According to Statistica.com, about 26 percent of new cars that left the lot in 2020 were leased, rather than purchased. What’s more, the 2020 average price of a new car was about $40,000, so some drivers have loan payments for six years. For many car buyers, these high prices and long commitments make vehicle leasing an acceptable alternative to buying.
Despite the relative benefits of leasing, circumstances may make it necessary for a lessee to end a car lease early. And when leasing companies won’t budge on contractual terms, Swapalease and Leasetrader offer a way out by matching vehicle lease sellers to lease buyers and facilitating the lease assumptions.
The Nature of Car Leases
Leasing a vehicle is akin to renting an apartment or a pair of skis; as with any rental, you never own the property. Instead, with an auto lease, you agree to make payments for a certain number of years in exchange for driving the car.
The pricing of those payments represents the difference between a car's value at the start of a lease and its residual wholesale value – the car’s worth at the end of the lease – plus interest.
Because you aren't financing the car’s price, the lease payments are less than car loan payments would be over the term of the lease. That fact is the origin of the popularity of leasing vehicles: You can drive a more expensive car than you can afford to buy.
At the end of the lease when you return the car, you remain on the hook for fees for miles driven in excess of the maximum agreed-upon mileage in the lease deal, damage beyond normal wear and tear to the car and a turn-in fee.
Read More: How to Lease a Car
Breaking Lease Agreements
Major vehicle leasing companies give you options for breaking lease agreements through early termination, but the terms can be severe. You might return a car to the dealership and pay the amount owed on future payments plus an early return penalty. Depending on the point in the lease that you return a leased vehicle, he could owe the dealer thousands of dollars.
Alternatively, you might walk away from a lease, or ask the finance company to pick up the vehicle before the lease ends. In this case, the leasing company can collect termination fees, and your credit rating will take a hit.
Another option is to return the vehicle to the leasing company before the lease end and purchase a new car. While this method avoids a financial penalty for prematurely ending the lease, you don't forego the original financial obligation, and you assume additional debt for the new vehicle.
Finally, you might turn to a lease transfer broker to identify someone to buy the lease. In this case, the lessor may hold you liable for the original obligations, such as a fee for additional mileage, post-transfer.
Read More: What If I Go Over the Miles on My Lease?
Vehicle Lease Transfer Platform
Both Leasetrader.com and Swapalease.com are marketplaces that match lessors hoping to transfer or “sell” their car leases with those who want to “buy” or do a lease takeover of a car lease. These platforms collect fees for the matching services they provide, as well as their efforts to guide site users through the lease transfer process.
How it works is that it's up to you and the lease buyer to negotiate the lease transfer terms. These terms must comply with the original lease agreement between you and your leasing company.
Read More: What Happens at the End of a Car Lease?
Swapalease vs. Leasetrader
Both Swapalease and Leasetrader say they list thousands of vehicles, but whereas the former operates in the United States and Canada, the latter operates only in the U.S. Any lessee with an in-process lease that allows lease transfers can use the marketplaces to "sell" a lease.
Marketplace Fee Structures
The fee structures of both marketplaces include a lease buyer's membership fee and a lease seller’s lease transfer fee. For example, as a Swapalease or Leasetrader lease seller, you pay to create a listing, which may include the vehicle's features, the miles and months that remain on the lease, the monthly payment and one or more photos.
In addition, each site offers a unique set of listing packages at different price points. For instance, if you use Swapalease to sell your car lease, you'll pay from $74.95 to $1,000 to list your car on the site. In part, the prices vary due to your listing’s ranking in the site's search results.
In turn, buyers pay registration and credit verification fees. For instance, a Swapalease buyer pays a one-time $59.95 registration fee to gain access to Swapalease listings.
A separate fee is charged by the marketplaces to facilitate the lease transfer process. For instance, Swapalease charges you a "success" fee of $150 or more depending, in part, on the listing package you select. The success fee is charged when a buyer agrees to assume your lease and you initiate the lease transfer.
Vehicle Leasing Company Fees
Once the vehicle leasing company receives the lease transfer documents and fees, the transfer is final. Typically, leasing companies charge the lease buyer a credit application fee and a lease transfer fee.
For instance, according to Leasetrader, BMW Financial Services charges the buyer a $400 transfer fee, but GM Financial charges $625. To determine the relevant fees for a specific leasing company, the buyer should contact the company directly. Be aware that the buyer can ask you, as the original lease holder, to pay this fee.
In addition, a leasing company policy governs the disposition of your original security deposit upon the buyer's assumption of your lease and any new deposit made by the new lessee. Some leasing companies transfer the original deposit to the assuming lessee.
Other firms return the original deposit to the lease seller and require the lease buyer to pay a new deposit. Still others don't require a security deposit. The handling of the deposit is negotiable between you and the lease buyer.
The lease buyer may ask you to pay additional costs. For instance, depending on your situation, you may pay a cash incentive to the buyer to close the deal quickly.
Other lease terms, including the monthly payment, allowed mileage and lease-end date, are also controlled by the leasing company and remain fixed after the transfer. Because the lease buyer assumes an in-process lease, that buyer is responsible for those terms.
Other Issues Related to the Lease Transfer
If your state of residence is different than the lease buyer's, lease transfer costs may include both a transportation fee and a third-party inspection fee. Again, the buyer may ask you to pay these fees.
Be aware that not all vehicle financial services agencies allow the transfer of leases. For instance, Maserati Financial Services and Mercedes-Benz Financial Services prohibit lease transfers.
Also, your leasing company may allow a lease transfer but not release you - the original lessee - from the liability for lease payments. This means that if a lease buyer defaults, damages the vehicle or accumulates mileage that’s greater than the allotted mileage, you may remain liable for the related costs.
Read More: Is Buying Out Your Car Lease Worth It?
A car lease agreement is like any other contract. Unless the agreement contains specific reasons that allow you to end the lease, you must make the payments. If circumstances make it necessary for you to end a lease early, but the leasing company won’t budge on contractual terms, Swapalease and Leasetrader offer you a way out.
- Swapalease: How It Works for Lease Sellers
- Swapalease: Maserati Financial Services
- Swapalease: Mercedes-Benz Financial Services
- Swapalease: Frequently Asked Questions
- Swapalease: Bentley Financial Services
- Swapalease: Ally
- Swapalease: Lease Company Information
- Legal Zoom: Can You Get Out of a Car Lease?
- Statistica: Percentage of Newly-Bought Vehicles on Lease in the United States From 1st Quarter of 2017 to 3rd Quarter of 2020
- CNET: Average New Car Price Crosses $40,000 in 2020 and That's Nuts
- Consumer Reports: Leasing vs. Buying a New Car
- Edmunds: The Residual Value of Leasing
- Leasetrader: Want to Get Out of Your Lease?
- Leasetrader: Costs and Fees
- Swapalease: Buyer/Seller Tips
- Swapalease: BMW Financial Services
- Swapalease: GM Financial
Billie Nordmeyer is an IT consultant of 25 years standing. As a senior technical consultant for SAP America and Deloitte Touche DRT Systems, a business analyst, senior staff, and independent consultant, Billie has worked across the retail, oil and gas, pharmaceutical, aeronautics and banking industries. Billie holds a BSBA accounting, MBA finance, MA international management as well as the Business Analyst and Software Project Management certificates from the Cockrell School of Engineering at the University of Texas at Austin.