Car leases are designed to make acquiring an automobile easier and more flexible. It’s essentially just another method of car financing similar to the car loan. The biggest difference, of course is that your lease payments are not contributing to any equity in the car, unlike an auto loan. The only way to gain full ownership of the car is to pay the balloon payment at the end of the lease period.
For many, such a payment isn’t even a consideration because they plan to hand the car back at the end of the agreement anyway. For example, let’s say we have a young white-collar professional who has moved to a new part of the country for a fixed period of assignment at a regional headquarters of a bigger company based in New York. Their contract to be there is 3 years, and will lead to bigger and better things. They know they’ll need a car in the new location, but have no desire to own one fully given that they will be moving back to NYC in 3 years. In this situation, a car lease is perfect.
Car Lease Transfer – Changing Circumstances
When our young professional moved to the regional headquarters, they leased a smart Audi A4 to use for commuting and general life. Everything was going great for the first 2 years, in fact it was fantastic. After 2 years at the regional office, our professional is invited back to New York early to take up a mid-level position at corporate headquarters. They are obviously thrilled, but what about the car lease? There’s still a year to go and there’s not enough money to buy it outright. That was never in the plan, after all. The fees for ending the lease early will be huge, too.
It is in situations like these where people decide to take an alternative route to ending their lease early — lease transfer. In this case, our exemplary professional is going to transfer the lease over to his colleague at the regional office. She makes the same salary and so can afford the monthly payments. How will they get started?
How to Transfer Your Lease to Another Person
Below we will walk you through the process involved in transferring your car lease to another party. It sounds a little dodgy on the surface, but in fact it’s an increasingly common practice by those who find themselves wanting to exit a car lease early without enduring the financial penalties involved, not to mention potential damage to their credit rating.
1. Research Lease Swapping/Transferring Platforms
Two of the biggest platforms that can offer you this service are:
While these sites are competitors, they offer the same basic service. What they do is they connect you as a lessee with someone hoping to take over a lease on the car that you have or at least a car like it. The systems on these sites help to make the right connections that will be approved by the lessors (the party from whom you leased the vehicle).
In the case of our imaginary scenario described above, the professional returning to New York doesn’t need to use one of these platforms because he already has one of his professional peers ready and willing to take over, and given that they have the same income you can be confident that there won’t be too many stumbling blocks.
2. Contact the Lessor
Once you are connected with a potential transfer candidate in your own circle or someone you’ve been connected with on a lease swapping website, it’s time for the all-important second step which is informing the lessor of your desire to make the transfer.
Despite what you might think, car leasing companies and dealerships are surprisingly open to the idea of lease transfers, just so long as your new proposed lessor meets their main requirements. You might have in your mind the need to plead your case with them over the phone or in person at the dealership, like begging some ancient king for a favor, but in fact it will likely all be very amiable.
Why is that? Dealerships are only in this lease for the money that they take each month and eventually for the money they’ll make either selling the car to the lessee, or taking it back and selling it as a certified pre-owned vehicle. Who is paying that money is a matter of supreme indifference to them.
3. Credit Check
Upon contacting the lessor and announcing the plan, they will require that the new lessee submits an application and passes a credit check before the transfer of the car lease can be confirmed. The credit check is the most important step because that’s the part that tells the lessor whether or not the new lessee will be able to keep up with payments as you have. This is why platforms strive to connect people with the right leases based on their location, budget, income, etc. It minimizes risk and connects you with lessees who are not likely to be refused.
4. Making the Transfer
Once the new lessee is approved, there are usually some transfer papers to do, and there could be a fee for you to pay to complete the process. This depends on the individual policy of the leasing company and dealership. It might even be the new lessee who pays. One more consideration is that there could be a condition that you, the original lessee, are still liable for payment if the new lessee defaults on payment. Once again, this is not universal, but is known to happen in some circumstances. Ultimately, many things depend on how long is left on the lease and how much the monthly payments are.
Why Would You Transfer Your Lease?
In the scenario with our white-collar professional, a sudden change in job circumstances was what prompted them to make the transfer to another lessee. A new job in a place where your lease car is no longer a necessary tool is just one of the reasons that people decide to transfer their leases, however. Below are some other common reasons:
1. Monthly Payments Become too Much
Financial circumstances can shift just as easily as one’s job. In fact, the two may be linked. Let’s say you lose your job and find yourself struggling to make payments on the lease. You can make it through the next few months, but after that it’s going to be impossible. A transfer is an easy way to take the burden off of your shoulders.
2. You Need a Bigger Car
The typical car lease is about 3 years in length. When you take out a lease that first year, you might be just starting out in a new relationship. After the first 18 months, you might be married to that person and expecting triplets. It could happen! Whether it’s like this or happening within some other time frame, the sudden need to accommodate more passengers in the car can quickly come about, and not necessarily in line with your car lease dates. A transfer allows you to quickly exit one lease without any penalty, and take up a new one for a more suitable vehicle.
3. You Hate the Car
We can’t discount personal taste and driving experience from the equation. Many people are taken in by car brand advertising, only to discover that the real experience of driving this car is quite far from what they imagined or wanted. Imagine, then, being stuck with that vehicle and paying for the privilege of driving a car you so dislike for up to 3 years, and possibly more if you took out a longer lease. Transferring the lease is a neat solution to this problem.
Lease Swapping: Consider all the Options
One more thing to consider in some of these circumstances is that the original leasing company might actually be willing to let you swap to a different vehicle, possibly with some minor adjustments to the lease agreement depending on what kind of car you swap to. They are just as keen to keep you as a customer, and can always lease that vehicle to someone else, or just sell it as a pre-owned car. Leasing is a competitive game for dealerships and other companies who do it, so they’d likely prefer to keep your custom if they can. Approach them about it and see what they say.
When it comes to transferring your car lease to another person, the most important thing of all is to get the approval of the lessor and do everything by the book. If you take matters into your own hands, you will just create more problems than you solve.