If you’re in a car lease and want to avoid paying off the early termination fee, you may be able to get out of it with a lease swap, provided the leasing company formally agrees to the swap. Giving over keys and other people making payments isn’t enough. The one question that is commonly overlooked is whether the original lessee is totally excused from liability following the takeover. Confirm this in writing before giving or receiving money or property.

What a Lease Swap Actually Changes

Also known as a lease transfer or lease assumption, a lease swap is the process of transferring the remaining rights and liabilities of a vehicle lease to another person. The incoming driver assumes the car, monthly payments, remaining mileage, condition stipulations and end of contract duties for the remaining contract period.

Assume there are 14 months left on a 36 month lease, a monthly requirement of $429 and a $24,000 purchase option at the end. An approved buyer can take over those 14 payments and be granted the right of using the car as it was originally negotiated. The car is still leased not by either driver.

Lease assumption is not the same as co-borrower vs co-signer because the intention of the lease is not to have the person using and paying for the vehicle replaced with another co-borrower or co-signer, but rather to be replaced by the person using and paying for the vehicle. If the lessee who is first on the list stops paying, the contract determines whether that person is removed or not.

First Confirm That the Leasing Company Allows Transfers

The decision of whether a swap will occur is up to the leasing company. Some contracts will allow a complete transfer, some will only allow transfers within specific states or before a certain date, while others may not allow transfers. A private contract between two drivers can never take precedence over the contract itself.

Contact the lessor by phone (from the phone number listed on your statement) and be sure to ask if an assumption is allowed, what are the deadlines, who can assume, and if the original lessor is also released. The CFPB rules acknowledge that a consumer lease can be taken over by another party and that the lessor may require a fee to be paid for the assumption.

Go over the actual lease, don’t just take the dealer’s word for it or the word from the listing on the internet. Read about the transfer, assignment, subleasing, early termination, mileage, insurance, registration and liability. If a sublease is against the terms of the contract, the original lessee may be liable for any payments, tickets, damage, or breach of contract.

How the Lease Transfer Process Works

Typically the lessee calls the leasing company to initiate the process. The driver of the vehicle that will be driving then files an application and agrees to a credit check. Approval subject to income, payment history, debt obligations, residency, insurance and lessor underwriting standards.

Upon approval, the parties sign transfer documents and make the necessary charges. The vehicle might require a test, up to date registration, proof of insurance and an odometer statement. The lessor then confirms the date of transfer followed by an explanation of how future payments will be received.

Imagine that the application takes 10 days and the next $475 payment is due in 6 days. The lessee shall make such payment unless the lessor shall give other directions in writing. If it is not made on time, the existing account history may be hurt, and a late fee may be imposed.

Please do not approve release of the car on the basis of an approval e-mail only. When necessary, wait for final documents, check insurance, take photos of the car, note the mileage and retain documentation of the handover.

Add Up Every Cost Before Agreeing

Leases may have a low monthly cost but turn out to be a high price. The driver in the new car may have to pay an application fee, transfer fee, registration fee, sales or use tax, inspection fee, shipping, insurance premium (increase), and a cash payment from the leasing company that is the seller of the car.

Let’s take a look at a $700 ship-to, $300 lessor registration and tax and $595 lessor fee with 12 payments of $399. The other is $6,383, excluding insurance, fuel, maintenance, wear and excess mileage. When the lessee is being replaced and there is a $1,500 incentive offered by the outgoing lessee, the net reduces to $4,883.

Compare this total to either leasing or purchasing another vehicle for the same length of time. You will need to factor in the payment, the insurance, fuel, parking, maintenance and return payment amount. Inquire if there’s a cost for an online transaction, or if it’s a convenience cost.

For an incentive to be effective, it has to be offered to offset the negative aspects of the contract. If the vehicle is worn out, has minimal miles on the clock, or has four big tyres that are about to expire, a $2000 sum might not be sufficient.

Inspect the Car and Calculate the Remaining Mileage

The new lessee takes over the car and the requirement for the car to be returned in good shape. Check the body, glass, wheels, tyres, interior, keys, charging equipment and service history. Take photos of any existing scratches and if the lessor provides one, get an inspection report.

The mileage needs to be calculated separately. If the car has 24,500 miles on the odometer and 14 months remaining on the contract, how many miles have been driven during the lease?If the car has 14 months left on the contract, and 24,500 miles on the odometer, then how many miles have been driven on the lease? They have 11,500 miles left, or 821 miles a month. This would result in the car being driven 5,300 miles over the allowance per month.

That overage, at an illustrative $0.25 per mile cost, would run up a bill of $1,325. Then throw in a $600 tyre replacement and a $400 disposition fee and the seemingly great deal suddenly costs $2,325 more.

One way to track your spending is to track the expenses on the vehicles each month. The driver who is driving on board should check mileage each month rather than finding the problem at the final inspection.

The Original Lessee May Still Carry Risk

The safest way to make a transfer is to have the leasing company confirm that the outgoing lessee has been fully released. In some cases, the initial lessee may still have to pay if the new lessee doesn’t pay their bills, wrecks the car, goes over the mileage cap, or returns the vehicle improperly. This will vary in accordance with the contract and transfer documents.

A change of billing name does not mean that the document is a legal release. Request a copy of a document to show the effective date and if your obligation for paying is over. Store it along with the original lease, condition report, payment receipt and handover receipt.

This is because early termination of a lease may cost a lot of money. Early termination fees can be high and a driver can’t just drop off the car and call it quits, according to the CFPB. Before exploring options, if a formal swap is not available, request a written payoff or early termination quote from the lessor.

One of the best tips for a good credit score will be to ensure that no unnecessary late payments are made to any account. Please keep tracking the lease until the lessor has verified the transfer is completed and no longer responsible for your lease.

The Bottom Line

Always begin with the leasing company, NOT a swap site or private buyer. The transfers are OK, work out all the other expenses, check out the car, look at the mileage allowance and insist on a written note of who is still responsible. If you are an outgoing lessee, continue paying rent until the lessor has finished the transfer. If you are an incoming lessee, then only take the deal if the total cost and remaining miles are less than what you can realistically do.

Frequently Asked Questions

Is there someone willing to give me a ride in my car lease?

If the leasing company will allow transfers and the applicant is approved, someone else could be able to take over your lease. If you make an agreement with your lessor where you assume the responsibility for the payment, you are still responsible unless you make an actual assumption statement with your lessor.

What are the costs of a lease swap?

The fees for each contract can differ and include application, transfer, registration, inspection, tax and shipping fees. Before determining if the swap is cost-saving, include all remaining payments and any and all end-of-lease costs.

The transfer of the car lease affects the credit?

Late payments and other history reported on the account is not removed by a completed transfer. If not paid during the approval process or if the incoming driver still owes the credit and it is not paid, credit may suffer.