How Car Lease Swaps Work
A 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.
People might look to transfer a lease because their financial situation has become more difficult, they have had a change in family circumstances, or they simply want to buy or lease a different car.
How to Swap a Car Lease
If the current owner of a lease wishes to transfer it to someone else, their first step should be to confirm with their finance company that it is possible. The seller also should check if the company charges any administration fees for transferring the lease, as many do. This can be as much as several hundred dollars.
Once it is confirmed that the lease can be swapped, it is then the responsibility of the owner to find someone to take it over. The simplest scenario is to find a friend or relative who is happy to take on the lease. Alternatively, if this is not possible, owners can advertise online or elsewhere. Sites that specialize in lease swaps offer the advantages of matching up suitable buyers and sellers and providing tools to calculate the costs associated with the specific transfer.
When a potential buyer has been found, the finance company will run a credit check on them, and confirm that they are able to afford the monthly payments. Assuming that their credit rating is high enough, they will be able to take over the lease on the same terms and the same interest rate as the person selling it. Once the buyer, the seller, and the finance company are happy with the arrangements, the paperwork can be completed to formally transfer the lease.
As part of the transfer, the new driver will be required to visit their state's department of motor vehicles to transfer the registration to their name and get new license plates if required.
Most leases specify a mileage cap, which is the maximum number of miles a car can be driven during the life of the lease. This often is fairly low a fee is charged for each mile over the limit. With a typical cost of 15 cents per mile, this easily can become expensive. Before taking on a lease, new drivers should check both the limit and the current mileage on the car and assess if they are likely to exceed the cap during their ownership.
This can be calculated by considering distance to work and other driving habits. However, as many lease owners are eager to transfer the lease, they may be willing to offer a cash incentive to help cover the cost if the car already has high mileage.
It also is a standard requirement that vehicles must be returned in reasonable condition at the end of a lease. When a car is returned, it is carefully checked by the dealership, and any damage must be paid for. For this reason, anyone seeking to take on a lease needs to carefully check the condition of the vehicle to ensure that they will not find themselves having to fork out cash for repairs.
The definition of reasonable condition can vary, so buyers should carefully check the lease agreement before taking it over to see if it specifies any particular points. This may include, for example, no scratches above a certain size, or a minimum tread depth on the tires.
While it may be easy to spot dents and scratches, other damage may not be so easy for the untrained eye to identify. It is always worth getting a trusted mechanic to check over the vehicle to make sure that it is in good structural and mechanical condition.
Sometimes cars are involved in accidents and then patched up before the lease is transferred to an unsuspecting driver. It also is possible—and sensible—to purchase an independent report from sites like Carfax.com or Autocheck.com that will reveal if the car has ever been involved in a serious accident.
Many leases also require cars to be maintained and serviced on a regular basis. Failure to do so may invalidate the warranty on the car. New drivers should ask for proof that the required services have been completed, particularly if the lease is being sold because the driver cannot afford the repayments.
In addition to the obvious costs of the monthly payments and putting fuel in the car, there are other expenses buyers should consider. Some states tax lease transfers just like they would a sale. Check with your state to see if this applies and how the tax is calculated and when payments are due.
Insurance can be another significant cost. Finance companies generally require that any leased vehicle has at the very least comprehensive and collision coverage, usually with a maximum deductible of $500. Furthermore, they may require the driver to also hold personal liability coverage. This is usually a minimum of $100,000 per person, $300,000 per accident, and $50,000 in the event of damage caused to property.
There can be both advantages and disadvantages to taking on a car lease swap, depending on the situation. Anyone taking on a car lease swap should consider all factors and make sure it is the right decision for their needs.
Lower payments than buying new
Good deals due to possible seller motivation
Lower miles than buying a used car
Limited savings compared to leasing new
Higher costs due to possible undetected damage/issues
Increased cost due to state sales tax, if applicable
Low-mileage swaps difficult to find
Benefits of Taking on a Car Lease Swap
A car lease swap is a way of being able to drive a vehicle you otherwise may not be able to afford. As car leases usually last between two and four years, and as it is often at around the midpoint of the lease that a swap happens, it is ideal for those who want to change their car in the near future, or get a feel for whether or not a car suits their needs before purchasing outright or taking out a lease on a new vehicle.
Moreover, as many of those looking to sell their leases are in a situation where they need to rid themselves of the lease as quickly as possible for financial reasons, sellers may offer incentives such as a cash payment and covering the transfer costs.
Disadvantages of Taking on a Car Lease Swap
As long as buyers have done their homework, there aren’t really any drawbacks to a lease swap. They get the benefit of a nearly-new vehicle at a good monthly cost with the reliability that comes with owning a newer car. They may even get a cash bonus from a lease seller who is keen to pass on the liability. Overall, with the proper checks, it’s a win-win situation for the buyer and seller.
However, perfect situations are difficult to find. Some sellers will be looking to transfer a lease because the mileage already is high or because there is some other issue with the vehicle. The buyer then needs to negotiate a fair arrangement to cover these additional costs. In situations when mileage is low and the vehicle is in the best condition possible, a seller likely will want to recoup some of the down payment, making for a more expensive deal for the buyer.