A car lease takeover, lease swapping, lease assumption, or lease transfer, is a way for someone to take over someone else’s car lease before the time is up. It may seem like taking over someone else’s lease is a good move but there are things to stay aware of during the process.
Should You Assume a Lease?
When you assume a car lease, you’re taking over all monthly payments and ownership of the vehicle. You will become the responsible party to handle everything related to the car moving forward.
You want to make sure you know the entire contract that the person before you signed and be aware of these:
- Mileage Limits
- Transfer, Disposition, and other Fees
- Mechanical Defects
- Vehicle Service Coverage
The more you can learn about the vehicle before you sign, the better. If the car has required a lot of past maintenance or has been rebuilt after an accident, a lot of the perks of a new lease are gone. You may even be able to order a vehicle history report to confirm the history of the car under the current and past owners.
Each person gets approved for different amounts of mileage but the standard is around 10,000 miles per year. There may be some taxes and fees, specifically transfer fees, that you should be aware of. Normally most maintenance on the car will be covered under warranty since you’re under a lease but make sure you get all records from the person before you sign anything.
There are a couple different kinds of people that typically take on a lease takeover.
- Someone looking for a short-term commitment for a car.
- Someone that doesn’t have the finances to secure their own lease.
A few reasons one may consider doing a lease swap is that there is no down payment on the car, sometimes you can get cash incentives to take over the lease, you get all of the rights of the first lease, and in many cases you can take over a lease with less credit that it requires to get a lease on your own. A normal lease usually requires a credit score around the 670 range or higher which cuts out quite a bit of people in the USA. Make sure you know your current credit standing before entering any sort of significant financing or leasing agreement.
Paying towards your newly assumed lease will build your credit, however. So if you’re looking to establish or improve your credit, this could be an added bonus, but we don’t recommend this as a method for credit building necessarily.
How Does a Lease Takeover Work?
It sounds pretty simple to just take over a lease but it’s really not that easy. In order to start the process the person who currently has the lease will need to verify with the finance company that it can even happen. In many cases, the finance company won’t allow it to happen unless there is a good reason. This request almost always comes with added administrative fees to handle all of the paperwork.
If you have approval from your finance institution, you’ll have to go find a buyer. The buyer will have to submit their application to the company and have their credit run. Typically a takeover requires less credit but it’s still up to the bank or lease holder to make the judgement call on the buyer’s risk. If the bank comes back with good news then you’re free to move forward with the lease transfer and the new owner will have to handle all of the transfer paperwork, registration, and licensing.
Advantages and Disadvantages of Taking Over a Lease
- Lower payments than buying a brand new car.
- Find better deals due to seller motivation.
- Shorter-term commitment than normal (most are 1.5 years or less).
- Lower miles than buying a used car.
- Some savings, but not much compared to getting your own.
- Possible higher costs due to unforeseen damage or issues.
- Fees, Taxes, and other costs during the process.
- No control over the original negotiated contract (very low mileage).
Lease Transfer Checklist
If you’ve decided that you want to take over someone’s lease, you now know some of the pros and cons, risks, and perks that come with a lease swap.
Here’s a checklist so you can make sure nothing is overlooked. Just keep in mind that each situation is different – the more you know beforehand, the better.
- Review the original lease contract – Check mileage limits, payment agreements, warranty and service coverage, everything.
- Get a Vehicle History Report – Learn everything you can about the car you plan to assume to avoid “surprises”.
- Compare to other methods of purchasing a vehicle – Look at the cost benefits, practicality, pros, and cons of a lease takeover vs. other methods such as a new lease, financing a car, or buying a used car in cash if you can swing it.
- Compare to other lease swaps – How does your potential deal stack up against similar lease transfer scenarios for your make, model, year, and location?
- Look at your own driving habits – Do you know if 10,000 miles per year is enough? Make sure your driving habits align with leasing.
- Be aware of fees – Research state tax laws and discuss with your financial institution so you’re clear on what fees there will be and who is responsible for paying them.