Early Termination of Lease
- Most leasing companies will allow a lease transfer.
- Online lease-transfer companies help match lease sellers with buyers.
- Costs of lease transfers are low compared to fees and penalties for early termination of lease.
Years ago, a new-car lease was a lot like a Roach Motel: It pulled you inside with the sweet smell of lower monthly payments; but once there, you found yourself trapped with no way out. It was a risky roll of the dice a lease holder made to drive more car than he could get with a conventional car loan.
That's the way it used to be. Early termination or breaking a lease was a major undertaking often with catastrophic results. Car leases were iron-clad contracts that the lease holder couldn't break without forking over huge fees and penalties -- sometimes in the thousands of dollars.
Car leases today are still iron-clad contracts; however, terminating one early no longer needs to be the savings account-emptying experience it once was. If you find yourself in a lease you no longer want or can't afford, you probably have a relatively inexpensive avenue of escape: Sell your lease.
There are online companies specializing in helping lease holders who need to terminate their leases early, find qualified buyers to assume them. Swapalease.com and LeaseTrader.com are the 800-pound gorillas of the lease-transfer industry, but there are others as well.
You may be surprised to learn that there are thousands of people out there searching for a lease to buy. According to Swapalease.com's executive vice president of operations Scot Hall, there were nearly 12 million searches for leases on Swapalease.com alone in 2012. He said there are a number of reasons for buying someone else's lease. Among the more common reasons is that some people simply like the idea of leasing a car for a few months rather than the 36-to-48-month terms of the average lease. Other lease buyers appreciate that because there isn't a new contract, they may benefit from any down payment the lease seller made up front. Finally, lease buyers also have the option of buying the car at the end of the lease; some take on the remaining few months of a lease just to get a deal on the car when the lease expires.
How does a lease transfer work?
Lease transferring works something like selling a car online. Based in Cincinnati, Ohio, Swapalease.com oversaw roughly 10,000 lease transfers in 2012. On its site, a lease holder who wants to exit the lease enters information about the make, model, year of the car, its features, as well as the number of months left on the lease, the monthly lease payment, contact information and so forth.
Swapalease.com posts the listing on its site where consumers interested in assuming a lease can view it. Once a buyer indicates he would like to move forward with a deal, Swapalease.com handles the specifics, working with the buyer, seller and leasing company in completing the transaction. "It's a dating service for leases," Hall explained.
If seller and buyer aren't in the same area, Swapalease.com and LeaseTrader.com can help with a third-party inspection and getting the vehicle shipped.
How long does it take?
The timetable for completing a sale from the initial listing until the final paperwork is completed has two parts: finding a buyer and finalizing the transfer agreement with the leasing company. According to Hall, lease sellers can expect locating a serious buyer to take from 30 to 45 days. Once the lease buyer is in place, the leasing company usually requires two weeks, on average, to complete the transfer paperwork.
What's the cost?
Online lease-transfer sites typically charge lease sellers to list their lease. At LeaseTrader.com the initial charge is $89,95, plus a $249.99 commission when an exchange is completed. According to Hall, Swapalease.com has a range of listing options with an average cost to the seller of $150.
Some leasing companies charge a transfer fee. Hall said such fees average $300, and are usually assumed by the lease buyer. This is in addition to a small fee to register as a buyer on the Web site.
When a lease holder is under pressure to sell quickly, he may consider sweetening the deal with a cash incentive to the buyer. This is a bonus of sorts to grab a buyer's attention, and get him moving. Even if it is several hundred dollars, it may well be less than the fees and penalties simply returning the car to the dealer might involve.
Can every lease be transferred?
In a word, no, but most can. Recognizing that transferring a lease creates goodwill with a current customer while adding a new customer, most leasing companies have relaxed their lease-transfer rules. Having said that, every leasing company treats transfers differently. Nissan's financing company won't allow transfers of leases with fewer than seven payments remaining, and charges the buyer a $250 credit-application fee. BMW's financial arm won't transfer a lease with less than six payments remaining, charges a $100 credit-application fee and a $400.00 transfer fee. Ford Motor Credit Company has no restrictions based on remaining payments and only charges a $75 credit-application fee.
Before listing a car with a lease-transfer site, check with your leasing company to determine any rules and fees it has.
What it means to you: It is likely that if you need or want to get out of a car lease, you can do it with the help of an online lease-transfer Web site. It isn't free, but certainly will save you money when compared to early termination fees and penalties.