With new Web sites, lease trading getting easier
Sharon Terlep - The Detroit News
Frank J. Parker / Special to The Detroit News
Rising gas prices led Rob Abraham of Livonia to find someone to take the lease on his Linclon Navigator.
For those leasing SUVs who are desperate to get rid of their gas guzzlers in favor of a more fuel-friendly ride, now there is an easier way out.
Companies are popping up across the country to help people trade out of their leases, a practice that used to be difficult to impossible but has become much easier due to Web sites that help compatible buyers and sellers find each other. Lease-swapping also has become more attractive, not only for SUV owners tired of paying $60 for a tank of gas but for those locked into three- or four-year leases that have become a burden.
SUV owners looking to trade their leases are finding buyers in people who want an SUV but don't want to commit to a full-term lease or can't afford their own lease, said Sergio Stiberman, LeaseTrader.com founder and chief executive officer.
"Maybe at the beginning, when you first got the vehicle, you like the car, (gas prices) weren't a big deal," he said. "After a while, it starts adding up and making a really big difference."
Lease-swapping fell out of favor earlier this decade, when low- and zero-interest loans drove more people to buy their vehicles. But leasing is becoming popular again as interest rates rise and financing a new vehicle over several years becomes more costly.
Trading leases also has become a lot easier. In the past, automakers and financing companies either didn't allow customers to trade leases or made swapping difficult. Even when it was allowed, people had to rely on newspaper ads or other local media to connect them with potential buyers.
Sweetening the deal
When people sell a lease on sites like LeaseTrader.com, they often sweeten the deal by offering a chunk of cash or by discounting the monthly payment.
Livonia's Ron Abraham posted his Lincoln Navigator SUV on the site in May. He bought the vehicle for his wife, a homemaker, to drive around town. But as gas prices rose, he began to feel the $700-a-month truck wasn't worth the expense.
Months passed, and he had no takers. But then he increased his offer to include $2,500 to help lower the lease payment. That was enough to land a buyer, a woman from Florida who plans to have the car shipped down.
"I'm paying more than $1,000 a month for fuel -- it's just not practical," Abraham said. "I can get something very nice at a lot less. They're giving away cars right now."
The lease-swapping route isn't without its problems, though. Some lending companies hold consumers liable for the lease, even after it has changed hands. In addition, lease-trading Web sites, and sometimes the automakers, charge fees for trading a lease.
In some cases, though, trading a lease is the cheaper route because most lease holders, or lessees, must pay a hefty penalty to get out of the contract early.
Edmunds.com's Philip Reed spells out this scenario in an Edmunds tip sheet for people considering trading their lease:
Someone who has a $1,000 payment and 24 months remaining on a contract would be liable to the lending company for $24,000.
The owner might offer the vehicle with a $2,000 incentive and would have to pay the lease-swapping company a fee of 5 percent of the value of the remaining payments, which is the typical charge.
When the deal is done, the lessee paid about $3,200 (the $2,000 incentive and $1,200 for the fee) to get out of the lease, rather than taking a $24,000 loss.
Business is up
"When you're talking about a short-term lease, it becomes very appealing to people who don't want a long-term commitment," said George Kang, an Edmunds.com analyst. "The typical 'It's going to cost too much' barrier is being broken down."
Business is up about 40 percent from last year at Swapalease.com. The increase is across the board, not just with SUVs, founder Ron Joseph said.
"People are looking at leases again," he said.
"It's a way to get more car for less money."
Auto companies and lenders are still cool to the idea of lease-swapping, but they are beginning to respond to the growing number of lease holders who want out early.
General Motors Corp., for example, is running a promotion that lets people out of the last four months of their lease. Other companies are offering leases as short as 24 or 27 months.
Automakers "are learning from what's happening in the market," Edmunds' Kang said. "They're realizing that people want shorter-term leases."
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