Car buyers have another option: trading leases
By Christopher Boyce
ST. LOUIS POST-DISPATCH
09/21/2007
The following story was published in the St. Louis Post-Dispatch.
A Chevrolet Corvette may have many great qualities, but family car isn't one of them. An unfortunate man from Atlanta apparently didn't realize that until his wife told him so — six months into a 48-month lease.
But the situation was quite fortunate for Mark Workman, a 57-year-old tooling engineer in Chesterfield, who found the 2007 Corvette posted on LeaseTrader.com last month.
The website provides a relatively new way for people to get a used car. It's an online marketplace connecting people who want to get out of a lease contract with people looking to get into one.
Through the site, Workman was able to see pictures of the car and learn the details of the lease contract. LeaseTrader.com assigned an agent to help the men through the deal, handling the legal technicalities and working with the leasing company.
Just a few weeks ago, Workman flew to Atlanta to take possession of his new lease and the Corvette, which had been driven just 3,300 miles.
Founded in 1998 by Sergio Steiberman, Miami-based LeaseTrader.com processed 20,000 transactions last year and is on pace for 35,000 this year.
Steiberman, 41, came up with the idea when he was confronted with $14,000 in penalties and fees to get out of an auto lease of his own. Like many consumers, he admits he didn't fully understand terms of his lease but instead was lured by a low monthly payment on a fancy car.
"You sort of get upset and wonder, 'How did I fall for that?'" Steiberman said.
Compared with buying, auto leases generally offer lower monthly payments and a smaller down payment on new vehicles. That's done through a leasing company, often affiliated with an auto manufacturer. Typically, the customer drives the vehicle for a set period of time and a maximum number of miles.
At the end of a lease, the consumer usually has the option to turn in the vehicle or buy its at a price designated in the contract. Damaging the car or driving it more than the mileage allowed results in extra charges at the end of the lease.
As Steiberman found out, getting out of a lease early also carries a significant charge, usually more than the value of the remaining monthly payments.
After his experience, Steiberman wondered why lease companies couldn't treat car leases more like apartment leases, where landlords generally let tenants out of a lease if they can find another tenant to finish the duration of the lease. He found most leasing companies don't forbid the practice, but it requires more legwork than most people care to do.
For those looking to escape a lease, LeaseTrader.com charges $79 to post a vehicle and $149 to process the transaction. Lease acquisitions cost $39 for a credit check and $149 to complete the deal. LeaseTrader.com employs about 40 people, mostly consultants who help customers through their deals.
Many lease trades come after people make dramatic life changes, such as moving out of the country or an increase or decrease in family size, Steiberman said. Others simply get bored with their leased vehicles or like to switch cars frequently.
Those seeking the lease might want to avoid working with dealerships, or don't want to make a hefty down payment.
A good chunk of the vehicles posted are near the end of their leases, and some are already over their mileage. Steiberman explained that customers for these vehicles often need a vehicle for a short time, and paying a mileage penalty is cheaper than buying a car. One company that hasn't warmed to the idea of lease trading is Honda Finance, the financial services arm of American Honda Motor Co.
"American Honda finance is somewhat selective about the consumers that are granted the lease on the cars," spokesman Chris Martin said. "If we had people coming out of the blue to lease our vehicles on a lease that's already in term, we wouldn't be able to control (that)."
Martin said the company also believes that if the vehicle was damaged before a lease transfer, complications could arise in determining who would assume responsibility. He acknowledged that there are ways the company could protect itself from that scenario, but Martin said many consumers misunderstand lease contracts, and "we've tried to keep ours as simple as possible."
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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.
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