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Swap-a-Car Lease

Last updated 29th Nov 2022

Consumers looking for a no-money-down car lease should evaluate the opportunities that a swap a lease marketplace provides. The term "swap" is a bit misleading, because trading leases isn't necessary. It's an arrangement whereby a buyer agrees to assume responsibility for the seller's existing lease.

Swap Lease Arrangements

The basics of swapping a lease work like this: A marketplace is created that matches the "sellers" of car leases with "buyers." A seller is anyone that currently has a lease on a car that is looking to transfer it to someone else. A buyer is someone that is looking to assume the remaining car lease payments from the seller.

Sellers are typically individuals that are looking to upgrade their lease, or have run into financial difficulties. Buyers are usually individuals looking for a good deal on a short-term car lease. This is an important point.

In general, the term of a car lease is relatively short. Timelines will usually span two to four years. If the buyer is looking to assume a lease from another party, the duration of the swap will usually be less than two years.

Sellers need to determine whether or not they can actually assign their contract to another party. This type of arrangement is typically referred to as a lease transfer; not all agreements allow for transfers.

Pros and Cons

The pros and cons of these arrangements are somewhat obvious. They allow the owner to exit the arrangement without the worry of buying out the lease, which can be an expensive undertaking. When the swapping marketplace is active, sellers are matched with buyers in a way that guarantees they'll obtain the true market value for their lease.

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This process also allows buyers to avoid putting a large amount of money down on a lease. This is usually in the form of an upfront capital cost reduction payment, which is often used by dealerships to lower monthly payments. Since the original lease owner has already made that investment, the buyer gains the advantage of the lower monthly payments.

On the other hand, the buyer is getting only a short term benefit. In just a couple of years, the buyer will have to go through the whole process again. In addition, the original owner of the lease knows how well they've maintained the car. It's important for anyone thinking about entering into a lease swap agreement to make sure the car is in good running condition, and the car's out-of-warranty parts are in good condition.

Transfer Fees

The most efficient way for a lease swap to operate is through a marketplace that matches buyers to sellers. Companies that offer these services collect a fee in exchange for creating a robust marketplace.

Buyers can be expected to pay two types of fees. The first goes to the company that created the exchange or website. This is usually in the form of a registration fee. The leasing company itself may also charge the buyer a fee for providing services such as a transfer, or processing a credit application.

Lease sellers will often have to pay a listing fee to have their vehicle included in the website's database of available cars. In addition, the seller is usually charged a second fee at the successful completion of a swap. This second fee is similar to a sales commission that the swap-a-lease company collects. The total fees paid by a seller are usually around $150 to $250.

Consumer Warnings

Potential buyers and sellers of car leases need to be aware that swapping does not work for everyone. It's important to carefully evaluate the benefit of taking over someone's car lease. Even if the car is "clean" and mechanically sound, the details of the vehicle are critical.

For example, does the car have a manual transmission? Not everyone is comfortable driving a stick shift. Was the car garage kept? Did the prior owner smoke? Even if the vehicle passes all of these tests, buyers still need to be aware of one special situation.

Mileage Caps

Most leases restrict the number of miles that can be driven over the term of the agreement. This is referred to as a mileage cap. Before entering into a lease swap, buyers need to make sure they can accommodate the remaining miles left before reaching the mileage cap. What seems on the surface to be a great value in a car lease might be a burden or an unacceptable arrangement for a buyer. We're going to close out this article with an actual example to illustrate this point:

Swap-a-Lease Example

A website was offering a late model BMW 3 series sedan for only $350 per month. This car had 24 months remaining on a 30 month lease. The car is practically brand new. On the surface this seems like a great deal, but there is a hidden cost to this monthly payment.

The original arrangement calls for a cap on the mileage at 30,000 miles. After only six months, the car already had 17,000 miles on it. This leaves the buyer of the lease with only 13,000 miles over the next 24 months, which works out to roughly 500 miles per month. That's not a lot of miles, especially if someone plans to use the car to commute to work. The excess mileage charge on this car was $0.20 per mile, and that charge will quickly increase the effective monthly payment on this vehicle.

If the buyer drove the car the original lease allowance of 1,000 miles per month, the excess mileage charge would be an additional $100 per month. This brings the true cost of the lease back up to $450 per month. Buyers need to do their homework, or they could wind up leasing a car that's too costly to drive.

Online Calculators and Glossary of Terms

This website contains a number of online calculators that can help with the decision making process. In particular, there is a car lease calculator, which can help the user to figure out if they're getting a good deal on the car. Users that are not familiar with these arrangements can refer to our car lease glossary, which contains over 30 of the most commonly used terms in this industry.

About the Author - Swap-a-Car Lease

Moneyzine Editor

Moneyzine Editor