Are you stuck with a lease or loan for a car you just don't want any longer? Many leases, and some loans, allow a new person to assume the remaining term of the lease, taking over the vehicle and the payments on it. This person could be the person you are selling your car to, allowing you to walk away from the transaction without any more payments hanging over your head. This is not simple and you need to take care to ensure everything is fully documented and agreed with your leasing company.
EditSteps
EditFinding Out If You Can Transfer an Auto Loan
- Determine whether it is a lease or a loan. You will no doubt already know this, but if you are in any doubt be sure to clarify whether your have leased the car or have an auto loan. A loan would mean that you have in effect bought the car and you are paying off the cost in instalments to a bank, auto dealer, or other financial institution. A lease, on the other hand, is a limited term contract that will expire after a certain length of time.[1]
- If you are leasing a car it is generally easier to transfer the lease to another person than it is to transfer a full auto loan.
- It is often not possible to directly transfer one loan between two people, but there are alternative ways to bring about the same result.[2]
- Check your loan contract. Before you go any further you need to make sure you understand your contractual situation. Thoroughly read through all the documentation you have about your auto loan, looking for information about your options if you are struggling to make the payments, or want to get out of the contract early for whatever reason.
- There may be options in your contract to sell the car and pay off what you owe, or to trade in the car for another model and adjust the loan accordingly.[3]
- If you are uncertain about your position, contact the loan company and consider getting some legal advice from an attorney.
- Speak with your creditors and find a buyer. Once you have established your position with your loan company, you may well find that your best option is to sell your car privately. You could then use the money to pay off the amount you owe, with the new owner making the payments to the bank or loan company. If you decide this is your best option you need to have the agreement of your loan company before you go ahead with it.
- Until you have paid off all the debt on the car, you will not completely own it, so you will need to get permission from your loan company to sell it.
- Taking responsibility for the sale yourself will make it more likely that you will get a good price than if you left it to the creditor to sell.[4]
- Defaults and repossessions are costly for creditors so they will most likely be interested in alternatives if you can't make the payments.
- If you have an agreement with a friend or family member this can help the process move more quickly.
- Come to an agreement with the buyer and your loan company. The simplest way to effectively transfer an auto loan between between two people is for the new owner to take out a loan which he uses to buy the car from the old owner. The old owner will use the money from the new owner to pay off the amount he owes to the loan company and the car's ownership would be transferred to the new owner.[5]
- If you are operating with one loan company this process could be more straightforward than if you are dealing with multiple organisations.
- By doing this you are basically transferring the loan and the outstanding payments to another person.
- Make sure that you also transfer the title of the car to the new buyer, in accordance with the laws in your state. Notify your insurance company that the car is no longer in your possession.
EditDetermining Whether a Lease Take Over is Permitted
- Check your contract. The first thing you need to do is make sure that there is an option in your leasing contract to transfer it to another person. This varies from company to company so you need to know where you stand.[6] If you are unsure whether your lease agreement allows assumption of the lease, consult the leasing company or an attorney.
- Generally, leases are easier to transfer to another person than loans are. If you are only leasing the car, you are not working towards buying it outright, so the contract will be shorter than a full auto loan.[7]
- Speak to the leasing company. After you have checked your loan agreement, you should contact the leasing company directly to discuss your options and the possibilities. Before any lease assumption can be made, you will need to have it signed off by the leasing company, so it's a good idea to talk to them in the early stages. Some leasing companies might work with you to determine whether they consider an assumption as a good and viable option.[8]
- Some companies may work on a case-by-case basis, so they may be able to help you with the process.
- Consider your options. If you are struggling to keep up with your lease payments or your circumstances change and you decide to try to pass on the lease, you should take some time to consider your various options and the impact they will have financially and on your credit rating. It can be very expensive to terminate a lease early, and defaulting on the lease will lead to repossession and a significant black mark on your credit record.[9]
- One alternative might be just to sell your car outright rather than transferring the lease to someone else.
- If you are in negative equity, meaning the value of the car is less than the amount outstanding on the lease, selling the car won't cover your debts.[10]
- You may be able to work out a deal with your creditors that enables you to turn in the car. So always speak to the leasing company about your options.[11]
EditFinding a Third Party to Assume the Lease
- Contact a specialist company. Perhaps the easiest way to find someone to take over your lease is to go through a company that matches people with leases. For a fee, these companies will help buyers and sellers connect and act as a go-between which can assist in the process and vet potential buyers and sellers.[12]
- Search online for car lease swap companies and look for customer testimonies and companies with positive feedback.[13]
- Weigh up the costs of the fees with the value of the service being provided. If you need to find a buyer quite quickly, it could be worth it.
- Some lease swapping websites will enable you to search by make, model, and year.[14]
- List your lease online. An alternative to employing a lease swapping company is to list the lease online yourself, and deal with any interest you get from the advert. If you opt for this approach, you will have to do more of the work to find a buyer and negotiate a deal, but you will avoid the costs of employing someone else to do it. There will be listing and registration fees, so be sure you shop around to find the best deal with a reputable company.
- The fees will vary but you should expect to pay around $200 to register with the listing site and place your listing.
- There will be optional extra costs that will boost the visibility and presence of your advert.[15]
- Advertise it locally. The classified section of your local paper is a good place for an ad seeking potential drivers to assume your lease or take over your loan. Run an advert with a photograph of the vehicle, mileage, general condition, amount of monthly payment, and term remaining on the lease.
- You can also use social media websites. If you use Twitter, Facebook, Pinterest, LinkedIn, or any other social media site, post an ad on it.
- Be sure to include a photograph and the amount of the monthly payments, as well as the remaining term of the lease.
- Talk to friends, family, and co-workers. Let friends, family, and co-workers know that you are looking for someone to take over your loan or lease.
EditTransferring the Lease and the Vehicle
- Contact your lease company. Once you have found someone to assume the lease, you need to work with your leasing company to ensure everything is properly agreed and all the paperwork is complete. Each financial institution has its own procedure for lease assumption, but the procedure generally includes:
- Submission of credit application by the new owner. When taking over a lease, a potential owner/lessee will have to fill out a credit application and be approved for the total amount remaining on the lease.[16]
- Payoff or transfer of the current lease. Once the new owner/lessee is approved for purchase/lease of the vehicle, the lease or title will be transferred to him or her.
- Creation of new lease in new lessee name. When lease for the vehicle has been opened or transferred, the new lessee becomes responsible for the remaining payments on it.
- If you are operating through a lease trading company they will guide you through this process.[17]
- Take the buyer for a test drive. The buyer will no doubt want to take a test drive in the car before completing the deal. They will also want to inspect the vehicle to verify that is in the condition you stated in the listing or advert.[18] This is important for both buyer and seller, as you will both inspect the car together and agree on its condition. Having a clear and recorded understanding will avoid potential disputes down the line.
- The seller should always accompany the buyer on the test drive.
- Be sure you are present for any independent inspections of the vehicle. It can be helpful to take photographs to ensure that you have proof of any minor blemishes or damage.[19]
- Prepare the vehicle for its new owner. When turning over a vehicle to a new owner, you will want to be sure to remove all personal items. That means taking out your iPod, gloves, charger cord, and any other items of personal property out of the vehicle. After this, be sure you clean the interior of the vehicle. Wipe down the dash, doors, and steering wheel, and clean the inside and outside of all the windows. Take the vehicle through the car wash or wash it yourself. Be sure to put a nice wax on it when you are through.
- Turn over the vehicle. Depending on the arrangement you have reached, you will pass the car on to the leasing company, lease trading company, or directly to the person taking over the lease. Follow the instructions you have been given by your lease company to turn the vehicle over. Most companies will pick up the vehicle and handle turning it over to the buyer.
- If you are in possession of the title to the vehicle, you will need to sign it over to the new owner or your financial institution. Check with the lease company for instructions on whom to sign over title to.
- Contact your state's Motor Vehicle Department to transfer ownership. This will eliminate the possibility that you might be held liable for any damages after the transfer.
- Once the paper work is all complete, and you have handed over the keys, the process is complete.[20]
EditLeasing the Car to Someone You Know
- Ask around friends and family. Another option is to allow someone you know and trust to use the car and make payments to you which you then use to make your lease payments. If you are considering this option, you should approach trusted friends and family who might be interested in taking over the lease.[21]
- Contact your lease company. Before you consider this you should check your leasing contract to see if such an arrangement is expressly forbidden. Simply allowing someone to take over your lease contract without the involvement and approval of the leasing company is likely to violate your contract.[22] If you have a trusted family member lined up to take on the lease, the company may look on the proposal more favourably.
- Speaking to the leasing company can help you decide whether to transfer the ownership completely by putting the lease in someone else's name.
- If you do this the new lease holder will have to be checked and approved by the lease company.
- The alternative is to keep the lease under your name and have the other person pay you directly, but this may breach your contract, so be sure that you are clear.
- Understand the risks. This more informal arrangement comes with inherent risks that you should understand. If someone is using your car and making payments to you, you essentially become a creditor so if the person stops making payments to you, you will have to repossess the car. This can be difficult and complicated. You will still need to make the payments on the lease regardless, so you are exposing yourself to risk.[23]
- Any damage to the vehicle will see its value depreciate and push you into negative equity.
- If you own the car, you will need to add the new driver onto your insurance, which will likely raise the premium. If you do not, the driver will not be covered, which is often illegal.
- Due to these risks you should carefully consider the risks before embarking on this kind of arrangement.
- Think about the trustworthiness of the person, as well as his ability to make the required payments to you.
EditWarnings
- If the car remains in your name, you will be liable for any parking fines or other charges that might be incurred by whoever is driving.
- Ensure you have legally binding written agreements with whoever assumes your car lease.
EditSources and Citations
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