How a lease swap works

Woman sitting in the driver's seat of her car, shaking hands with a man standing outside of the car Image: Woman sitting in the driver's seat of her car, shaking hands with a man standing outside of the car

In a Nutshell

A lease swap, also called a lease transfer or lease assumption, can get you out of your lease by getting someone to take it over. swaps can benefit everyone involved — but there are financial pitfalls to look out for. In some cases, if you try to transfer a lease and it’s not done by the book, you can still end up responsible for the lease. Or you can get stuck taking over a lease with minimal mileage and unfavorable terms like high interest, for example.

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If you want to get out of your car lease early, or if you’re someone who wants a short-term lease, a lease swap may be the solution you’re looking for. But consider your options carefully before moving forward.

A lease swap allows you to get out of a car lease early by having someone else take over the remainder of the lease. Getting out of a car lease could be helpful if your finances or other life circumstances have changed. And taking on a short-term lease in a swap could allow you to try out a specific make and model for a little while.

But lease swaps can have drawbacks too. And not all lessors or states allow lease takeovers.

Let’s take a look at the mechanics of a lease swap as well as the pros and cons to consider before deciding whether it’s right for you.


What is a lease swap?

A lease swap is the transfer of a lease from one person to another. After the swap is complete, the new lessee becomes fully responsible for the lease, as long as the transaction meets all of the lessor’s requirements.

Transferring a lease is an alternative to simply ending a lease early, which could result in hefty early termination fees. If transferring the lease is less expensive and you can find someone to take it over, it may make sense. This is especially true if your financial circumstances have changed and you can no longer afford your lease.

You may also want to transfer your lease because the car no longer meets your needs. After all, you can’t use a two-seat sports car to take your newborn child and spouse home from the hospital. Or you may have found you just don’t like the car you leased.

When it comes to taking on a lease transfer, someone may want to drive a newer car or need a certain type of car for the short term.

How to swap a car lease

To get started, check with your current leasing company to make sure it allows lease assumptions, and get familiar with its particular ground rules. Some, such as Acura Financial Services and Hyundai Motor Finance Co., don’t allow them, and others may prohibit transfers if you’re near your lease’s end. If you are able to transfer your lease, ask about any fees, such as transfer fees, that you may have to pay as part of the process.

The next step is to advertise your lease. Lease swap websites can make the process easier, because they already have an audience that may be interested in taking over your lease.

Once you find someone interested in your lease, that person will need to undergo a credit check. Whoever takes over your lease will typically need to meet the same credit standards that you were required to meet when you began your lease. Your leasing company will usually check the credit of the person who wants to take on your lease. Some lease swap sites, like leasetrader.com, also verify the person’s credit.

If the person qualifies to take over your lease, both of you will complete transfer paperwork to finalize the transfer.

Finally, the new lessee will need to register the car in his or her name and pay any related fees. This can include sales tax in certain states.

Benefits of a lease swap

Serves a short-term vehicle need

A lease swap could be ideal if you need a car — or specific type of car — for only a short time. For example, if you typically rely on public transportation but recently took on a contract job that requires a commute by car, a lease swap could provide the temporary wheels you need without the typical two- to four-year lease term hanging over your head.

Is a short-term lease ever a good idea?

Allows you to test drive a car for a while

A lease swap can also serve as an extended test drive. If you’re debating whether a particular car will be a good fit for your long-term needs, you can try to find a lease swap that has a few months left on the lease. This would allow you to try out the car in your everyday life without committing to ownership of a new car or a long-term auto lease.

No down payment

When you take on a lease, you can avoid making the security deposit and potential down payment (called a capitalized cost reduction) typically required at the start of the lease.

Considerations with a lease swap

You inherit the original lease terms

When you take over a lease, you’re typically stuck with the terms of the original lease, including the monthly lease payment, interest rate and mileage limits.

This means that you’ll have to make the same monthly payment as the previous lessee, which might include a higher interest rate than you’d otherwise pay by getting a new lease yourself.

You’re stuck with the car’s condition and mileage

Someone may be looking to get out of their lease because they’ve driven more miles than they anticipated after they signed their lease. This could leave you with a few thousand miles for the remainder of the lease. If you go over the limit, you’ll likely face a fee for excess miles —typically 10 to 25 cents per mile — at the end of the lease. Before you take over a lease, be sure the remaining mileage fits your needs.

You’re also stuck with the current condition of the car. The previous lessee may have put a lot of wear and tear on the vehicle, and you’ll be on the hook for charges related to broken parts, dents, stains, cracked glass or other damage when you turn the car in.

Before taking over a lease, get a vehicle history report to confirm the car wasn’t in any major accidents, and ask for service records to confirm the original lessee kept up with the required maintenance detailed in the lease agreement.


Bottom line

A lease swap can be beneficial to everyone involved. The person getting rid of the lease can move on, and the person assuming the lease can meet a temporary vehicle need, potentially at a lower overall cost than a long-term lease or a car purchase.

As with any car shopping, remember to do your homework and explore all your options before choosing a lease to take over. If you’re struggling to get approved for a lease swap, you could also look into a long-term car rental or the purchase of a lower-priced used car.


About the author: Lance Cothern is a freelance writer specializing in personal finance. His work has appeared on Business Insider, USA Today.com and his website, Mone… Read more.