Can someone else purchase my leased vehicle?
Have you ever considered breaking your vehicle lease too early to let someone else take over your lease payments? Of course, it might not be beneficial to keep your lease contract when it does not fit your budget and needs.
A few of the questions you need to find answers to are, can someone else purchase my leased vehicle or car? Are you allowed to buy your leased car? Can you sell your leased car and earn profits on it? Can you transfer your lease to another person?
But before you chose to take any steps, it’s important to understand the potential complications and risks involved in transferring a car lease to another person before the end of your lease contract.
Leasing can be the best cost-effective and convenient way of driving that sleek new car you ever dreamed of without going through the complications of applying for and financing a car loan.
In this article, I am going to explore the ins and outs of transferring or selling your leased car to someone else, and I will go further to help you decide whether transferring or selling your leased vehicle to someone else is the best move for you. Alright, let’s go!
What is a leased vehicle?
A leased car is a vehicle rented to you by a leasing company. Some of the best US leasing companies include Alliance leasing, The US Bank, Mercedes-Benz, and others.
The car is usually rented to you by the lease company for a period of between 2 to 4 years and You will be required to pay a monthly installment or pay according to what is agreed in your lease contracts.
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In my opinion, leasing a car is far cheaper and more convenient than taking up a car loan. This is because the monthly payments for a leased car are way lower than the monthly payments for a financed car (car loan).
When you lease a car, you and your company agree on certain terms and conditions such as maintaining the vehicle in good condition, not exceeding certain mileage, and expected tear and wear.
At the end of your lease term, you usually have 3 options ie, returning the leased car to the company, buying the car at the predetermined price, or starting a new lease.
How does vehicle leasing work?
In my opinion, here is how leasing a car works. You want to drive a good car but you have no money, or you are not ready to own the car, you temporarily need one.
Walk into any leasing dealership, let the company check if your qualify, process the paperwork, and boom! drive off the car lot.
In the lease contract, there are certain things you need to know.
- You will drive the car for a certain period. For instance 4 years.
- You should return the car, or buy it at price X after 4 years.
- The returned car should be in a certain general appearance, be worth price X or else pay penalties.
- Car Mileage. The common mileage for leased cars is 10,000, 12,000, or 15,000 miles.
Can someone else purchase a leased vehicle?
Compared to someone else purchasing your financed car, it’s far easier for someone else to purchase your leased car. But this is not smoother as you may think.
You actually do not own the leased car. Instead, the leasing company owns the car and has full rights over it. This implies that someone else cannot buy the vehicle from you.
If the leased car is for sale, then the customer will buy your leased car from the company, and payments will be done directly to the company other than you. You only receive the difference or extra Dollars as profit.
If the car’s predetermined price is $20,000 at the end of your lease period, you can negotiate a higher price and the difference is yours!
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In simple terms, the person interested in purchasing your leased vehicle will need to take over the lease from you.
If your car still looks nice and is in better condition, you can sell the leased car back to the company or sell it to a third party and make a profit! Continue reading to find out how?
Transferring the lease from you to someone else
According to Eric from CarsDirect, the process of taking over a lease from someone else is called ‘Lease Assumption”. Someone else cannot take over the lease from you unless his creditworthiness and financial status have been verified and found satisfactory by the leasing company.
The new person who wants to take over the lease from you will need to accept the same terms as you, or else transferring the lease won’t go through.
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If you are thinking of transferring your lease vehicle, both you and the new customer need to understand the complications involved in the transfer process. For instance, the new client will need a good credit score, and his income levels should be commendable too.
The new client will also be asked by the lease company to pay a security deposit, and other fees just like the same way you did at the beginning of your lease contract.
“Transferring the leased vehicle is totally different from selling the car”, says Erick, one of the salespeople at CarsDirect. when you sell the vehicle, you transfer the ownership of the vehicle to the buyer. The buyer here takes over the ownership of the car and is responsible for paying any loan or any financing.
When you transfer the leased car to a new client, the leasing company still remains the owner of the car. The new lessee simply takes over the responsibility you had towards the leased car.
can I sell my leased car to someone else?
In my own opinion, you are free to sell your leased car but you should do this only if the terms and conditions in the lease contract allow you to do so. Short of that, no, you can not sell your leased car because you are not the rightful owner– your lesser company owns it.
According to NerdWallet, you can sell your leased car and make a profit. This is because there is a high market for a used cars in the US today. For Instance, assume you and your company agreed to $40,000 as your buying price after your lease period of 4 years.
You can make a good profit if someone else offers you $48,000 for a few months towards the end of your 4 years leasing period. Selling your leased car earned you $8,000 in profits.
I strongly recommend revisiting your leasing terms and conditions. Some companies allow the transfer of a leased vehicle from you to another person, while other companies do not permit the sale of your leased vehicle.
If your contract does not allow you to sell the car, you will need to find someone else who is capable of taking over the lease from you, and probably buy the car at the of the lease period. This buyer will still need to qualify for the lease and be approved by the leasing company.
If the company does not allow selling the car or transferring the lease to another person, you have only 2 options ie returning the car to the company at the end of the lease period, or terminating the lease and paying fines/penalties.
It is also worth noting that it is much more difficult to sell the car you are leasing compared to selling the car you own. This is because the remaining months of lease payments may not look attractive to the potential buyer. You will be forced to provide extra incentives or higher discounts to attract the buyer.
what are the penalties for breaking a car lease?
Premature breaking of your lease could earn you penalties like paying the remaining monthly payments on the lease, paying an early termination fee, the fee to prepare the vehicle for sale, storage and transportation fees, and the gap between the current car value and what you still owe on the car, etc
what are the Alternatives to transferring a lease?
There are many alternatives to transferring a lease you should consider. These include:
1. Return the vehicle to the dealership. If you are a couple of months toward the end of your lease period, you can return the car to the dealership and walk away. But, this is simpler said than done because you will be asked to pay for extra tear and wear, pay for extra mileage, and other fees.
Some companies will also make you pay fines for premature termination of your lease contract. You might also be asked to pay certain fees, or outstanding lease payments on the car.
2. Purchase the vehicle outright. If you leased a $60,000 car for 3 years, the leasing company usually inserts the price they believe is fair for you to buy the car at the end of your leasing period. For instance, the predetermined price could be $50,000.
If the lease period comes to an end and you want to buy the car, you simply walk to the dealership, pay $50,000, and boom! the car is yours. If you buy your leased car, we say you have ‘exercised your buying option“.
If you or someone else wants to purchase the leased vehicle before the end of the lease period, he/she will pay a price that is higher than $40,000. So, someone who prematurely purchases your leased car usually pays a higher price than the predetermined price agreed in the lease contract.
3. Start a new lease. Let’s say your agreed lease period of 4 years come to an end but you still love the vehicle. What do you do? It’s simple, you have an option of starting a new lease if you are not interested in buying it from the dealership.
This option is more appealing if you are coming near the end of your current lease period but you still love the vehicle. However, you should know that, at the beginning of the new lease period, you might be asked to pay a new down payment on top of monthly payments too.
It’s possible someone can purchase your leased vehicle and if you act smart, you could even earn profits. It is also possible for someone to purchase a leased vehicle, or transfer the lease to the new lessee which requires approval from the company.
If you can not transfer the lease, your options are returning the vehicle to the company after your lease period, buying the car at the end of the lease period, or starting a new lease.
Look into your finances and make the best decision depending on your needs and financial status.