Having a car is typically a required commodity among Canadians, especially in rural areas. However, a car is a hefty purchase, usually requiring some level of financing to help make the transaction a reality. While there are leases and financing options available, another potential option that’s not as well-known is a “lease takeover.”
In fact, a lease takeover can get you the car you want while helping you save quite a bit of money.
Key Points
- A lease takeover allows you to assume an existing car lease and take over the payments and terms from the original leaseholder.
- Before opting for a lease takeover, be sure to consider the lease term, the car’s residual and market value, mileage limits, and the cost of a lease transfer.
- A lease takeover may be a good option to consider if you have bad credit.
What Is A Lease Takeover?
A car lease takeover involves the transfer of a current lease from the seller (current lease holder) to you. In this transaction, the lease would be transferred over to you so that you now take over the contract and are responsible for making lease payments and following all other terms of the lease.
Sellers usually agree to these arrangements when they want to get out of their lease earlier than the original end date. Rather than suffering a penalty for bailing on the lease with the dealer, the seller can simply look for a buyer who is willing to take over the lease along with the vehicle. In turn, you would inherit both the contract and the car in its current condition.
This can be a great way to get a good deal on a good car if the vehicle is still in decent condition and the terms of the lease are fair.
Where Can You Find Lease Takeovers?
Lease takeovers are available from a variety of sources:
- Online Marketplaces: Sites like AutoTrader.ca, LeaseBusters.ca, LeaseCosts.ca, and Leasesniper.ca are just some of the marketplaces online that advertise lease takeovers in Canada.
- Dealerships: Some car dealerships may handle lease takeovers. Check their websites or call to see what your local dealers have to offer.
Factors To Consider When Opting For A Lease Takeover
Here are some of the important components of car leases that you should become familiar with before agreeing to be part of a lease takeover:
Lease Term
Every lease has a term, which is the length of time that the lease contract is in effect with the current lender. If you take over the lease, you’ll be subject to the conditions of the contract for the remaining part of the term.
Residual Value
The residual value refers to the car’s value at the end of the term. Leasing companies predetermine the anticipated value of the car at the end of the term versus what it’s worth when it was brand new. If you want to keep the car at the end of the term, that residual value is the price you’ll have to pay.
Market Value
The market value refers to the private resale value of the vehicle, which doesn’t necessarily have to be the same as the residual value. A high resale value can help you get better deals in the future if you ever decide to trade in the car for a new one.
Fees
There are numerous fees to be aware of when opting for a lease takeover, which can vary by leasing company. Some of these fees may include the following:
- Fees for the transfer of a car lease from seller to buyer
- Penalty fees for outstanding violations
- Wear and tear costs
- Mileage overages
Mileage Limits
Leases typically stipulate how many kilometres you’re allowed to put on a leased vehicle every year. If you go over that limit, fees could be applied. Typically, the limit is around 20,000km to 25,000km, depending on the leasing company.
Wear And Tear
This refers to the amount of deterioration that the car suffers by the end of the lease term and what is considered normal by the leasing agency. Anything that is deemed beyond normal wear and tear will require a fee to accommodate.
What Type Of Car Can I Get With A Lease Takeover?
The great thing about a lease takeover is that it does not restrict the type of vehicle you decide to buy. Virtually any type of vehicle is within reach with a lease takeover, as long as there are willing sellers, including the following:
| Minivan | Sports cars | Crossovers |
| Compact cars | Convertibles | Pick-up trucks |
| Hatchbacks | Station wagons | Luxury cars |
| Midsize sedans | SUVs | Commercial trucks |
Brands Eligible For A Lease Takeover
Here are just a few of the vehicle brands that are eligible for a lease takeover, depending on availability:
| Acura | GMC | Mitsubishi |
| Audi | Honda | Mercedes |
| BMW | Hyundai | Nissan |
| Buick | Infiniti | Porsche |
| Chrysler | Jeep | Ram |
| Chevrolet | Jaguar | Subaru |
| Cadillac | Kia | Suzuki |
| Dodge | Lexus | Toyota |
| Fiat | Land Rover | Volkswagen |
| Ford | Mazda | Volvo |
Pros And Cons Of A Lease Takeover
A lease takeover can be a great way to get a car without committing to a long-term lease. However, it comes with both advantages and disadvantages.
Pros
There are plenty of benefits of taking over a lease, including the following:
- Lower price tag – Compared to buying new, a lease takeover can help you save quite a bit of money without buying the car outright.
- Lower start-up expenses – There’s no need to come up with a down payment with a lease takeover, unlike other financing options.
- Lower payments – With a lease takeover, there’s a good chance you’ll pay lower monthly payments compared to financing. With a lease takeover arrangement, you only pay for the depreciation of the vehicle for the duration that you use it.
- Sell for a profit – If the vehicle winds up with a higher market value compared to its residual value by the end of the lease, you could potentially sell it for a profit after purchasing it at the end of the term.
Cons
In addition to the advantages of a lease takeover, there are also a few drawbacks to such an arrangement:
- Kilometre limits – With a lease, you’re stuck driving no more than the stipulated kilometre limit specified in the contract. If you happen to drive a lot, you could easily go over that limit. If that happens, there could be financial penalties to pay.
- Restrictions on wear and tear – You could be stuck paying extra fees if the current condition of the vehicle is worse than what’s considered to be normal wear and tear.
- Hidden car lease fees – There could be “turn-in” or “lease transfer” fees included in the contract. If there are, you could be paying more than you thought at the onset. Also, some hidden fees can include things like outstanding violations, including unpaid tickets.
Is Leasing A Car Better Than Financing?
While a lease takeover is certainly something to consider, there’s also the option to finance a car. The question is, which route is the better one to take? Be sure to compare both options before making a decision.
| Leasing | Financing | |
| Ownership | No: The vehicle is returned at the end of the lease. | Yes: you own vehicle car after you finish making all payments |
| Monthly Payments | Lower than financing | Higher than financing |
| Mileage Limits | Yes | No |
| Customization | Limited | Unlimited |
| Long-Term Costs | Higher if you lease multiple times | Lower – car becomes an asset |
Learn more: Leasing vs. Financing A Car In Canada
Final Thoughts
A lease takeover can be a great way to reduce upfront costs without a long-term commitment, making it ideal for those who want flexibility and affordability. However, it’s important to carefully review the mileage limits, fees, and wear-and-tear risks before taking over a lease. If you can get yourself a well-maintained vehicle with good lease terms, it may be a cost-effective way to access a car instead of buying or leasing a new vehicle.
