For those who like driving a nice set of wheels but can’t afford huge monthly payments, a car lease can be a tempting alternative to taking out a loan. But those benefits do come at a cost, one of which is flexibility. If you decide you want to return the vehicle before the lease expires, you’ll likely face some stiff early termination fees.
However, drivers who want out of their contract ahead of schedule can take heart – there are a few options that allow you to circumvent the usually harsh termination penalties. One frequently overlooked path – and often the least expensive choice – is to transfer the lease to someone else.
Suppose you have two years left on a three-year lease. Whoever buys your lease agrees to make the remaining monthly payments. While some finance companies don’t allow such transfers, the vast majority do. The trick is finding someone interested in taking the reins from you.
These trades can be just as advantageous for those assuming the lease. For one thing, they won’t have to put up a sizable down payment for the vehicle, which the original leaseholder has already done for them. Furthermore, some people only need a car for a relatively short period of time – say, one or two years. Taking over someone else’s lease is an ideal way to obtain a relatively new car for such a short period.
Keep in mind that getting someone else to assume your lease usually isn’t free. Using a trading website to facilitate the transaction will usually cost between $100 and $350. However, that’s a fraction of what most leasing companies will charge should you decide to return your vehicle early. Some finance companies also assess a lease transfer fee – typically around $300 – when you arrange a swap.
To sweeten the pot, you may want to consider offering an up-front incentive, say $500, to lower the payments the person you transfer to will need to make.
Before deciding to register with a lease-trading website, it’s important to perform your due diligence with both the company that holds your lease and the website. Here’s what you’ll want to know:
- Does your leasing firm allow transfers?
- Does the buyer take on full financial liability for the lease once it’s transferred? You could, for example, be liable if the buyer fails to make lease payments.
- If you (the original leaseholder) maintain some responsibility after the transaction, does the lease-trading website perform a credit check on the buyer?
Alternatives to Swapping
Depending on your goals, there are other possible ways to unload your leased vehicle. These include:
- Trading it in. Sometimes manufacturers will allow you to exchange your current automobile for a different model. This option is a mixed bag. In many cases, you still have to pay the early termination fees, although they’re rolled into your new payments. In other words, the pain is spread out over a longer period of time.
- Buying it. Often, the leasing companies will allow you to buy the car before the lease runs out. This is a course you might want to take if, for instance, you’ve passed the lease’s mileage allowance and you know you want to hang onto the car long-term anyway. The company should have a payoff schedule showing how much you’ll have to pay to make the car yours.
- Selling it. Another alternative is buying the car in the middle of the lease, if it’s allowed, and selling it to another party. Be forewarned: the payoff amount might be higher than the car’s market value, making the transaction a loss. But if selling the automobile is less expensive than the early termination fee, it’s something to consider. Do the math.
The Bottom Line
There are a number of ways to get out of your lease. Transferring the contract to an interested party can be a particularly appealing choice. Just make sure the financing company allows such transfers before you start.