Lease transfers provide flexibility
By: CHRIS BAGLEY - Staff Writer
North County Times (San Diego)
With monthly mortgage payments weighing heavy, Corey Leamon decided late last year that he probably shouldn't be leasing a late-model BMW.
Leamon and his wife had bought their house in central San Marcos in January 2005, the peak of the market. They later realized they had paid too many dollars for too much house, and that taxes and other costs added up to more than they had expected.
The 2006 BMW, a 328 sedan, was sporty and fun, but the $430 monthly payments were driving Leamon a bit too close to the edge of a financial cliff, he said. So when his mother-in-law offered to loan him her car, a 1999 Mercedes sedan with 160,000 miles on it, he parked in front of a computer and typed "getting out of a lease" into an Internet search engine.
Several clicks later, Leamon ended up at www.LeaseTrader.com, a service that facilitates the transfer of a vehicle lease from one driver to another before it expires. A Del Mar resident took over the final 14 months of Leamon's two-year lease.
While leases are generally aimed at drivers who want a new car for a limited time, the fixed 36- and 48-month periods are surprisingly difficult to cut short, with early-termination penalties often equalling the sum of remaining payments, said Scot Hall, vice president of operations for Swap a Lease Inc., a Cincinnati-based company that runs the other large player in the industry.
Representatives of both companies said slumping home prices and rising mortgage payments have been driving both "sellers" and "buyers," as they're known in the lingo, to the services in the last year or so. A LeaseTrader representative said more "selling" customers have recently been trying to get out of expensive leases and into smaller, less expensive cars.
"Times are kind of tight and I had access to an alternate automobile that wasn't going to hit me in the pocketbook," Leamon said. "It was a $430 payment that's off my books now."
Lessees' desires for newer or bigger vehicles, particularly in image-conscious Southern California, have also fueled business for both companies over the last decade, their representatives said. LeaseTrader.com claims about 20,000 used cars, trucks and SUVs available for lease. Swapalease.com claims about 12,000.
John Glenn, a Carmel Valley resident, said he had leased a modestly sized Range Rover sport utility vehicle that turned out to be too small for his wife's taste. They used Swapalease.com to offload it to a Florida resident and leased a full-sized Chevrolet Suburban in its place.
The two services are similar. Lessees pay $79 to list their cars on LeaseTrader.com. "Buyers" can browse free of charge, but pay $39 to contact an unlimited number of "sellers" during a two-month period. When a transfer goes through, each side pays LeaseTrader $149. The lease-transfer company typically arranges the paperwork with the financial institution.
The terms of the lease, which is typically held by a finance company, are almost never open to negotiation. But the original driver and the new one are able to negotiate cash payments and other incentives from one side to the other, according to representatives of the two transfer companies.
Leamon said he had gotten such a good deal on his original lease that the Del Mar man covered the $149 payment to LeaseTrader.
The companies say they're able to get most drivers out of leases with little or no hassle. In perhaps 10 percent of the cases, the finance company flatly refuses. Another 10 percent of the lessees have to remain on the lease alongside the new driver or pay sizeable penalties, said Hall, of Swap A Lease.
Mission Federal Credit Union and Point Loma Credit Union, which have branches throughout San Diego County, both require lessees to buy out the remainder of their leases, according to customer service representatives.
Swap A Lease helps negotiate those payoffs with finance companies, Hall said.
John Sternal, an executive with Miami-based LeaseTrader, said market power has begun to shift back toward buyers after a long period where sellers almost always had their costs covered. That's particularly true among lessees in Southern California, long a key market for his company, Sternal said.
"It's a commuter region," he said, "more so than any region of the United States."
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