While most drivers are aware of the buy versus lease options for picking up a new vehicle, few realize that there’s a third option: car lease swaps.

In a car lease swap or car lease transfer, the existing lease on a vehicle is transferred from one person to another. This can be a great deal for both buyers and sellers of these lease swaps.

Insurify can help you compare quotes from top insurance companies in just minutes—a change in the primary car on your policy, leased or not, might greatly affect your car insurance premium. Learn more about how to perform a car lease swap below, and then check out Insurify to get the best and lowest deals on your next car insurance payment.

Why you’d want to sell a car lease swap

Getting out of a car lease early can be difficult and extremely expensive. If you return the vehicle before the lease runs out, you’ll be hit with early termination fees and penalties—and you’ll still have to make all the remaining payments.

But sometimes there’s no option but to change vehicles mid-lease. Perhaps you’ve just had a baby and your two-seater convertible isn’t going to cut it anymore. Or perhaps you’ve lost your job and can’t afford to keep up those car payments. In those kinds of situations, a car lease swap can be a lifesaver.

Car lease swaps can also be great in less dramatic circumstances. For example, if you realize a year into your lease that you just don’t like the vehicle, a car lease swap can get you into something you can love right away. Lease swaps are also a good option for drivers who like to switch vehicles every year or so.

Why you’d want to buy a car lease swap

A car lease swap can be beneficial for buyers for a number of reasons:

First, car leases generally become available for transfer somewhere in the middle of the lease. Since the typical lease is two to four years, that means there will likely only be a year or two left on the lease by the time the new owner assumes it.

That makes lease transfers a great way to get a leased car for a very short term. If you want to try out a car you’re considering buying, or just don’t want to tie yourself down for a long period, a car lease swap can be an ideal solution.

Second, leaseholders looking for a swap are often quite eager—even desperate—to close the deal. Many will be willing to throw in incentives to the person who assumes the lease, which can result in quite a sweet deal for the buyer.

Third, there is no down payment to assume an existing lease. Buyers typically have to pay transfer fees, but those fees are much smaller than a standard down payment.

Finally, lease payments on a swapped lease can be smaller than those on a new lease, particularly if the original leaseholder made a large down payment or traded in another vehicle at the beginning of the lease. Lease payments, in general, are usually smaller than purchase payments on the same vehicle, so the even smaller payments on some swapped leases can be a great deal.

What you need to know before you do a car lease swap

Not all car leases can be swapped. Each of the major car manufacturers works with a different financing company to manage its vehicle leases. And the various financing companies have different rules about how and when their leases can be purchased:

  • Some financing companies don’t allow lease swaps at all, except under extraordinary circumstances (military deployment is a common exception).
  • Other financing companies allow lease swaps, but only under certain conditions. For example, they might require the original leaseholder to keep the car a certain length of time before permitting a swap (i.e., 12 months).
  • Still others permit a sort of limited transfer; the original leaseholder stays on the lease and still has some liability (for example, if the buyer doesn’t make the lease payments, the original leaseholder might be responsible for those payments).
  • The last group of financing companies allows leaseholders to do a full swap, putting all responsibility for the vehicle and the lease on the buyer.

Before you consider either selling or buying a lease swap, find out how the financing company for that lease restricts such transfers. If the financing company falls into the last group and doesn’t have any restrictions on lease swaps, that’s great news. However, if there’s some restriction on swapping the lease, it’s important to know exactly what that restriction is—and how it will impact you.

Even financing companies that allow a 100 percent transfer of their leases will still charge transfer fees. These transfer fees can be as much as several hundred dollars, so the fees can be a significant consideration for buyers. If you’re on the selling side of the lease swap, and the financing company charges relatively high fees, you may need to offer to assume some of those fees in order to entice buyers.

Finally, credit will be a consideration. Financing companies will run a credit check on prospective buyers of any lease swap, and if the buyer’s credit score is not high enough or if their credit history includes red flags such as a bankruptcy, the financing company may refuse the transfer.

Special lease swap considerations for buyers

If you’re thinking about buying someone else’s lease on a vehicle, you’ll need to find out a few additional details about the lease and the vehicle to make sure you’re not buying a pig in a poke.

Find out what the mileage limits are for the lease you’re considering, and find out how many miles the original leaseholder has already put on the vehicle. You can compare those numbers to your own driving habits to see if you’re likely to exceed the lease’s mileage limits by the time you’re ready to turn the vehicle in.

For example, let’s say that a four-year lease permits 12,000 miles per year, there are two years left in the lease, and you typically drive 10,000 to 12,000 miles per year. In that case, you’d want to make sure that the vehicle has no more than 24,000 miles on it (12,000 miles per year the original leaseholder has had the car) or you’ll risk going over the mileage limit by the end of the lease and have to pay penalties. On the other hand, if you drive only 5,000 miles in an average year, you can safely buy a lease swap for a vehicle that has somewhat more miles on it.

Take a look at the vehicle and check for visible damage. Leases will typically spell out what they consider acceptable versus unacceptable damage to the vehicle. You definitely don’t want to be charged penalties for damage that the original leaseholder put on the car, so be diligent in your inspection. You might even want to pay a mechanic or a friend with experience fixing cars to check the vehicle for you. Many leases require the leaseholder to have regular maintenance done on the vehicle; confirm that the original leaseholder has kept up this requirement as well.

If you find a particular vehicle that looks like a good fit, check its current value on Kelley Blue Book or a similar website. Some car make and models retain their value much better than others, making them more valuable to acquire in mid-lease. This is a particularly important factor if you think there’s a chance you’ll be buying the vehicle at the end of the lease instead of turning it in.

Finally, look through the lease to see if there are any other limitations or potential penalties. For example, some leases include turn-in fees—a fee that you’ll pay to the financing company when you turn in the vehicle at the end of the lease. If such a fee exists, you’ll need to factor it into the cost of assuming the lease to see if it’s really a good deal.

How to do a lease swap

If you’ve decided that a lease swap is the way to go, you have a few different options.

First, you can check around with friends and family to see if any of them are interested in doing the swap with you.

Second, you can use a free venue like Craigslist or Facebook Marketplace to connect with the right buyer or seller.

Finally, there are websites dedicated to facilitating lease swaps; Swapalease and LeaseTrader are the largest and most reputable of these marketplaces. If you choose the last option, expect to pay fees to sign up on the website and possibly a monthly subscription fee as well.

Once a lease swap seller and a potential buyer have found each other, the seller informs the financing company holding the lease, which then performs a credit check on the potential buyer. If the potential buyer’s credit score is high enough and his income is sufficient to meet the monthly payments, then the buyer, seller, and financing company can complete the paperwork to transfer the lease. During this process, the buyer will need to visit a DMV office in his state to formally transfer the vehicle’s registration into his own name. Some states have additional requirements, such as a new license plate number, so buyers should check with their local DMV offices to find out about any additional steps.

If the transferred lease’s financing company allows for a full transfer, the seller is now completely out of the picture and can get on with their life. However, if the financing company requires the seller to remain on the lease as a cosigner, they may want to keep an eye on the new leaseholder’s activities. If the new leaseholder starts to fall behind on payments, the seller may want to intervene rather than potentially getting hit with an enormous bill by the financing company.

While lease swaps can get complicated, they’re a great option for drivers who need to get out of a lease early and for those who prefer a short commitment to their vehicles. As long as both buyers and sellers of lease swap to do their homework first, these transfers can be a powerful financial tool.

Insurify will help your new car swap be as seamless a process as possible. After the hubbub of car lease swapping, don’t let insurance shopping weigh you down. Save up to hundreds on your current premium, and then enjoy that new ride!

Happy swapping!

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Wendy Connick is the founder and owner of Connick Financial Solutions, a provider of tax and bookkeeping services and a QuickBooks Online Certified ProAdvisor. A long-time freelance writer, she specializes in business and finance articles on subjects including taxes, investing, and retirement. Wendy is an Enrolled Agent (EA), the only federally-licensed tax practitioners who specialize in taxation and have unlimited rights to represent taxpayers before the IRS. She is a member of the National Association of Enrolled Agents and a certified volunteer for VITA (Volunteer Income Tax Assistance), an IRS-sponsored program to provide free tax help for low-income individuals and families.

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