A financial firm's former vice president, whom authorities say steered $1 billion of victims' money to convicted Ponzi mastermind Bernard Madoff, is trying to dump the lease on his 2009 Mercedes-Benz SL class convertible.
The executive, who claims he's another Madoff victim, supposedly can no longer afford the $2,600 monthly payment.
Con artist or victim, he is part of a growing wave of car lessees seeking to unload their contracts.
Many are finding they can bail via lease transfers. Such swaps are revving up because they save money for people on both sides of the transaction. And lenders are increasingly cooperative.
Most act out of financial necessity.
"They are cutting household spending, even if they have not lost their job," said Sergio Stiberman, LeaseTrader.com's CEO.
Many do it despite costs such as abandoning a down payment. "In the end it costs far less than holding onto the contract for its full term," Stiberman said .
LeaseTrader expects the number of lease swaps to rise 17% this year.
For lease sellers, it means an end to a monthly bill. On average they save $9,837, excluding transfer fees.
It also saves them from walking away from a lease. Skipping out can blemish their credit record and spark penalty fees.
Savings are bigger for re-lessees — often called buyers.
They do not have to make a down payment, which is typically several thousand dollars. The seller already did that at the outset of the original lease.
Buyers also can get a lease for periods much shorter than usual. Some have only months remaining.
The bulk of transfers for which LeaseTrader and Swapalease.com are middlemen have 18 months to go.
That's far shorter than the 36-, 39- and 48-month terms commonly offered by finance companies.
So transfers offer buyers flexibility and convenience.
Short-Term Lease
This kind of transfer is often a bargain. If a finance firm offered a lease as short as 18 months, it would have to price it much higher than a 48-month lease, Stiberman says.
In a lease transfer, the buyer generally pays the same amount the seller did, even if the remaining lease period is short.
And in many transfers the buyer pays less than the seller did.
"As an inducement to a potential buyer, some sellers will pay down part of the lease's outstanding balance," Stiberman said. That cuts the size of each remaining monthly nut.
In addition, buyers avoid having to speak with a dealer's salesperson. "Many people really do not like dealing with sales pitches and so on," Stiberman said.
Some finance companies charge a fee for their approval of a transfer. Who pays that is generally negotiable between sellers and buyers.
Several Web sites act as middlemen for lease transfers. You can find them via online search engines. Use keywords like "lease transfer."
In choosing a Web site, consider whether you want one that checks buyers' credit and how fast it does that.
Another factor is the middleman's fees. LeaseTrader charges sellers $89 to list a lease. It charges them an additional $149 to complete a transfer.
Buyers can browse the site for free. If a buyer wants to pursue one or more transfer offers that look tempting, he must pay a $39 membership fee. That lasts 60 days. It includes the cost of a credit check.
A buyer must also pay another $149 to finish a transfer.
Swapalease assesses seller fees ranging from $49.95 to $149. Only the standard listing, for $49.95, must also pay a completion fee. That's an additional $95.
Fees reflect various levels of exposure on the site. Buyer fees range from $34.95 to $79.95.
They provide membership for various time periods, as well as other services. Fees do not include a credit check. Buyers pay no completion fee.
You can also buy or sell on a site such as craigslist.com.
What To Do
Weigh potential drawbacks. One is that you don't get any equity in a leased vehicle.
"But unless your car is a collectible, its value declines over time anyway," Stiberman said.
Still, he says that if you keep a car more than four years it typically makes more sense to buy than lease.
If you are thinking of taking over a lease, compare your monthly costs with what it would cost to start from scratch via a dealer or lender.
Include Web site fees.
You can use online calculators to find monthly costs via a dealer.
Buyers should also check:
• If the lease contract has a mileage cap, how close to it is the car? What would excess miles cost? Include this in your comparative cost calculation.
• Is a warranty still in effect?
• Will the seller let your mechanic check the car?
• Does the car have an automatic transmission or stick shift?
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