Purchasing a new car can leave a hole in your pocket, especially if you are not financing it with a loan. A lease takeover is an alternative for those Canadians who cannot afford the high cost of purchasing a car outrightly.
With leasing, you can hire a car for a duration, and depending on the lease term. You can decide to take over the lease before your term expires from the seller. This process is known as lease takeover. Let’s take a walk through how a lease takeover works in Canada.
Lease Takeover in Canada
A lease takeover is a form of leasing – in this case, a vehicle that involves transferring a lease contract from the seller to you (the buyer). Generally, the lease is transferred to you; hence, you will now be responsible for the contract, making the lease payment, and any other terms surrounding the lease.
Most sellers agree to lease takeover when they want to exit their lease earlier than the stipulated end date. Instead of abandoning their lease and getting penalized by their dealer, it is advisable to look for a buyer willing to take over the lease alongside the car.
Once all negotiation with the new buyer is finalized, he/she will get both the vehicle and the contract with the terms.
A lease takeover is ideal for people who want a cost-effective way to lease a car or people who only want to hire a car for a short period. It is an excellent way to get a good deal on a car as most cars as usually in decent conditions, and the lease terms are fair.
The cost-effective part is, of course, dependent on the terms of the takeover, which is discussed below.
Lease Takeover Terms to Consider
Before you go ahead with a lease takeover, you should be fully aware of the following lease terms:
- Lease term
This is the lease’s length – that is, the time it will take for the lease to expire. If you are buying a lease, you have to agree to the remainder of the lease term.
- Distance Limit
This is a limit of kilometers allowed during the lease term. If you go over the limit, you will be penalized, and you will have to pay additional fees, which can be expensive. Before you do a lease takeover, ensure that the lease seller doesn’t owe any fees.
- Transfer Fee
The transfer fee depends on the terms and conditions of the original lease contract. There may be a fee for transferring the lease.
- Wear and Tear
The leasing company determines this as some damages are considered normal or not during the lease term. If any damage is deemed to be abnormal, the lease owner has to pay for the repairs.
Pros of A Lease Takeover
A lease takeover is an affordable way to own a car. You get to pay lower as there is no need to make a down-payment since the seller has already made the down payment at the start of the lease term. You make lower monthly payments because you will only be paying for the remainder of the lease term.
If, as a lease buyer, you choose to purchase the vehicle at the end of the lease term, you may be able to sell it off and make a profit if the market value (the vehicle’s worth) is higher than its residual value – it’s worth at the end of the lease term.
If you are looking only to use a vehicle for a short period, a lease takeover might be the best option for you.
Cons of a Lease Takeover
The cons of a lease takeover lie in how poorly the lease seller honored the lease contract’s terms and conditions. Ensure that the lease seller has not exceeded any of the limits set by the leasing agency.
For instance, most leasing agencies’ average distance limit in Canada is 25,000 kilometers per year. If the seller has exceeded this limit, you will be responsible for the limit fees when you buy the lease.
Hence, before buying a lease, ensure that there’s still enough distance that you can as well cover without exceeding the limit. In cases of damage, a proper review of the lease contract should be done to know which type of damage is considered normal.
Once the vehicle you want to purchase has damages that are not regarded as normal, the best thing to do is to not go ahead with the takeover because you will be responsible for the repairs.
The lease buyer is also responsible for the lease transfer fee if you must pay them, depending on the lease contract terms. To avoid these risks, you must go through the car history details and thoroughly inspect the vehicle before going ahead with the lease takeover.
A lease takeover is a great way to lease a vehicle for a lesser price and a shorter period. You can take over any vehicle type as lease takeover is not restricted to a particular car brand type. However, to avoid regrets, you must take the proper steps before signing the lease agreement.