Can't pay Car Lease? You don't have to walk away
Shannon Buggs
Houston Chronicle
November 15, 2007
The following story was also posted online at www.leasetrader.com.
Nov. 15--Personal finance columnist Shannon Buggs answers readers' questions about managing money.
Q: I leased a new Mercedes Benz C230 in March 2006 and then lost my job in August of this year. I haven't found a new job yet and I can no longer afford to make the payments on my car. What options do I have? I need my car to look for a job.
A: Your worst option is to walk away from the car and lease contract.
That will blemish your credit records and sink your credit score.
"Repossession is the last thing any lender wants to do because every time they take back a car they are guaranteed to lose money," said Pete DeLongchamps, a vice president at Houston-based Group 1 Automotive, which owns 96 dealerships across the country.
After 90 days to 180 days of nonpayment, lenders usually repossess leased cars if you have not communicated with the lender about your financial problems, DeLongchamps said.
Another option is to terminate the lease early.
However, it's likely you don't have the cash to do this. Usually to cut a contract short, you pay all the remaining lease payments, plus a termination fee and a lease-disposition fee, which is typically collected when the vehicle is not purchased at the end of the lease.
The leasing company can also drive up the costs of extracting yourself from this deal by charging you for wear and tear on the car. In the end, you may spend more than the car is worth to end the lease early.
You also could transfer the lease to someone else.
Reread your lease agreement to see if your leasing company allows transfers. If it's not flat-out banned, check to see if complete transfers are permitted.
Some companies let you sell your lease to others, but keep your name on the contact as its guarantor. If the person who buys your lease stops making payments, the responsibility for those payments falls back on you.
To find a buyer willing to take over your lease, list your lease in the newspaper classified section or at leasetrader.com.
This route also costs you listing charges, lease-transfer fees and vehicle inspections.
Your best option is to renegotiate the lease.
Call the leasing company, explain your situation and ask to extend the contract's term, which should lower your monthly payment. This will cost you more money in the end, but allows you to avoid defaulting on the loan.
The leasing company also may approve you to skip a couple of payments, which gives you a break by extending the contract without adjusting the monthly payment.
Take notes during the conversation and ask the company to send a written acknowledgment of any agreed-upon changes.
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