Taking over a lease: stepping into a running contract

In a lease takeover a new lessee steps into the place of the old one, in the same contract: same monthly rate, same remaining term, same residual value, same mileage allowance. As a rule nothing is renegotiated. Legally it is a transfer of contract with three parties — the outgoing lessee, the incoming one and the lessor, who owns the car throughout.

For someone who wants out, a takeover is often the cheapest exit from a contract calculated over its full term. Early termination regularly costs a settlement sum that takes the outstanding payments and the calculated residual value into account; a successor simply lets the contract run on. For the person coming in, it is a way to have a car for a shorter period than a new contract usually allows.

The procedure is almost always the same. The outgoing lessee asks the lessor whether a takeover is possible and receives the paperwork. The interested party applies as for a new contract. If the lessor agrees, all three sign a takeover agreement; then come the change of registered keeper, insurance and handover. An advert offering a takeover must say so — it is not a sale, because the lessee does not own the car.

Nobody has a right to have a lease transferred. Whether a takeover is allowed is set out in the lease terms, and even where they provide for it, the lessor reserves consent in each individual case. The lessor signed the contract with a particular person whose ability to pay was checked, and will only swap that person for someone checked in the same way.

The check is the same as for a new contract: income, existing commitments, a report from the national credit agency; in Switzerland it includes the creditworthiness assessment under the Consumer Credit Act. Anyone who would fail it for a new contract will fail it for a takeover too. Some lessors also charge a transfer fee; the amount is in their price list or given on request.

Until consent is given in writing, nothing has been taken over. Until then the outgoing lessee remains responsible for payments, insurance and any damage, even if the car is already with the interested party. Without consent there is no change of keeper either: in Germany the lessor holds the registration certificate part II, and in Switzerland the vehicle registration of a leased car often carries an entry that blocks a change of keeper without the lessor's consent.

One question needs settling at this point: is the outgoing lessee fully released from the contract, or do they remain liable in some form? The answer is in the takeover agreement. Anyone leaving should have it confirmed there explicitly.

The contract works with a total mileage for the car, not for the lessee. Whatever the predecessor has driven is used up. The sum belongs right at the start: agreed total mileage plus the odometer reading at the start of the contract, minus today's reading — that is what remains for you. Divide it by the remaining months and compare it with what you actually drive per month.

If your needs are higher, every extra kilometre costs the rate in the contract, charged at the end, all at once. Some lessors adjust the mileage on a takeover, many do not; ask before you do the sums. If the predecessor is already above the pro-rata mileage, the excess is built in — which makes it a point to negotiate with them, not your problem at the end of the contract.

The same logic applies to condition. At the end, the car is assessed against the return conditions in the contract, and the bill goes to whoever hands it back. A scratch the predecessor caused and nobody recorded at the takeover ends up on your bill. A takeover therefore needs a condition report with photos, dated and signed by both — better still, a report by an independent body using the standards applied at return.

The same goes for servicing and accessories. Missing service entries, a lost spare key or a missing charging cable are charged at return, even if they date from before your time. Ask to see the service record, both keys and everything that will appear in the return report.

Many leases start with a down payment, and that is where takeovers most often get stuck. The outgoing lessee paid it at the beginning, and it lowered the monthly rate over the whole term. Whoever takes over the contract benefits from those lower payments for the remaining months without having made the down payment.

That is why outgoing lessees often ask for a payment: an amount the incoming lessee pays directly to them to compensate for the unused part of the down payment. That is legitimate as long as the amount can be traced. The sum: down payment divided by the total term in months, times the remaining months. That is the part that still benefits you. Paying more means paying for part of what the predecessor has already used.

An example of the method: on a 36-month contract with 12 months left, one third of the down payment falls on the remaining term. The predecessor has used two thirds; the last third is the range within which a payment to them still adds up for you.

This payment is an arrangement between the two lessees, not with the lessor. Put it in writing and pay only once the lessor has consented to the takeover — not in advance to secure the car. Money paid before consent depends on a contract that may never come about.

The monthly rate alone says little, because it is based on a down payment you did not make, and because costs not included in it may arrive at the end. A takeover only becomes comparable through the total cost of the remaining term, divided by the number of months.

The result is your real monthly cost. Set it against two alternatives: a new lease for a comparable car, spreading its down payment, rates and fees over the months in the same way, and buying a comparable used car, allowing for its expected loss in value over the same period. Only if the takeover comes out ahead is it cheap. One advantage that does not show in the sum can still tip the balance: the short commitment, if you only need a car for a foreseeable period.

With the takeover you move into the position the contract assigns to the lessee at the end, with everything settled there. With a mileage lease that means excess kilometres and damage beyond normal wear. With a residual-value lease there is a bigger item: if the car fetches less than the calculated residual value at the end, the lessee pays the difference. Your predecessor took that risk into account, not you. Anyone taking over such a contract first estimates the car's market value at the end of the term and compares it with the residual value in the contract.

For the outgoing lessee, the risk only ends with the written release from the contract. That argues for completing the takeover quickly and fully: consent, agreement, change of keeper, insurance, handover report — in that order and with no gap in between. Insurance and vehicle tax pass to the incoming lessee from the change of keeper.

If you doubt the car will come through the return well, there is a third option: rather than taking over the contract, buy the car after the current lessee has settled it with the lessor. Then there is no return, no excess mileage and no inspection report — instead there is a purchase price that has to stand up against the market like any other.