What You Should Know About Car Lease Takeovers and the Benefits of Doing So
Buying a car usually involves such a large amount of money, that it becomes a long-term decision. But if you’re the kind of person who likes to change their car models every few years or don’t like the idea of driving an old car? You’d only result in losing a lot of money in the re-selling process as the value of cars is known to depreciate a great deal.
That’s why it’s a good idea to consider leasing a car or even taking over someone else’s lease. If you’re new to the leasing world and are unfamiliar with the ins and outs of care lease takeovers, there are many factors to take into consideration but don’t worry, we’re here to catch you up to speed:
When it comes to car leasing, most car companies rarely offer short-term leases and if they do, your bank will surely suffer. However, companies usually offer a leasing contract between 24 months to 60 months for long term leases depending on your location. The point behind leasing is being able to make a short-term commitment, without having to go through the hassle of re-selling a car and calculating its depreciation, resulting in losing a large amount of money for someone who doesn’t plan to use the car for long. That’s why leasing can come in quite handy as it offers an alternative, giving you the option of using a car without worrying about getting rid of it later on. According to the people over at https://www.leasecosts.ca/en/lease-takeover-canada, this is a great option for people who like to drive cars for a short period of time, allowing you to hand over your keys at the end of the term and get another lease on a newer model.
But what happens if you need a car for just a year? In this case, the short term leasing option would be quite expensive as you’d be paying the first use of a new car, as well as the value of depreciation. In this case, taking over someone else’s lease could be extremely beneficial as you’d be able to find someone with the remaining duration amounting to the same time you initially needed, but at a lower cost. The advantages of subleases, in this case, outweigh the benefits of owning your own car and incurring the costs and hassle of reselling and devaluation.
If you’re looking to lease a certain car model, it is only likely to be available if it’s a new model. But, finding a car model dated a few years back or a specific car that the company stopped manufacturing, will no longer be available as an option. If you’re looking to lease a specific car model, then your best bet would be taking over someone else’s lease to ensure that you not only get the car you want but also receive it at a discounted rate as you will not have to incur the initial costs instated at the beginning of a lease.
When subleasing, it is important to check and double-check the terms and conditions of transferring the contract to another party, as well as the initial contract. That’s because there are so many hidden costs you need to be aware of in order to be able to evaluate whether you’re getting a good deal or not. Sometimes, when transferring the lease, there are transfer fees included. This needs to be discussed and decided who will be paying that fee and if the sum of the monthly costs plus the fees are worth it or not.
Some of the hidden costs and risks that you need to be aware of in the contract include the following items:
- Kilometre limits
When the company calculates how to price the lease for its customers, it takes into consideration a few aspects such as the initial value of the car, the average percentage of depreciation, as well as the usage of the car in terms of mileage in a specified amount of time. In order to guarantee that the company is getting its money’s worth, a kilometre limit is added as part of the contract. Once the client has crossed the limit, for each km, an additional cost is incurred.
When taking over a lease, it is essential to check the contract and ensure that the car has not been used above the limit instated. After calculating a rough figure of the distances you’ll be driving, you’ll be able to have a good overview of the situation and decide whether the terms of the car lease are a good match for your needs or whether it is a better decision to get your own lease.
- Wear and Tear Restrictions
Before committing to any contract, check the guidelines carefully, especially when it comes to wear and tear conditions. If you’re taking over a lease, it is crucial to make sure that there are no wear and tear guidelines that you could possibly be held accountable for when returning the car at the end of the lease period. If it’s normal damages that can be easily fixed, such as scratches and small bumps, then it shouldn’t be a problem. But if the contract indicates that any excess wear and tear items will result in repairs or a fine, then you need to make sure that the new contract being drawn up includes these expenses, so you don’t end up paying fees of the previous owner or additional fees that you hadn’t put into consideration. It is also worth asking for a mechanical inspection to be able to hand over to the company and know what you’re dealing with.
- Turn in fees
Some contracts also include turn-in fees that are calculated at the end of the term and might include charges for violations such as unpaid tolls or tickets. If you are the person who has initially leased the contract, you will be aware of the possible fees you could be held accountable for. However, when it comes to subleasing, there could be hidden costs you are oblivious towards made by the previous tenant. Checking the contract to avoid certain issues could be a good idea. If you’re thinking of buying the car at the end of the term, remember to factor in the repair costs of the future that you will have to pay yourself before deciding on the deal given by the company. Sometimes, the turn-in fee is waived or you are given a discount in order to encourage you to buy the car at the end of the period and remove the leasing car from the hassle of having to try and sell or lease it themselves.
Figuring out the best deal for you depends on quite a few factors. Ask yourself how long you intend to keep the car for? How much money are you willing to spend on a car? And whether you’re looking for a new car or not. Once you’ve figured out what you’re looking for, you might realize that leasing, or subleasing could result in the best price for the specifications and duration you’re after.
That’s because when calculating the price of a car, the value will instantly depreciate once it’s purchased and the rate of devaluation increases every year, reducing the value of the car in the long run. If you’re looking to use a car for a short period of time only, the leasing company will factor all these costs into the price, leaving you paying a hefty amount without getting the benefits of owning the car in the long run. However, when subleasing, the previous owner has already incurred most of these costs, leaving you with the benefits of a long-term lease with the reduced price of a short-term lease.
Sometimes, to avoid high monthly installments, an initial down-payment is required. However, when subleasing, more often than not, that start-up cost is no longer necessary depending on the remaining term of the contract. If a down-payment was instated to reduce the cost of a 3-year lease and only one year of the term is remaining, the percentage of the start-up cost required will either be much less, or the tenant will decide to let it go in order to get out of the lease. In all cases, the costs to be paid upfront are minimal in comparison to first-time leasers.
Lower monthly payments
The reason most people tend to lease rather than take out loans and buy a car is the difference in the value of the monthly fees needed to be paid. When it comes to buying a car, taking out a loan means that you’ll be paying a high-interest rate as well as the value of the car and its depreciation. However, with a lease, you are only required to pay the value calculated for the depreciation of the car, for the length of time you are using it.
Let’s say, you’re currently working on a low paid job, and cannot afford to pay the monthly installments in order to own a car, sub-leasing would be a good option until your financial situation improves, as it would give you the lowest monthly payments possible for the shortest terms and allow you to re-evaluate your finances in a year to decide on your next step.
With most companies, getting out of a lease is quite a difficult ordeal. That’s because the company has its financial obligations, too, and in order to guarantee that they wouldn’t be losing their profits or even incurring costs at the expense of lease terms being shortened, they require you to pay a higher rate to give them the time to find a second leaser.
Let’s say you signed up for a 3-year lease, but had to move to another city/country where taking your car wasn’t an option anymore. What happens to the lease? In cases like these, people tend to put up their leases for subleasing and offering incentives to encourage people to take them over. These incentives could include reduction of monthly payments, receiving any car accessories purchased at no extra costs, or even cash incentives. That’s why sometimes subleasing could not only be a great idea when looking for a short-term lease but also a good way of saving money due to the reductions in cost entailed by the tenant needing to get out of the contract as soon as possible. In their situation, if they do not find someone to take over their contract, they will be paying extra costs that are completely unnecessary and unneeded as they will no longer be able to use the car, making it worth losing some money by offering a lower deal.
Market vs. residual value
When leasing a car, the monthly payments are calculated according to the residual value of the car at the end of your lease term in comparison to the starting price. This is determined by taking into consideration the estimated amount that the car will earn once it is sold after the lease period. However, there are times that the calculation is incorrect leaving the market price to be higher than the residual value.
If you choose to buy the car in this case, you could be making a profit and getting back some of the expenses that are usually lost when leasing. However, if you choose not to, you will have paid unnecessary costs to the leasing company as the estimated value was incorrect.
Leasing and subleasing have many benefits depending on the kind of car deal you’re looking for. However, reading the contract and making sure you’ve factored in all the costs is essential before making a decision to avoid hidden costs that you hadn’t taken into consideration. If you’re looking for a short-term deal without losing money in resales or going through the hassle of having to sell the car, then subleasing could be just what you’re looking for.