You can get into a new vehicle a variety of ways, including financing and leasing. While leasing has some benefits — including lower monthly payments and taking the entire monthly payment as a tax deduction — it also comes with strict rules that you may not like, such as not being able to modify your vehicle to your liking.
However, there’s another option to a regular lease. It’s called a lease takeover, which is when a lessee transfers their lease to a new person. This not only gets the lessee out of the lease, but it also gives the new lessee the ability to take on a short-term lease that may not be available through the manufacturer.
Below, we'll cover the pros and cons of a lease takeover, how a lessee can get out of their lease, and a lease takeover alternative that lets you skip this option altogether.
A lease takeover has a handful of valuable benefits for certain types of buyers. Here are a few pros to taking over someone else's leased vehicle.
Perhaps the most significant benefit of a lease takeover is that there's no long-term commitment on your end. Instead of taking on a full lease term, you can take over a lease for just a year or even a few months. That said, it could be longer. For example, if you take over someone’s four-year lease at the two-year mark, you’ll have two years of payments.
A lease takeover can occur at any point in the term (barring any contractual issues), so make sure you find one with a remaining term that matches your needs. A lease takeover could be a good way to get an extended test drive before committing to buy a brand-new vehicle.
When a car lease ends, the lessee can buy the vehicle instead of returning it. If you've driven the vehicle for a few months or longer and love it, you're afforded the same option. You can purchase the vehicle, and depending on the original lease terms, you may be able to get a great deal.
Some car salespeople still use high-pressure tactics to talk you into buying or leasing a car. By taking over someone's existing lease agreement, you bypass the dealership salespeople and deal directly with the original lessee. You’ll need to go to the dealership to process the transfer, but the hard sales element is not part of the process.
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While there are some pros to doing a lease takeover, there are plenty of downsides to taking over someone else's lease. Here’s what you need to know.
Automakers often offer cash incentives to help sell and lease vehicles. When bypassing the dealership and going directly to the lessee for a lease takeover, you can miss out on these offers. Of course, if the cash incentives were applied to the down payment, then you'll still get the added benefit of taking on the lower monthly payments from the original agreement.
Depending on the leasing company the car is leased through, there could be significant fees involved in the process.
One of the more common charges will be a lease transfer fee. This is the fee the leasing company charges to move all the documents from the lessee's name to your name. In Canada, this fee generally runs around $600, but it can vary depending on the leasing company.
Some automakers with higher lease transfer fees include:
The leasing company will also want to check your credit before approving the lease takeover, which may result in you paying a small credit inquiry fee.
Many things impact a monthly payment when you take on a lease, including your credit history, down payment, and negotiation skills. When you do a lease takeover, these variables mean nothing since you must take the monthly payment as is.
If you take over a lease from a person who's not a great negotiator, had a spotty credit history when they took on the lease, or couldn't afford a larger down payment when they signed the lease contract, you may also take on higher monthly payments. Unfortunately, there's no way to renegotiate the lease terms.
The standard lease in Canada allows up to 20,000 km per year over the life of the lease, but you can get 24,000- and 26,000-km leases too or purchase additional kilometers if needed. So, if it's a four-year lease, you can drive a total of 80,000 km without penalty. However, some automakers offer less expensive low-kilometer leases that allow as few as 12,000 km per year.
Remember, you’ll inherit this limitation from the current lessee, so check the vehicle’s odometer and compare this to the lease’s allowance. Also, compare this amount to how much you typically drive to make sure you'll remain under the allowance.
If you go over the allowance, you could pay 8-20 cents per km when you turn in the lease. For instance, if the vehicle has an 80,000 km allowance but you turn in the vehicle with 90,000 km on the odometer, you could pay $800-$2,000 in overage fees.
Like kilometers, wear and tear on a leased car may end up costing you big when you turn in the lease. While most leased cars are well-maintained because their owners know these fees are looming, some people let their leased vehicle fall apart or go without maintenance.
Keep in mind, the dealership can waive these wear-and-tear fees if the lessee purchases another vehicle from the dealership when turning in the leased car.
If you turn in a vehicle with excessive wear and tear at the end of the lease, you’ll be liable for reconditioning it. It doesn't matter if you weren’t the one who let it fall into disrepair.
When considering a lease takeover, make sure to check all the service records against the maintenance schedule. Also, check the tires for excessive wear and ensure the proper all-season or winter tires are installed as required by law. Don’t forget to inspect the body and interior for cracks, tears, car dents, and other excessive damage.
These issues can also diminish the vehicle's market value — its private party sale value — if you decide to sell the vehicle instead of turning it in at the end of the lease.
If you plan to use a lease takeover as a short-term lease with the option to buy the vehicle at the end of the lease, you must consider its residual value, which is the remaining value of the vehicle at the end of the lease term. This is also what you’d pay to buy the vehicle once the lease ends.
If the original lessee put little cash down, you may end up with a residual value that’s too high to make financial sense to buy it out. Always check the residual value in the lease contract before agreeing to a lease takeover.
If you're a lessee looking to get out of your lease, you can consider offering your vehicle as a lease takeover. There are many sites online offering Canadian car owners the ability to offer their vehicle for takeover, including LeaseBusters.
Keep in mind that finding the right person to take over your lease could take time. For a more immediate solution, Clutch can help. We don't perform lease takeovers, but we do purchase previously leased vehicles.
Navigate to our online vehicle estimator to get an estimate for selling your leased vehicle to us. If the offer works for you, enter a few more bits of information and upload vehicle images to get a firm quote to trade or sell your vehicle to us.
If you accept our offer, you’ll have to request a payout of your lease from your dealer. Clutch will purchase your vehicle once it’s been paid out.
If you're shopping for a vehicle and want to skip all the uncertainties and potential headaches associated with a lease takeover, Clutch can help. While we don't offer lease takeover services, we do offer a wide range of quality pre-owned vehicles in Ontario, British Columbia, and Nova Scotia and easy financing.
Plus, we've taken the car-buying process out of the showroom and into your living room with our 100% online process. Once you choose a vehicle online and complete the purchasing process, we'll deliver it to you, whether you're in Quebec, Ottawa, Toronto, or beyond.
You can also rest assured you're getting a quality vehicle from Clutch, as all our pre-owned vehicles have been through a 210-point inspection before going on sale. Plus, all vehicles sold online come with a 90-day or 6,000-km limited warranty and a 10-day no-hassle money-back guarantee.