vehicle for which you might be held responsible as you return the car on its end term. As much as possible, bring your own mechanic as you inspect the car, so that you are already made aware of any possible defects. If there is anything that you are skeptical about, then maybe it’s best for you to look for another leased car to take over instead. In Canada, you will find many.
As you inspect the car, also remember to be on the lookout for the following documents:
- Car inspection
- Car history
- You Might Be Paying For Hidden Expenses That Can Be Costly
Unless you are going to have the car checked thoroughly, you might be spending for more instead of being able to save. This is one of the inherent disadvantages when choosing a used car instead of a brand-new one. Remember that your main goal is to save on expenses, not to spend even more. Hence, you might be suffering from hidden costs that you will discover later on, which can hurt your pocket. This is one prevalent risk with purchasing used cars in comparison with brand-new ones.
With this list of disadvantages, it is safe to conclude that the benefits still outweigh the costs. At the end of the day, the choice boils down to a matter of personal preference.
Common Car Lease Takeover Restrictions
Car lease takeover contracts do not just have two principal parties, which comprise of the buyer and the seller. There is also the car company, which sets restrictions that you have to comply with. Apart from that, there may also be government regulations and restrictions that may or may not let you opt for a car lease takeover.
Some of the common car lease restrictions include the following:
- Some car companies do not allow a car lease takeover when there are just 12 months left on the lease contract.
- Some car companies also do not allow a car lease takeover if you are not from Canada or perhaps neighboring regions within Canada.
Before deciding to go for a car lease, be sure that you make yourself fully aware of all the restrictions first.
Steps On How You Can Assume A Lease (For The Lease Buyer)
Assuming or taking over a lease contract is a legal procedure. There are formalities you have to go through and papers you will have to complete. To guide you, here’s how you can assume a lease, including some tips:
- Be prepared to have your credit checked by the lease seller. They will have to do this as a means to ensure that you are financially capable of taking over the lease and that they will not fall into any liability due to your failure or inability to pay. If you feel like your credit score is bad, then you might want to improve your credit score first before you even take on the responsibility of assuming a lease. For instance, start paying off your credit card balances.
- Learn how to negotiate with the lease seller. More often than not, they are more than willing to negotiate the price just so they can successfully leave the lease contract, which is something that they intend to do in the first place.
- Select the right websites for you to find possible lease transfers online. Thanks to technology, there are numerous lease transfer websites that can make the whole process easier for you. These car listing websites present you with a wide variety of options, all at the tip of your fingers. Especially if you are a beginner, it works to your advantage to have a strong support system. However, with the numerous car lease websites available, make sure that you are trusting one that is legitimate and credible.
Steps On How You Can Transfer A Lease (For The Lease Seller)
This section applies if you are the lease seller or leaning towards becoming one. As the potential lease seller, there are procedures you will also have to comply with first. It isn’t as easy as drafting your contract and having a buyer sign it. The basic procedural steps that you will have to comply with include the following:
- Confirm with your car finance company if a lease transfer is possible. You have to be a hundred percent certain that what you intend to do is being allowed by the company. Otherwise, you might be entering into an invalid or an illegal contract, which has serious consequences.
- Check for the charges that you will have to pay for due to the lease transfer. When you do this, you are more aware of the costs that you will be facing, and if these costs are something you can afford at the moment.
- Find a lease buyer. This step is often one of the most challenging one that you will have to go through. You cannot just rely on any stranger to take on the lease, lest you fall into a liability should the lease buyer suddenly discontinue paying for the monthly payments. As much as possible, it is highly recommended that you trust only close friends or family members as your lease buyers.
When you have found a lease buyer, run a credit check on them, together with the finance company, so that you can be better assured that the potential lease buyer can afford to assume the liability of accomplishing the necessary monthly payments.
Now that you have a substantial background about car lease takeovers, you can be a more responsible car buyer. The bottom line is this: whatever manner it is that you are going to buy your car, always familiarize yourself with the details of your contract. Do not haphazardly sign a contract you are unfamiliar with. Remember that with your lease takeover, you are trying to take advantage of the best deal possible for your car ownership. Depending on your preferences and circumstances, a car lease takeover can often end up being one of the cheapest and best ways you can own a car.