Car Lease

Let’s start by redefining what a lease is. It’s really just a fancy way of financing your car. Instead of buying the car forever, you are financing it for just the length of time you wish to use it for. Because of this, getting out of your lease isn’t much different than getting out of a car you have a traditional loan on. However, it may be harder because you are likely to have negative equity. The reason for this is that you have financed just a portion of the life of the car, and the depreciation rate in the first few years is higher, so the amount you’ll owe will likely be more than the car is worth.

While it is possible, be careful. If a dealer tells you not to worry about the miles or negative equity if you lease/buy another one, it’s a blatant marketing tactic. They will not forgive the overages; they don’t own your lease, the bank does. They will simply roll over this amount into your next car and not tell you. Then you’ll end up with negative equity on that one too.

If You Are Over Your Allowed Mileage

First, determine how much you would owe if you returned the lease with the excess miles. Then, you also want to find out how much your car is currently worth. Sometimes, your car is worth more than you think, and just selling it outright instead of turning in the lease works in your favor, and you’ll only owe a little bit.

You may be able to roll over the negative equity into a new loan or lease.  The mileage overage charges may be able to be rolled over into a new loan, but usually only if you buy or lease a car of the same make. Of course, you can always pay the balance you owe for the overages.

Then, of course, the other option is to buy out your lease and keep the car. In some cases, that is the best way to avoid the huge fees you would pay for driving over the mileage. However, be sure to finance through your own bank so you can avoid the fee the dealer may charge.

Getting Out of Your Lease EARLY

If your life changes and you can no longer afford your car, or you need a different car entirely, getting out of a lease can be tough. Leases are set up on a three year term typically so that you can eat some of the worst depreciation at the front end. The newer your lease is, the higher your negative equity likely is.

Getting out without a big financial hit is nearly impossible, but you can get out. Some leasing companies require you to make all of the remaining payments and pay an early termination fee on top of that. At that point, turning in the lease doesn’t make any sense.

You can try to roll over the negative equity into a new vehicle like mentioned above. But then you are simply financing two vehicles, which is financially not practical.

None of these options are helpful if the reason you need out of the lease is financial reasons.

You can typically sell a leased car privately, just the same as you can a car with a loan on it. While sometimes the leasing company may require that you buy it from them to get the title first, others may transfer the title after the financing company and the leasing company work out the details.  You may need cash to cover the difference in the selling price and the lease payoff amount, but it will likely be much less than just turning the lease back in and paying all the payments.

Lease Swapping

Sometimes you have a friend or family member that might be open to taking over the lease. That could work, but usually you’re looking for a stranger to do this on what probably is a lease swapping site.

car lease swap, or transfer, is when a vehicle that is subject to an auto lease is transferred from the current driver of the car to a different driver. Along with taking on the running costs of the car, the new driver takes over the lease on the same terms as the original owner. This includes making the same monthly payment for the same remaining duration and ensuring that it is returned in an appropriate condition.

Before you go this route, make sure your leasing company allows this, and if they do, how much the fee is. If your lease can be taken over, you can list it on a lease swapping website – there are many to choose from.   Most charge a fee of around $100 to advertise your vehicle, as well as a “commission” when you transfer your lease.  The lease swapping site helps facilitate the transfer process and paperwork with the leasing company.

Of course, just because you advertise your lease doesn’t mean someone will want to take it over. Usually, they only want to do this if they are getting a great deal, or else they would just get their own lease.

Most of the vehicles listed on lease swapping sites are luxury vehicles – BMW, Mercedes, Lincoln, Porsche, Cadillac, Alpha Romeo, Audi, etc.  This isn’t surprising. Since the leases can feel more affordable, people can spend beyond their means on a vehicle they cannot afford.

Some sellers offer cash to make the payments lower, making the lease takeover more attractive. This helps if the seller originally rolled in negative equity and the payment is too high, or if they have used most of the mileage allowance. So there’s a cash incentive to effectively lower the monthly lease payment, making the car look more competitive.

If you find someone to take over your lease, the leasing company will still have to approve them based on their credit.  The transfer process can take up to 4 weeks then it will have to be registered. They will have to pay any taxes and fees required by the DMV. They will also be subject to the mileage restrictions of the original lease.

Is taking over someone else’s lease a good idea?

If it’s a good deal, buying someone’s lease can be a great way to drive a car you might not be able to afford for a short time. Of course, with reward comes risk.

Do your research before you take the plunge. Make sure the car itself is in good condition by getting an inspection. Determine the actual value of the car so you don’t overpay. Don’t pay too much! Sometimes it’s cheaper to negotiate a new lease of your own.

While getting out of a lease can be difficult, it’s not impossible. Call me, The Car Chick, and I can help.

Photograph by snowing / Freepik