Automotive

Lease Takeover Risks?

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  • Aug 7th, 2013 10:28 pm
[OP]
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Apr 30, 2013
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King City

Lease Takeover Risks?

What risks are taken if you take over someones lease?

I assume the dealership is involved and any issues with the car would already be known...

Any way you can get screwed?
13 replies
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Jul 30, 2007
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Prior to your takeover, make sure the car has NOT been in an accident, big or small. If it was involved in an accident, was the repair done to the financing company's approved guideline ? If not, you are on the hook for non approved repairs.

At end of lease, any excessive w&t items are your responsibilities. It could amount to big $ ??? The luxury car brands tend to be more picky on these sort of things.
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Mar 18, 2008
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Damage/repairs on the car, mileage, and payments are the big things to worry about. I wouldn't really call them risks as you know what you are getting up front but they are definitely things to look out for.

I don't think you can get screwed especially if the dealer is involved. I would say the seller is at a greater risk than the buyer.
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Dec 23, 2008
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luxery car brands that require premium octane but previous owner uses the regular octane
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freeforall wrote:
Aug 7th, 2013 2:41 pm
What risks are taken if you take over someones lease?

I assume the dealership is involved and any issues with the car would already be known...

Any way you can get screwed?
Is OP assuming the dealer is going to examine the car in detail prior to the transfer?

I think the dealer will just process the lease transfer paperwork for their transfer fee.

If there is damage on the car, it is the responsibility of the person returning the car at the end of the lease to fix the damage. (ie. OP still needs to make sure car is in good condition when OP does the transfer.)

Hopefully, there the car is still under warrantee for balance of lease to cover major issues.
[OP]
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Apr 30, 2013
594 posts
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King City
booblehead wrote:
Aug 7th, 2013 2:47 pm
Prior to your takeover, make sure the car has NOT been in an accident, big or small. If it was involved in an accident, was the repair done to the financing company's approved guideline ? If not, you are on the hook for non approved repairs.

At end of lease, any excessive w&t items are your responsibilities. It could amount to big $ ??? The luxury car brands tend to be more picky on these sort of things.
What do you mean by w&t?
Busybuyer888 wrote:
Aug 7th, 2013 3:03 pm
Is OP assuming the dealer is going to examine the car in detail prior to the transfer?

I think the dealer will just process the lease transfer paperwork for their transfer fee.

If there is damage on the car, it is the responsibility of the person returning the car at the end of the lease to fix the damage. (ie. OP still needs to make sure car is in good condition when OP does the transfer.)

Hopefully, there the car is still under warrantee for balance of lease to cover major issues.
Does the dealership offer any service to do an inspection for any accidents/repairs - if not, is this something that should be done elsewhere?
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wear & tear. For example, door dings ...how big is it ? How is the financing company view/assess such grey issue ??
[OP]
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Apr 30, 2013
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King City
booblehead wrote:
Aug 7th, 2013 4:01 pm
wear & tear. For example, door dings ...how big is it ? How is the financing company view/assess such grey issue ??
ahhhhh gotcha, thanks!
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If I were you, I would only do a takeover if the followings are in my favor:

- orig. lessee pays for the transfer fees
- there are lots of mileage remaining
- the term is not extremely long, ideally, 18-24 months left
- the interest rate must be very low and/or the orig lessee has a good down payment
- orig. lessee pays for dealer inspection and pays for the unwarranted items before the lease is to be taken over
- if the tires are 50% worn, the orig lessee has to pay for 50% for the cost of replacement
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Nov 13, 2012
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spena wrote:
Aug 7th, 2013 3:01 pm
luxery car brands that require premium octane but previous owner uses the regular octane
+1

once i saw a bmw x3 owner fuelling 87
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Jun 21, 2013
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In the middle of now…
booblehead wrote:
Aug 7th, 2013 8:27 pm
If I were you, I would only do a takeover if the followings are in my favor:
...
- the interest rate must be very low and/or the orig lessee has a good down payment
...
Pardon my ignorance... I would think that depreciation on a new vehicle is sort of logarithmic function of time, i.e. it is the steepest in the first 1-2 years, and then it slows down. In case of a lease, however, the cost of depreciation is spread more or less equally over the entire term. That's why shorter leases have higher monthly payments.

In other words, the original lessee has used a new car for couple years when depreciation is the steepest, paying a 48-month lease rate on what effectively is a 24-month lease. Whoever takes over the remaining 24 months is left to hold the bag (absorb the depreciation that had occurred in the first 24 months). To offset that, there would have to be a really really good downpayment on the original lease. Otherwise, what is the point to take over someone else's lease?

Plus, as already mentioned - wear&tear, mileage, etc.
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Siberian wrote:
Aug 7th, 2013 9:48 pm
Pardon my ignorance... I would think that depreciation on a new vehicle is sort of logarithmic function of time, i.e. it is the steepest in the first 1-2 years, and then it slows down. In case of a lease, however, the cost of depreciation is spread more or less equally over the entire term. That's why shorter leases have higher monthly payments.

In other words, the original lessee has used a new car for couple years when depreciation is the steepest, paying a 48-month lease rate on what effectively is a 24-month lease. Whoever takes over the remaining 24 months is left to hold the bag (absorb the depreciation that had occurred in the first 24 months). To offset that, there would have to be a really really good downpayment on the original lease. Otherwise, what is the point to take over someone else's lease?
Shorter term, for one. But yeah usually if the lease wasn't a good deal in the first place (like the original lessee paid MSRP or something), it's not going to be a good one to takeover. A lot of people that lease don't put anything down either. So for getting someone to takeover a lease usually a cash incentive is offered by the current lessee. That and/or signing over the original security deposit. All these things equal something attractive to make someone take over the lease--shorter term, if there was a good deal originally, a downpayment made originally, cash incentive, security deposit sign over, paid transfer fees. Any one or combination of those can make the lease desirable for someone to take over.

However sometimes if someone put down a large enough amount (to get a relatively low payment) they may actually ask for some of that money when they list it for takeover. For example, if they put down $6000 or something, they may ask for $4-5k to takeover, just because otherwise they're losing quite a bit. Those leases are less taken over I think though, because most people looking to take over don't want to fork over cash initially. That's just another reason why if you do lease a car, you probably shouldn't put too much (or anything) into downpayment--if you ever have to get rid of the lease it'll probably be easier and you probably won't lose as much.

As for the depreciation, in a lease the lessee (whether original or someone that takes over) isn't left to hold any bag at all. The depreciation is the lessor's problem, not theirs.
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Feb 23, 2013
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ES_Revenge wrote:
Aug 7th, 2013 8:22 pm
Take a look at the FAQ page on Leasebusters.com--it's a good start.

http://www.leasebusters.com/en/faq.asp
Thanks for the link ES, there's a lot of good information that I would never have even thought of. I just know that when you turn the car back in at the lease end, any damage has to be covered financially.

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