Many people find leasing a car as a cheaper option due to the affordable monthly lease payments.
However, due to unavoidable circumstances, you may need to swap your lease. It is expensive terminating your lease term before term expires. This is because you still have to clear your remaining monthly payments. You will also incur some penalties for premature termination. Here are a few ways to transfer your lease without incurring more penalties.
Swap lease with another buyer
This option requires you to find someone who is willing to lease your car and finish off the remaining payments. You will first have to confirm with your dealer whether this is possible before posing adverts online. Some carmakers do not allow transfers if they are done with the first 12 months of the lease.
You will need to check the fine print of your lease term for conditions. There are many car leasing swap websites, you just have to find one that works for you. Transferring current lease to another buyer does not absolve you from post-transfer liability charges. The other party will still be forced to pay any exit fees due. In case they incur excess mileage charges they will still need to pay.
Buy the car then sell it
The other option is to purchase the car under the early buyout option in the lease. This option is profitable depending on the remaining lease payments and the resale value. In this instance, you avoid paying any penalties for wear and tear. Next, check the current market value of the car. If the buyout price is lower then you have an opportunity to make a profit.
Selling to a dealer or private buyer
You can sell to the car dealership. They will check the value of the remaining lease repayments and value of the car. They will then buyout the contract and write you a check, which you can take to the leasing company. In this instance, you do not pay any sales tax.
Lastly, you can find a private buyer for the car. The buyer will buyout the contract, pay the remaining lease payments and buy the car. However, you may be required to pay sales tax for this.
Trade in the current car for another
If you are not cash strapped and have been eyeing another better car model, you can exchange your current lease for another. The exit fees will be included in your next lease payments. Due to your current financial situation, you may find yourself struggling to make monthly lease payments for a large vehicle. A cheaper car model may make sense in terms of lower monthly lease payments.
Car dealers are only the lockout for potential long term customers. When you trade in your existing car for another car model, you are not getting rid of the monthly payments but it gives you the satisfaction of getting a better car model or the latest one. The dealer will roll over your remaining car lease payments to the new deal.
Cost of prematurely terminating your lease
In most cases the lease terms specify a list of penalties that are due should you terminate the lease before it expires. The penalty also called early termination fee can either be a flat fee or calculated on reducing balance method. The figure is higher than your remaining lease monthly repayments. But, the biggest negative effect of early termination of the lease is that you will incur negative car equity.
The equity of a car during a lease is the difference between the value of the lease at termination and the market value of the car. If the market value is higher you have positive equity if it is less than residual value you have negative equity. Positive equity is good because it enables you to make a profit from resale of the car.
In addition, the lessor can include other charges like storage fees, unpaid taxes for the lease and cost of transporting the vehicle. Couple all those costs with an excessive charge for dents and you are looking at any charges. You should only result in this option after you have exhausted all other options.
Taking a lease for many business owners has enormous cost savings because interest payments on lease are tax deductible. It also offers many people to drive off with cars that they could not afford if the cars were new. However, terminating a lease is not easy. The consequences of negative equity and penalties make it extremely hard for people to prematurely terminate their leases.
There are various options available to car owners who no longer what to continue using their car and want to terminate the lease. In summary, the first option is to return the car and pay all the penalties that will be due before the expiry of the lease. This is the most expensive option and we do not recommend it. The next option requires the car owner to take advantage of the buyout option. In this scenario you buy the car in the middle of the term of the lease and then sell it to another buyer.
For this to work the market value of the car should be more than the equity value. If it is not you would rather wait for the end of the lease and just return the car. Before deciding to use this option check the terms of the lease whether they allow buyouts. Buyouts do not absolve you from repaying the remainder of payments in the lease. Thirdly, you can do a lease swap. There is someone who is interested in the car you are using. Once you have identified this person you can perform a lease swap with them and they take over the remaining of the lease.
Before the internet, it was hard finding someone for a lease swap but today their many websites that offer the service. You will be required to pay some fee to list on the website. The person you swap lease with is under obligation to continue following the lease terms.