Angela Cochran and her 2005 BMW Z4. JOHN H. SHEALLY II | THE VIRGINIAN-PILOT
By CONNOR ADAMS SHEETS, The Virginian-Pilot
June 20, 2007
Angela Cochran loves cars. She signed a lease on a brand-new black 2006 Mercedes SLK convertible in November 2005. She's a sales manager at a local car dealership.
But she's also a financially responsible 27-year-old Virginia Beach resident with a vacation home in Florida. Still, Cochran recently realized the importance of saving and planning for her future. So she hired a financial advise r, who recommended lowering her bills as much as possible.
A friend showed her a site called LeaseTrader.com, through which Coch-ran will save thousands on car payments - plus she got to trade her car in for a black 2005 BMW z4. The site plays host to a "lease trading" network on which sellers post leased cars they no longer want and buyers browse the listings for leases to assume. Essentially, the process switches the lease from seller to buyer for a fraction of the cost of breaking the lease.
"My payment before was like $890, and my payment now is in the $400 range," Cochran said. "The SLK was a $51,000 car, and the one I have now is probably a $45,000 car. But I get to benefit because the guy who sold it probably put a lot of money down to get the payment so low. So I'm benefiting from his original deal."
Miami-based Lease-Trader.com and Cincinnati-based SwapALease.com are the main players in a growing lease assumption market.
The concept came to Sergio Stiberman, the president and founder of LeaseTrader.com, in 1998 after he leased a vehicle and the dealer told him he could get out of the contract after a year.
"So I go back to the dealer and I say 'OK, I'm ready, I want to get out, there's a new car I want to get into.' He says 'OK, great,' and he slaps me with a bill for all the rest of the monthly payments," Stiberman said.
"Your brain starts working and gets you upset. It cannot be that this is how leasing is. With an apartment, if you have a lease and you want to get out of the lease, you bring in another tenant, and the landlord transfers the lease to them. So I said 'W hy can't we do that with a car lease?' "
The next year, Stiberman began to turn that idea into a multi million- dollar business that completed 20,000 transactions last year and projects as many as 36,000 this year.
"As a consumer you sign this four-year contract, and the next thing you know you have a change in your life," he explained. "If you say 'I need to get out of this lease - without spending $15,000 - what's the next best thing?' That's what LeaseTrader is doing."
He also noted that with high gas prices, 58 percent of his company's SUV sellers have transferred into smaller vehicles. "The SUV category has grown 30 percent over the past year," he said.
SwapALease, which plans to complete 7,000 lease transfers this year, was started in 1999 by two brothers whose family owns a large auto group in Cincinnati. "They kept coming across individuals who were trying to get into a new vehicle who were stuck in a lease, and there was really no cost- effective way to break a lease," said Jenny Weaver, SwapALease's director of marketing.
Industry observers mostly speak favorably about lease assumption but warn that there are pitfalls of which consumers need to be aware.
"Companies like SwapALease afford the consumer an opportunity to change their minds without exposing themselves to early termination fees, fines and penalties, and the consumers are looking for that," said Elaine Litwer, legislative coordinator for the National Vehicle Leasing Association.
She added that when someone assumes your lease, "you're not giving up all your responsibilities. The responsibilities under the contract that you signed are likely to stay with you."
It might be smart to check the fine print if you are going to pursue lease assumption.
Stiberman acknowledged that a number of companies - he named Volkswagen, Honda and Nissan - will not fully transfer a lease. But he said "95 percent" of leasing companies will allow a full transfer, including GMAC, Ford, Toyota and U.S. Bank Corp.
Both sites charge users for the service - generally less than $250 each for the seller and the buyer.
"I think the best thing is the flexibility of being able to have a short-term lease because things change in life," Cochran said. "You might have children or you might buy a new house and need a new truck and you are not locked into one vehicle for the next several years."
This story posted by LeaseTrader.com, the automotive service company that lets people transfer out of their Car Leases early. If you're looking to swap a lease or transfer out of your car lease, please visit www.leasetrader.com