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Should You Take Over Someone’s Car Lease?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Should You Take Over Someone's Car Lease
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Leasing has become popular because it allows people to drive a car they otherwise might not be able to afford. Leasing accounts for about 29% of all new car transactions, according to Experian. But what about taking over a lease someone no longer wants? Does it ever make sense? And if so, how can you judge whether it’s a good deal?

“The problem is it’s really a minefield,” said Michael Saccucci, director of statistics and data science at Consumer Reports. “You have to work out the numbers to be sure you’re getting a good deal.”

What is a lease transfer?

You’ll find thousands of lease transfer offers on such websites as LeaseTrader and Swapalease. The idea is for you to take over the lease with the same monthly payment for the remainder of the original lease term, which usually is three years.

With a lease transfer, just like with a new car lease, you’re not buying the vehicle but instead paying for the right to drive it for a certain amount of time and number of miles. Usually you’re restricted to an average of 800 to 1,000 miles a month, although that can vary with a lease transfer, depending on how much the original leasee used the car before you got it. The monthly payments are based on the car’s projected loss in value during the lease term, the so-called depreciation, along with an interest rate. At the end of the lease, you must return the vehicle or purchase it at a predetermined price.

Why would you want to take over someone else’s car lease?

Someone might want to get out of their lease if they no longer can afford the monthly payments or if they need to dispose of a vehicle that was being leased by a family member who has passed away.

The pros of taking over someone else’s car lease

  • No down payment
  • Possible cash incentives from the original leasee
  • Car is most likely still covered by the new-car warranty — check with the manufacturer on how to handle transfers.
  • Avoid paying expensive upfront new-car depreciation

No matter what the reason, lease transfer offers can be enticing. Unlike with many new leases, you won’t have to make a down payment, which can save you thousands. That’s because the original leasee already has shelled out that upfront cash, along with the usual lease acquisition fee, which can be as much as $1,000. So in most cases, you can take over a lease with very little out of pocket, says Scot Hall, executive vice president of operations for Swapalease.

Beyond that, many leasees offer incentives, sometimes totaling $1,000 or more, to encourage you to take over their lease, which can turn a bad deal into a good one. And depending on how good that deal is, a lease transfer might even help you avoid a costly problem that comes with leasing a new vehicle – having to pay for the big loss in value that a new car undergoes during the first year, says Saccucci.

The cons of taking over someone else’s car lease

  • May not be available on the car you want
  • Transfer fees
  • It is difficult to determine whether you’re getting a good deal, which could leave you unknowingly overpaying by thousands.

Not every finance company allows lease transfers, including Chrysler Capital, Honda Financial Services, Hyundai Motor Finance Company and Volvo Car Financial Services. So if you’re looking for a lease transfer for a Volvo XC90, for instance, you’ll be out of luck unless the original lease was issued by a bank or other independent finance company, which is becoming increasingly uncommon, says Hall.

Even if you can take over a lease, there’s often a transfer fee that can be as high as $600. You also may have to pay a separate fee of up to $100 or so for a credit check, which will be for nothing if the finance company rejects the transfer. To avoid that, Hall says it’s best to have a credit rating of at least 680 before applying. And for a small percentage of lease transfer offers, such as those for cars that have been driven an unusually low number of miles, leasees want an upfront payment, which run into the thousands.

If you go ahead with a transfer, you’ll have the same responsibilities as the original leasee. For example, if you return the car having driven too many miles, you’ll face an excess mileage fee of 15 to 25 cents a mile or more. You’ll also encounter an excess wear and tear charge if the vehicle has unrepaired damage. And during the lease, you’ll have to pay for maintenance and any repairs not covered by the vehicle warranty. You’ll also be responsible for an end-of-lease disposition fee of usually around $350.

How do you take over someone’s car lease?

If you decide to proceed with a lease transfer, it’s best to take a close look at the vehicle itself as well as the terms of the original lease. If you take over a lease, you could wind up paying some of the expensive new-car depreciation that occurred while the original leasee had the vehicle, says Al Hearn, founder and president of LeaseGuide.com.

On the other hand, the transfer could be attractive if the original leasee put a significant amount down, negotiated a great on the vehicle or a combination of both, says Saccucci. The deal also could be worth considering if the leasee is offering a large cash incentive or drove the vehicle only a small number of miles. The more miles left on the lease, the more valuable it is to you, assuming you’ll actually use them.

Examine lease offers

Unless you know someone who wants to jettison an existing lease, start by visiting websites such as LeaseTrader and Swapalease and look for ads featuring make and model vehicles you’d like to lease. You could also check classifieds on Craigslist or in your local newspaper. Make sure the advertised monthly payments will fit into your budget. Remember to account for the cost of insurance — the leasing company will most likely insist that you maintain comprehensive coverage, which is more expensive than basic liability insurance. Decide how long you want to lease and how many miles you plan to drive. Then focus on vehicles that roughly meet that criteria.

TIP: If you take over a lease with too few miles, you could end up owing excess mileage charges when you return the vehicle. Too many miles and you may end up paying for more depreciation than you’ll actually use.

Try sticking to cars that are close to home. That makes it easier to check out the vehicle in person and avoids having to ship or drive the car a long distance once the transfer is complete. About 70% of Swapalease transfers involve cars that are within a two-hour, round-trip drive, says Hall.

Check the details. Along with the term and number of miles, find out whether the leasee is offering any incentives to encourage you to take over the lease or, in those rare cases, wants to you to make an upfront payment to him or her. Check the description of the vehicle’s condition, and review the photos carefully. Note which finance company issued the original lease and check its rules for transfers, including any fees. Eventually, you should verify this with the finance company directly.

Compare offers. Once you’ve narrowed your choices, compare offers to find out which ones are the best value. Because the number of miles and other terms will differ, the best way to do this by comparing per mile costs. To calculate this for each vehicle, take the total cost of the payments plus any fees or other charges, subtract any incentives and then divide that by the number of miles left on the lease.

By comparing costs for six similar 2018 Toyota Camry lease transfer offers, we came up costs ranging from 20 cents to 43 cents a mile. Some of the per mile costs were higher than those of leasing a brand-new Camry, which underscores why you need to do your homework.

Contact leasee

You’re now ready to contact a few leasees to find out more about their vehicles and to see whether you can negotiate better deals. To do this on a lease-trading website, you’ll have to pay a registration fee, a one-time fee of $50 to 60 at Swapalease and $10 to $35 monthly at LeaseTrader.

TIP: It’s possible to negotiate the leasee’s cash incentive and who pays any additional charges, including the lease transfer and website registration or other fees. (Along with its registration fee, LeaseTrader imposes a lease initiation charge of $150 to $200.)

Check out the lease contract and the vehicle. If you decide to go ahead with the transfer, ask the leasee to give you a copy of the original lease contract, and verify that it’s exactly as the leasee represents, including the monthly payment, term and excess mileage charges. Also make sure the vehicle’s condition and features match the advertised description. After checking the car yourself, have it thoroughly inspected by your mechanic and ask for a written report. Expect to pay at least $100 for this service. Finally, check the vehicle for any unresolved safety recalls, which a dealer who sells that make and model new can address for free.

Review the deal carefully. Double check to make sure the lease payments and insurance costs fit into your budget. If you later decide you made a mistake, you may be stuck. Some finance companies won’t allow more than one lease transfer on the same vehicle, says Hall. Once you and the leasee agree on the deal, says Hall, it takes an average of two weeks to complete the transfer.

Alternatives to taking over someone’s car lease

Taking over someone else’s lease might make sense, especially if you need a car for only a relatively short period. But there are other ways to get the same or better deal:

  • Consider a traditional new-car lease instead — as we mentioned earlier, we found new-car leases that were less expensive per mile than some advertised lease transfers. You could even lease a used car without taking over someone’s lease.
  • Or, buy a new or used car that you can afford. We recommend at least a 10% down payment and the shortest loan possible. Here’s why you shouldn’t take out a long auto loan. Another good rule of thumb is that the monthly payment and insurance cost for that vehicle shouldn’t exceed more than 15% to 20% of your monthly net income.

If you think a lease transfer deal is right for you, compare offers carefully. Even then, it’s difficult to determine whether the deal is a good value or you’re overpaying. And it’s important to remember that you’ll be subject to the same limitations as the original leasee, including limits on the number of miles you’re allowed to drive without incurring a penalty.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Anthony Giorgianni
Anthony Giorgianni |

Anthony Giorgianni is a writer at MagnifyMoney. You can email Anthony here

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Auto Loan

Seven Steps for Getting a Great First Car

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

First car
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When it’s finally time to buy your first car, you’re likely going to be excited about being behind the wheel of your new ride, but also a bit uneasy. After all, buying a car can be complicated. How do you know which car to get? Will it fit into your budget? Should it be new or used? How do you make sure you’re not paying too much?

Here are seven steps to follow to ensure that you’re getting the best vehicle you can without going broke, whether you’re buying a new or used car or from a dealership or individual.

The most important thing to remember is to take your time, says Brian Moody, executive editor of the car buying and selling website Autotrader. “This isn’t something you should do in one day,” he said. Remember, if a dealer or individual pressures you to make a decision, you can always go elsewhere.

1) Figure out how much car you can afford.

When purchasing your first car (or any car for that matter) it’s always smart to follow the 20/4/10 rule. That means you should put at least 20% down, finance it for no more than four years, and keep your monthly vehicle expenses, including the monthly payment and insurance, at just 10% of your net income, advises Bruce McClary, vice president of communications for the National Foundation for Credit Counseling (NFCC). Ronald Montoya, senior consumer advice editor for the automotive website Edmunds.com, says it’s still reasonable if you put down as little as 10% and go for a five-year loan, although he calls the 20/4/10 rule “ideal.”

Beyond that, examine your monthly net income and expenses to figure how much you’re comfortable paying on a loan while still having something left over to put into savings.

Next you need to figure out what your credit report and FICO score looks like. You can pull one free credit report every 12 months by going to annualcreditreport.com. Once you have an idea of what kind of information lenders will see on your credit report and you’re sure it’s accurate, check your credit score with the major credit bureaus like Experian, TransUnion and Equifax. Unfortunately, getting your credit score is not free so you will need to pay to access it.

One thing to note, auto lenders use more than just your FICO credit score to determine whether or not you are worthy of a loan. You want to pull your FICO Auto score to see exactly what lenders will use when you apply for an auto loan. Doing this work ahead of time will give you more leverage when it comes down to the negotiating process and make you a more informed consumer.

Once you have a good understanding of your credit report and credit score, examine current new and used-car loan rates for loans of up to four or five years. Longer term loans, while popular for their lower monthly payments, generally have higher finance charges. When coupled with little or no down payment, they increase the risk that you could be upside down on the loan at the end of the term. This means that you could owe more to the lender than your car will be worth on the market. One additional factor to consider when you are upside down on a car loan, is that if the car is stolen or severely damaged, your insurer may not cover what you owe to the bank.

To get an accurate interest rate estimate, you’ll need to know your credit score. If you don’t, there are many ways to get it for free, though you will need to pay to access your auto credit score. Once you have compared rates and know how much you can afford to pay monthly, you can use a specialized online loan calculator like this one to figure out how much you can borrow. Just enter the interest rate, number of months and monthly payment.

You also can explore your loan options with local and online lenders. Montoya from Edmunds recommends getting preapproved for an auto loan, which can save you time and money once you’re ready to buy. McClary from the NFCC recommends that you don’t overextend yourself financially. “There’s this tendency to go for the max and to get the most out of what you can qualify for in the financing. You have to resist that temptation,” he said.

2) Research a vehicle.

There are lots of online resources to assist you in choosing a car, among them Autotrader, Cars.com, Consumer Reports, Edmunds.com and TrueCar. Depending on the site, you’ll find car reviews by professionals and owners, road test results and prices for both new and used vehicles. Many car sites also show you actual new and used vehicles for sale. All of this will help you find a reliable, top-rated new or used vehicle that fits into your price range.

To find the right vehicle for you it’s important to be practical about your needs. “You want to think about how you will be using the car most of the time,” Montoya said. He says that you shouldn’t pay extra for a vehicle that’s too big or has features you don’t need. Remember to look at gas mileage, reliability and safety. Also examine the duration and scope any warranty coverage, which, in the case of a used car, you should verify is transferable to a new owner.

When deciding whether you should buy a new or used car, consider that used cars can save you a lot. The average used car transaction price is just over $20,000, compared to $36,000 for new vehicles, according to Edmunds.com. But with a used car, you’ll likely spend more on maintenance and repairs, especially if there’s no warranty.

Once you’ve settled on a few models, you can research them more carefully and compare them. If you’re buying new, check the manufacturer’s website for the various trims and equipment options. While there, look at the latest incentives, including rebates and low-interest financing.

3) Locate a car.

Now that you’ve narrowed your choices, you can locate a vehicle to test drive by visiting local dealers and checking websites such as Autotrader, Edmunds.com, and TrueCar. These sites show you vehicles in your area and can help you narrow your search. You’ll also find used cars being advertised by individuals on Craigslist and elsewhere. For first-time buyers it’s easiest to purchase through a dealer, who likely will have inspected the vehicle and done some reconditioning, say Montoya. Consider shopping first at a franchised dealer, one that sells the same model new since they will be experts in keeping their model of used cars in tip-top shape.

One caveat to keep in mind about buying a used car from a dealership is that you could end up costing you a bit more than it would if you bought a used car from an individual. That’s especially true if you opt for a certified used vehicle, also known as a CPO, or certified pre-owned vehicle. These usually come with a service contract and an extended warranty that covers the cost of some repairs. Car pricing websites such as Kelley Blue Book can show you how prices differ among private sale, dealer and dealer-certified used vehicles.

4) Check out the car.

The best way to assess a vehicle is to take it for a test-drive, preferably on roads you know, advises Moody. How does it feel? Is it quiet? Are the seats comfortable? What about the visibility? How easy is it to use the car’s infotainment system, a common feature in today’s vehicles. There’s a lot to consider, so take your time. “You can’t make a $30,000 decision in 15 minutes,” Moody said.

If you are looking at buying a used car, you also should inspect the vehicle carefully inside and out. There are many online resources, including at Consumer Reports and YourMechanic and our own checklist, that explain what to look for. It’s a good idea to bring someone (who knows about cars and car buying) and ask about the car’s history, including whether it’s ever been in an accident and, in the case of a dealer, whether it was a trade-in, auction purchase, returned lease or anything else.

Once you have narrowed your choice down to one or two specific vehicles, you should run a VIN check and vehicle history report on the chosen cars, to check if there are any hidden issues.

Ask for a Carfax or Experian AutoCheck vehicle history report, which can tell you if the car has been in an accident, stolen, repurchased under a state lemon law program and more. Some dealers post history reports with their car ads.

If you are buying a car from a private party, ask the seller for a history report, or get the VIN number of the vehicle and order one yourself. If the seller supplies a report, consider contacting Carfax or Experian by chat or email to verify it hasn’t been altered.

As an extra precaution, there are two other types of history reports you can request on your own, the free VINCheck report from the National Insurance Crime Bureau and another from the federal National Motor Vehicle Title Information System, which is available at no charge from yet another buying website, Carsforsale.com.

Be warned, history reports can miss a lot, so you’ll need to have the vehicle inspected by an independent mechanic who should check not only for mechanical issues but for body work and other signs the car has been an accident, flood or other mishap, says Rosemary Shahan, president of the California-based Consumers for Auto Reliability and Safety. She recommends it for certified used cars that supposedly have gone through a multi-point check, too. Expect to pay $100 or more for a thorough inspection, and ask for a written inspection report.

Before moving forward with a final decision on which car to buy, call several insurance companies to find out how much it will cost to insure the vehicle, including collision and comprehensive coverage if you’re buying a new car or if it is being financed.

5) Negotiate the deal.

Once you’ve settled on a particular new or used car and taken a test drive, it’s time to negotiate the price. If you’re buying from a dealer, he’ll likely ask you how much you want to spend each month. “I like to tell them zero,” said McClary. He says the dealer’s goal is to divert your attention from vehicle price so you’ll end up paying more than you otherwise would. One common mistake, especially among first-time car buyers, he says, is assuming that because a payment fits into their budget, it’s a good deal. For a new car, the negotiations will include the cost of any added options.

To negotiate like a pro, you should be well-informed. First, visit several car pricing sites, such as TrueCar, Edmunds, Kelley Blue Book, and NADAGuides, to find a good price based on the exact model, trim line, add-on options and, in the case of a used vehicle, the condition and number of miles on the odometer.

When negotiating a new car, contact several dealers and get “out-the-door” cost quotes for the vehicle you want. This means that you get a total cost including any extras, add-on options and warranties. Once you have a few numbers, you can play the dealers against each other to get the price lower. Fortunately, you can do that by phone, text or email, so you won’t have to do a lot of running around.

Comparing prices for a used car is more difficult because there likely aren’t others that are exactly the same as the one you’re considering. “You want to find other cars that are close to it,” said Montoya. If you can’t get a price that you think is fair, it may be time to consider another model, make or a different used car.

This is also the time to get the car checked out by a mechanic of your choosing. For a used car, make sure any agreement is contingent on a thorough inspection by your own mechanic, which should be completed before you sign.

If you’re buying from a dealership, you’ll likely be offered add-ons such as paint protection, rustproofing and undercoating for a new car, or an extended warranty for a used one. Many add-ons aren’t necessary. Some add-ons you can buy for much less outside the dealership, and you won’t have to pay finance charges on them as you would if you included them in the deal, says Montoya. Extended warranties can be a bad value and unnecessary, especially if you’re buying a reliable car and take care of it as the manufacturer recommends. Along with carmaker plans, many dealers sell expensive coverage from independent companies. Those plans often have many fine-print exclusions and may be difficult to use, so be wary.

6) Decide on financing.

Unless you can pay cash, you need to decide how you’ll finance the vehicle. For a private sale, you’ll be using the loan you’ve already researched with a lender. With a dealership, you’ll have an additional option to choose dealer financing or, in the case of a new car and some certified-used vehicles, special low-interest financing from the manufacturer.

Remember that dealers often mark up their best rates, so be prepared to negotiate the rate as well as the car price. Since you did your homework prior to shopping you will be well-equipped to make a good financing decision.

If you’re considering manufacturer financing, find out whether it’s in lieu of a cash rebate. If it is, figure out whether you’d come out ahead by opting for the rebate and then financing at a competitive rate elsewhere. Compare the total costs both ways. You can use an online low-APR versus cash back calculator to help you do the math.

Another financing option is leasing. You can lease a new or used car (in limited cases). A lease is attractive because you can get the same vehicle for a much lower monthly payment than with an equivalent loan, though you don’t own the vehicle at the end of the lease. “You can get in a cycle of just throwing money away,” said McClary. Leases also have fees, restrictions on the number of miles you can drive and finance charges that are higher than those of an equivalent loan, among other drawbacks. Be sure to check for any unresolved safety recalls on the vehicle, new or used. A dealer that sells that make of car can address them for free.

7) Verify the deal.

Get everything in writing, including anything that a dealer has promised to do after the purchase. Be sure that any agreed-to-recall repairs are included in the paperwork before you sign. When leaving a deposit with a dealer, use a credit card. That way, if the deal sale doesn’t go through as promised, you can contest the charge with your card issuer.

For a used vehicle, insist on seeing the title and ensure that all the information listed checks out. With a private sale, you’ll need it to register the car once you take possession of it. Your lender can advise you. A dealer will typically register the car for you.

When it’s time to pick up your car, do a final walk-around inspection before accepting delivery. If it’s a new car that has been ordered for you or that you otherwise haven’t driven, says Moody, consider taking a test drive just to make sure everything is okay.

By following these seven steps, you can be sure you will find a great deal on a great first car.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Anthony Giorgianni
Anthony Giorgianni |

Anthony Giorgianni is a writer at MagnifyMoney. You can email Anthony here