A lease is an agreement between two contracting parties, where the buyer or ‘lessee’ agrees to lease an asset – automobile, apartment, house, machinery, etc – from the seller or ‘leaser’. A lease is usually for a fixed period, usually 1-2 years, with a specified amount which is paid upfront or in periodic installments (monthly, quarterly or yearly).
There may be instances where you may need to end the lease before the prescribed period has ended; for example, you are relocating, have other expenses to take care of, or you find it difficult to continue with the lease because of financial constraints.
There are a few methods in which you can end your lease before the term is up, but will cost you quite a bundle depending upon factors such as asset value, condition/state of the asset, fees and penalties for early closing, time elapsed since start of lease, etc, as follows:
- Pre-closure or early termination of lease contract;
- Transfer of lease to another party; and
- Buying-out the lease.
Of the three methods mentioned above, the focus of this article is on method (b), i.e. transfer/takeover of the lease. Detailed below are guidelines on how to take over a lease transfer, from the buyer/lessee perspective.
At a time when most Americans have had to tighten their belts and restrict their spending habits, buying brand-new products or long-term assets such as property is fiscally imprudent. Instead, shop around for ‘pre-owned or used’ deals, where the price will be much lesser and you can find some great bargains! Taking over a lease from another person, who is looking to end their lease prematurely is an option, instead of purchasing the product/asset outright. Not only will you save money, you will also be able to negotiate an agreement where the terms match up with your requirements and affordability.
Looking for lease transfer deals
Look for details on lease transfer deals from the list of ‘usual suspects’ – newspaper classifieds, Yellow Pages, free-ad publications and the ubiquitous Internet! Alternatively, check through your network of family, friends and colleagues; you’ll be sure to find someone who is looking to get out of their lease and you can work out an agreement which is mutually beneficial, plus you can feel assured about the provenance and value of the asset.
The ‘takeover’ process
- Make a list of your requirements and how much money you can spend.
- Look for and choose a shortlist of parties willing to transfer existing leases.
- Negotiate and come to an agreement to transfer the lease. If you are undertaking this transaction through an agency, such as the leasing company, financial institution etc, instead of directly with the transferor, fill out the application form, provide the necessary documentation and await the results of a credit check.
- Once an approval is in place, read through the transfer agreement and if need be, get a lawyer to review the document so that you have a clear understanding of what exactly you are getting into and that there are no hidden clauses or loopholes, which will cost you dearly in the future.
With this, the transaction is complete and you will have leased a new asset at a price which is reasonable and affordable to you!