Leasing a car has its advantages, and a few downsides. However, if your credit is subpar qualifying can be a problem.
You might be able to take over someone’s existing lease payments and have the vehicle in your name. This way, you can have reliable transportation anytime you need it and get credit for making the lease payments on time.
Benefits and Disadvantages of Taking Over an Auto Lease
Before you decide that this is the right financial move for you, there are a few factors to consider. While a “take-over auto lease” can help rebuild poor credit, there can also be pitfalls. Knowing all the facts will ensure that you don’t end up hurting your credit, instead of helping it.
Upside to auto leasing
- You can trade in your vehicle every few years for a newer model. This can apply to the person that took over the loan, but a credit check will be required. If you make all the payments on time, and keep the vehicle for a few years, there is a chance your credit will have improved enough to be approved.
- Auto leases can be handled by the dealership or Buy Here Pay Here lot where credit requirements are often less strict than at a bank or credit union. This is not always the case, but the same benefit often still applies.
- Most car leases come with “bumper to bumper” warranties from the dealership at a lower price than if you would have purchased the vehicle outright.
- If the vehicle you leased turns into a “lemon”, you can have it replaced at the dealership with little to no hassle.
- Sales tax is often lower on an auto lease compared to buying the vehicle.
Downside to auto leasing
- A set mileage can included in the lease contract. If you go over it, fees often apply. These can add up depending on how often and the distance you drive.
- The dealership often gets to retain the vehicle’s blue book value when you are ready to trade it in. When you purchase an auto, you still retain its value and this can be used towards your next vehicle.
- When you assume a lease you might not have all the benefits that were included with the original leaser. This can include charges for mileage if they are over what the initial auto lease contract specified.
Taking over a lease can help you get behind the wheel. If you’ve decided that this is the right decision for you, there are a few steps you need to follow.
How to Assume a Vehicle Lease
If you want to take over someone’s car lease, there is a little more involved than just making the payments. You could just continue to pay on the original title holder’s lease but this is problematic. Not only is it illegal, you won’t be acknowledged for making the monthly payments on time. This means that your credit won’t benefit, only the original vehicle owner’s will. Everything from the vehicle title to the insurance will stay in someone else’s name.
What is a vehicle lease?
If you’ve ever rented a car, then you already have a good idea of what a lease is. A contract is signed with the lender; bank, credit union or dealership to drive the vehicle for a preset amount of time. Most leases are for 12, 24 or even 36 months. One can also be requested that it is shorter or longer depending on needs and finances. Yearly mileage will be restricted to prevent the vehicle’s value from depreciating, usually between 12,000 to 15,000. It is possible to raise the mileage restrictions but this usually results in higher monthly payments.
What is lease-swapping?
When you take over someone’s car lease it basically involves transferring the paperwork from their name to yours. Now, you are responsible legally for the remaining payments and vehicle maintenance. You will still have to abide by the mileage restrictions but you can drive the automobile for the remainder of the lease. If you want to renew the lease or get a new vehicle, you will have to meet the lender’s credit score requirements. For most lenders it is a FICO score of 620 or higher. Making the monthly payments on time can help raise your credit score, though it can take several months before it is reflected on any of your reports.
If you are ready to take over a car lease and repair your credit, here’s what you need to do.
Find out your credit score
You can find out what your credit score is for free, and without incurring any loss of points, with your bank or CreditKarma.com. If it is below 620, don’t give up, you might still be able to take over a car lease. The vehicle might be an older model but it still gets you on the road and a start to “upping” your credit rating.
Print out your credit report
There are three credit reporting agencies, Experian, TransUnion and Equifax. Each will issue one free credit report per year. You will need this when you sit down with the potential lender. Even if your report is dismal or almost non-existent there is still a chance that you can assume the lease, especially at a Buy Here Pay Here dealership.
You will also want to have documents that show proof of address and income.
Before You Take Over the Car Lease
If you have been approved by the lender, don’t sign the contract immediately. There are a few things that you are responsible for doing when you are assuming a car lease.
- You will want to be sure that you understand all the requirements and are able to be meet them. This especially applies to the mileage and monthly payments.
- Look to see if the lease and vehicle warranty end on the same date. In some cases the warranty ends before the “new” lease. If this is the case, you need to negotiate new terms before signing. It will save you money in the long run.
- Once you’ve selected a vehicle, have it inspected by a licensed mechanic. The one you select, if not supplied by the lending company, should be ASE certified.
- Double check to ensure you are getting the “best deal”. Sometimes Buy Here Pay Here lots are less expensive than traditional dealerships.
- Find out the vehicle’s history, even if you are taking over the lease from a friend or family member. You don’t want any unpleasant surprises after you have taken responsibility for the payments. A good source to check is CarFax.com.
- Know if there are any fees when the lease ends if you decide not to renew or select another vehicle. For some lenders, this is a common clause and the fee can be high.
Should You Assume the Lease of Someone You Know?
This is a common question, and the answer often depends on the vehicle and the individual. It might seem easier to take over the lease of someone you know but you still have to follow the same steps with the original lending company, and this includes a credit check.
What you should be paying attention to is the vehicle and if it fits your lifestyle and most importantly budget. If not, your best choice is to visit a car dealership and see what they have to offer. Since your credit isn’t the best, you probably won’t be able to assume the lease of a newer, fully loaded vehicle but an older model might be available without all the “bells and whistles”.
Once you’ve established a history of timely payments, then you can start discussing upgrading when the lease has ended.
Lease Swapping Could Be Right for You
There is no denying, it can be difficult to get a vehicle with little or bad credit. Being turned down repeatedly due to low credit scores can be embarrassing and disheartening.
While the chances of you driving off the lot in a new car are slim, assuming the lease of an older vehicle might be the chance you need to start rebuilding credit and get you a dependable ride so you can easily get to where you need to be.
Chances are, if you have your paperwork in order, someone will be willing to take a slight risk on you. It might be at a Buy Here Pay Here lot and there is nothing wrong with that. You might find that you’re glad you did.