Leasing a car is essentially like getting a long-term rental: Your lessor owns the vehicle, and you pay an agreed-upon monthly amount to use the car and drive it as though it were yours. But what happens if you can’t afford your monthly lease payments, or you want to stop driving the car before your lease period is up?
A lease takeover, also called a lease transfer or a lease assumption, is the process of transferring an auto lease from one person to another. If your lessor allows you to transfer your lease, you may be able to find someone interested in taking over your monthly payments and finishing out your lease. When that happens, you’re free to get a different car, although you may have to stay on the lease as a co-signer, depending on the terms of the transfer).
But an auto lease takeover can be tricky, and is only possible under certain circumstances. Read on to learn more about when it is and isn’t possible to transfer a lease.
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How does a car lease work?
As we explained above, you can think of a car lease as a kind of long-term car rental agreement. You and your lessor agree to a lease term, which is the length of time you’ll have the car (car leases generally last somewhere between 24 and 28 months). When leasing a car, you’ll typically also pay a down payment at the outset, then make monthly payments for the remainder of the lease term.
You’ll also have to pay for your own car insurance, and the lessor may set some rules and restrictions for you as a driver. For example, many leases only give you a set number of miles you can drive each year. If you exceed your annual mileage limit, you’ll be charged an extra fee. At the end of the lease term, you can return the car to your lessor and start a lease for a newer model.
Leasing a car tends to result in lower monthly payments than financing a car, and it lets you have a car without the hassle of ownership, but it also means you don’t build any equity, and you’ll need to keep making monthly payments for as long as you continue to drive a leased vehicle.
How to qualify for a car lease
The process for taking over a lease is different than applying for a lease outright, but in general, there are some things you should know about qualifying for a good deal on a car lease. Just like if you were buying a car, you want to shop around for the best options. Identify the right type of car for you and budget out how much you can afford each month, including insurance. Don’t forget, you may be able to negotiate the price of a lease.
When you apply to lease a car, the lessor will look at your credit score and your debt-to-income (DTI) ratio. If you don’t qualify at first, you can consider putting down a larger down payment, or find someone to co-sign the lease with you.
Transferring a car lease
There are several reasons why you might not want or be able to continue with your car lease:
If your financial circumstances change and you can’t afford your lease payments
If you don’t like the car you’re driving
If your needs change and you require a different type of vehicle
Different lessors have different rules for lease transfers, so check with your lessor and find out what’s possible before you make any plans. Your lessor may permit you to transfer the lease completely to someone else, or they may allow you to transfer the lease provided you remain named on it. If you’re close to the end of your lease, or there are only a few payments left on the lease, your lessor may not allow you to transfer the lease at all.
How to find someone to take over your lease
Assuming your lessor permits a lease transfer, you have a few routes to take when it comes to finding someone to take over your lease. There are several online marketplaces where you can list a lease takeover, but they may charge you a fee for listing your car. You can also try to find someone on your own, but it may take a while, leaving you stuck driving your leased car for longer.
Once you’ve found someone interested in taking over your lease, you’ll both contact your lessor, and the new driver will go through an application process, including a credit check, before they can take on your lease.
Pros and cons of taking over a lease
For the driver taking over a lease, there are benefits and drawbacks to being on the receiving end of a lease transfer. Some of the pros include:
Shorter term options. Taking over a lease that’s already in progress means you may be able to get a lease with just a year or so left on it, which is a good option if you only need a car for a short time.
No down payment. Taking over an existing lease also means that the original driver has already paid the down payment, so you won’t have to.
Incentives. Drivers who are eager to find someone to take over their lease may offer cash incentives for taking it on, which can be a good way to save money on a car, provided you can afford the monthly payments.
Taking over a lease has its downsides too, and for some drivers it may not be worth the hassle. Those include:
Limited selection. Unlike standard car shopping, when you’re looking for a lease to take over you’re limited in your options, so if you have your heart set on a particular make and model of car in a specific shade of red, it will probably take a while to find exactly what you’re looking for with the right lease terms.
Mileage limits. Make sure the miles left within the car’s mileage limit make sense for your lifestyle and driving habits, otherwise you’ll wind up paying fees for going over the allowed mileage.
Turn-in fees. Find out about any turn-in fees you’ll owe when you return the car to the lessor at the end of the lease — you don’t want to be stuck paying a hefty sum after the lease ends.