Lease takeovers: 5 things to know before you take on someone’s lease

Woman sitting in the driver's seat of her car, looking out the window and thinkingImage: Woman sitting in the driver's seat of her car, looking out the window and thinking

In a Nutshell

A car lease takeover — also known as a lease transfer, lease swap or lease assumption — gives you the opportunity to take on the remainder of someone else’s lease. Although a takeover could allow you to get a certain type of car that you might need for a little while, it could end up costing you in the form of fees and taxes.

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Taking over someone’s lease could seem like a great way to “test drive” your dream wheels or get a specific type of vehicle that you need for the short term.

A lease takeover can help you solve a temporary car need without locking yourself into a typical two- to four-year lease or buying a new car. In a lease takeover, you take over someone else’s lease before it ends, leaving you responsible for the remainder of the lease. But these short-term leases can come with risks.

Before you agree to a lease takeover, consider possible drawbacks, including a variety of fees and a potentially higher cost of financing than you could get on your own auto lease.



1. You inherit the monthly payment as-is

When you take over a lease, you don’t get to renegotiate its terms. Instead, you inherit the same monthly payment and lease terms that the original lessee negotiated.

Unfortunately, some people don’t negotiate as well as others — if at all. In other cases, the original lessee’s credit may not have been good, which can result in a higher cost of financing. Or maybe that person didn’t make a down payment — called a capitalized cost reduction on a lease — to reduce their monthly payments.

Depending on your credit and finances, each of these scenarios could lead to a higher monthly payment than you might have if you had leased a car yourself.

What you can do: Before moving forward with a lease takeover, shop around and compare lease swap opportunities involving the same make, model and year to help find the best deal for your financial situation.

2. Mileage could be very limited

As with the monthly payment, you also must stick to the mileage limits on the original car lease agreement when you take over a lease. If you go over the limits, you could face excess mileage charges from 10 cents to 25 cents per mile or more. Lease swap sites like SwapALease.com and LeaseTrader.com list the car’s current mileage along with the remaining miles on the lease or the lease’s mileage limit.

What you can do: If you really want the car but expect to exceed the mileage cap by the end of the lease, ask about mileage overage charges so you can plan accordingly. At the end of the lease, you’ll likely have to pay a fee for every mile you drove over the limit.

3. Wear and tear could wear out your wallet

If you’re lucky, the lease car you take over will have been immaculately maintained. On the other hand, the car may have been in a few fender benders. Either way, you’re responsible for the car’s condition after you take over the lease. And if the vehicle has a lot of dents, broken parts, burns or stains, worn tires or other damage, you may be hit with a charge at the end of the lease for excessive wear and tear.

This fee may also apply if the original lessee didn’t get the car serviced based on the manufacturer’s suggested maintenance schedule. You could be charged for failing to properly maintain the car or for the cost of completing overdue services.

What you can do: If you’re considering taking over the lease of a specific car, ask the original lessee for service records to confirm the car underwent required maintenance. You might also order a vehicle history report, which can tell you if the car was in a major accident or has sustained any damage.

4. You may be hit with taxes

Each state has its own laws regarding how it taxes a car lease. Depending on your state laws, you might need to pay tax on your lease takeover. In some states, the sales tax must be paid upfront at the start of the lease. Some states allow the tax to be rolled into the monthly lease payment. And if you take over the lease of someone who lives in a nearby state, you may incur taxes in your state.

What you can do: Research the laws in your state to find out if you have to pay sales tax and how much it will add to the cost of your lease transfer. This can help prevent the surprise of a hefty tax bill.

5. You might pay even more fees

On top of potential fees for excess mileage or wear and tear, you may have to pay the following when you take over the lease or at the end of the lease:

  • Lease transfer fees: Some leasing companies charge for transferring a car’s lease.
  • Credit application fee: The company that has drawn up the lease you’re taking over may charge you for checking your credit.
  • Disposition fee: When you return the car at the end of the lease, you might be charged to cover the costs associated with preparing and selling your car, such as vehicle cleaning, inspection fees, auction fees and depreciation.

What you can do: Confirm any fees and who is responsible for them — you or the original lessee — before agreeing to a lease takeover.


Bottom line

A lease takeover can be a great arrangement for both the person transferring a lease and for the person taking it over. The original lessee gets the lease payment off their hands, and you get the wheels you need — or want — without a long-term financial commitment.

If you’re planning to take over a lease, just remember to do your homework. Make sure the car was cared for and take the time to understand any potential fees or taxes you’ll need to pay at the time of the lease takeover or at the end of the lease.


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.