A lease assumption allows one person to assume an in-process lease from another person. For example, if your neighbor had 18 months left on his car lease, and you wanted to take over his lease, you would simply assume his lease and start making the payments each month for the remaining 18 months.
At the end of the term you would turn the car into your leasing company just as you would if you had leased the vehicle new. The process itself is relatively easy to understand and can provide a great deal of benefit and financial incentive if you use a lease assumption to your advantage.
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For the Buyer (the person assuming a lease) you are able to take over an existing lease with no money down and with a shorter lease term than you would normally have to take on if you were to write a whole new lease. In most cases it is difficult to even find a “short term” lease these days with the average lease term ranging over 40 months.
Assuming a lease can save you thousands of dollars and only require a short term lease agreement.
In many cases, Sellers (those looking to hand over their leases) are willing to offer Buyers incentives in the form of cash or other terms that are exciting to Buyers. We have seen cases where Sellers are willing to write checks as large as $15,000 to walk away from their lease obligations! The incentives offered are typically in proportion to the size of the lease and the intentions of the Seller.
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As the existing holder of a lease (let’s call this person a “Seller”), they are already bound to a leasing contract for the duration of their remaining term. In order to exit that lease early, they would have to pay thousands of dollars in early termination penalties to their leasing company.
The leasing company is under very little incentive to allow the Seller to return your vehicle to them. They lose thousands of dollars instantly when a vehicle is turned back in early.
The alternative is to find someone else who would like to assume a lease, allowing the Seller to walk away without paying these stiff penalties. In some cases they may offer a cash incentive to a Buyer to make their deal more attractive than a new lease or competing deals.
It’s important to remember that when signing a lease you have a contractual obligation to the leasing company for the entire term of the lease. It’s not a month-to-month rental, so your obligation is not just the monthly payment, but the entire amount of the lease, which usually totals tens of thousands of dollars.
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Ideally you would like to find a vehicle that has a low monthly payment, has at least 1,000 miles per month available to drive, and is in your area. Finding a short lease term is often of interest as well, but some people plan on keeping their leased vehicle for some time, so they prefer a slightly longer term.
It is possible to sometimes find a lease that is just an absolute steal. But always be aware of all aspects of the deal, including the residual and the allotment of miles left on the lease term. Here are some of the most popular criteria customers search for:
Monthly Payment - Is the price lower than what a new lease would bear? If not, remember that you are not required to put any money down on this lease.
The monthly payment on a lease assumption can be greatly affected by cash incentives and other offers.
Cash Incentive - Sellers will often provide Buyers with cash incentives to make their leases more attractive. Incentives can range from covering a single month’s payment to thousands of dollars in cash. Sometimes you will see a lower monthly payment listed which includes the cash incentive which means the actual payment may be higher than listed. To be certain, consult the Seller and ask this question directly before proceeding.
Location - Is the vehicle in proximity to you? If not, there are a number of options. Some people prefer to pick the vehicle up themselves by flying or driving to the car and taking it home. If neither of these options works, a vehicle can typically be shipped nationwide for between $500 to a $1,000.
Miles Allowed - This will be different for every vehicle, so you need to pay attention to this. In a case where the Seller has more miles available per month than the average lease, this lease is worth quite a bit more if you plan on driving a lot of miles. Look for deals on mileage allotments!
Lease End Buyout - This is the amount the vehicle is available for at the end of the lease (also called the "Residual Price"). Sometimes you can find a great price on a car at the end of the lease. In other cases the Lease End Buyout may be very high, which means that it will cost you a great deal more if you wish to buy the vehicle at the end of the lease.
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Whether you are using an on-line Web site or your telephone, there are a few key questions you want to be sure to ask before negotiating your lease assumption. In most cases the car will not be readily available to preview in person, so it’s important that you ask questions that can give you a good feel for the vehicle’s condition.
In addition to the condition report, you also need to know the condition of the lease itself so that you are not getting yourself into hot water with a lease assumption that is not being fairly represented.
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- What is the condition of the car?
- Dents? Dings? Scratches?
- Stains in the interior?
- Are the windows free of scratches or dings?
- Has the car been smoked in?
- Have there been pets in the car?
- What is the most current odometer reading?
- Does the payment listed include taxes? Is it modified at all from the original lease contract?
- Are there any options or features not listed in the ad?
- How much wear is left on the tires?
- What are the over-mileage fees on the vehicle?
- Are you willing to pay the shipping costs (if necessary)?
- Are you offering a cash incentive?
- Pay a month's payment (or two)
- Flat cash settlement at signing
- Cash amount to account for potential over mileage
- Is there an accident report available for this vehicle?
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Do NOT be afraid to negotiate your lease assumption with a Seller! Seller's are often more willing to negotiate the terms of the transaction than you think.
Your lease assumption is absolutely negotiable, but you need to understand what is and is not negotiable. Negotiating with the Seller is easy to do and can be done through e-mail if you are uncomfortable negotiating over the phone or in person. Typically it is not unreasonable to ask the Seller to offer some sort of incentive if the deal is not already below market. This may be one month's lease payment, a few hundred dollars or an aftermarket stereo that is left in the vehicle.
Your options are endless, but it never hurts to ask.
| Negotiable |
Not Negotiable |
Cash Incentive
Keep aftermarket items (speakers, stereo, cosmetic improvements)
Payment for over mileage fees
Who pays shipping
|
Term of Lease
Over mileage fees
Taxes
Lease End Buyout
|
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The fees associated with lease assumption are relatively few and inexpensive. Here are the fees you need to consider:
Registration Fee – Some classified services (such as Swapalease.com) require a fee to begin a lease transfer.
Credit Application Fee - The leasing company that you are assuming a lease with may charge a credit application fee that may or may not be refundable. This varies by leasing company.
Vehicle Inspection - This charge is not necessary, but often recommended. A thorough vehicle inspection can be performed on a vehicle prior to lease assumption by a third party vehicle inspection service. Typically these services only cost around a hundred dollars and are well worth the investment.
Transportation - Not every lease transfer is going to require special transportation of the vehicle.
Vehicle Registration - Once you obtain the vehicle, you will need to register it, no differently than if you were to buy it outright. Contact your local Department of Motor Vehicles to determine what vehicle registration charges may be applicable in your area.
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Once you and the Seller have come to an agreement regarding your deal, your next step is to begin the lease transfer process. This process can take as little as a week and as long as three weeks depending on you, the Seller, and the leasing company.
The best place to start is with a credit check. The leasing company typically requires the new lessee (you) to have as good or better credit than the person you are assuming the lease from. This is no different than buying a car on a lot from a dealer. In either case the leasing company wants to make sure you are a good potential customer. It is our experience at Swapalease.com, having dealt with thousands of lease assumptions, that leasing companies do not lower their credit expectations for lease transfers.
To initiate your credit check, simply contact the leasing company whom you want to transfer your lease with and request a lease transfer application. The application will look similar to a new lease application. Once completed, send this application back to the designated fax number or mailing address. The leasing company will review your application and contact you directly regarding your status. Once you have been approved, you can then begin the Lease Transfer Paperwork. Once you and the Seller have come to an agreement regarding your deal, your next step is to begin the lease transfer process. This process can take as little as a week and as long as three weeks depending on you, the Seller, and the leasing company.
The best place to start is with a credit check. The leasing company typically requires the new lessee (you) to have as good or better credit than the person you are assuming the lease from. This is no different than buying a car on a lot from a dealer. In either case the leasing company wants to make sure you are a good potential customer. It is our experience at Swapalease.com, having dealt with thousands of lease assumptions, that leasing companies do not lower their credit expectations for lease transfers.
To initiate your credit check, simply contact the leasing company whom you want to transfer your lease with and request a lease transfer application. The application will look similar to a new lease application. Once completed, send this application back to the designated fax number or mailing address. The leasing company will review your application and contact you directly regarding your status. Once you have been approved, you can then begin the Lease Transfer Paperwork.
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After you have been approved for a lease transfer, the leasing company will then send the appropriate transfer paperwork to both parties. Often this information is sent directly to the Seller because they are the party that is still legally bound to the vehicle. Once the paperwork is received, the Buyer (you) and the Seller then arrange to either meet or initiate the paperwork signatures through the mail.
In the event of a long distance transfer, it is customary for the Seller to arrange for transport with the Buyer ahead of the final signing of the lease paperwork. The reason is because the Buyer cannot be fully assured that the vehicle is in its stated condition until they see the vehicle or have it inspected. Upon delivery the Buyer must agree to sign the paperwork within a stated period or ship the car back. It is highly recommended that in the case of a long distance transfer the Buyer and Seller agree to a 3rd Party Inspection Service prior to shipment. For a hundred dollars or more it's well worth the investment.
When the vehicle arrives or when you go to see the vehicle you will often sign your transfer paperwork at this time. Typically a Notary Public is required to approve these signatures so make sure you are in proximity to a bank or other location of one of these officers. Remember that the car is not "yours" until you sign and notarize the transfer paperwork.
Be absolutely certain that the Transfer Paperwork you sign is exactly what was stated in previous conversations. The moment you sign that document you are liable for the rest of the lease! Drive Away!
Once both parties have signed their respective documents, the Lease Transfer Paperwork is sent back to the leasing company and you are now the (lease) owner of your new vehicle! Soon after you will receive documents in the mail that will let you register the vehicle and transfer the license plates.
Sometimes people ask whether or not to leave the license plates on the vehicle at the time of transfer. If possible, we recommend that you do.
We also recommend that you get your vehicle transferred and registered as quickly as possible so as to avoid any issues between registered vehicles. Also, you will want to insure the new vehicle in your name as soon as you take possession, just in case.
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Each leasing company differs, so it is important to research your leasing company to determine what needs to be one at the end of the lease. It is important to recognize that the leasing company that leased the vehicle to the original lessee maintains ownership of the vehicle once you assume the lease. Some leasing companies require the lessee to deliver the vehicle to a local dealership, whereas others might demand that the vehicle be dropped off at a designated auction lot.
Your leasing company can provide you with the location of your nearest drop-off point. It is important that any damage to the vehicle be repaired prior to vehicle drop-off in order to avoid paying the premium fees that will be assessed by the leasing company for such repair work once the vehicle has been inspected at the drop-off point.
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