# Negotiating a Bad Credit Car Lease Termination



## Westerncanada (Nov 11, 2013)

Good Morning CMF'ers..


I am bringing this question to you as a friend of mine is in a bit of a bind with a leasing company at one of those "No Credit approved today" type places with her vehicle. She signed a lease 2.5 Years ago that expires in 2015 Nov for way to high amount of money on a decent vehicle. Has anyone had success going back to the dealerships and negotiating an early lease penalty? In addition to her absurdly high payments there's also a $2000 buy out option at the end of the lease if she decides to keep it. 

My questions are as follows: 

Is it even possible for the dealership to take the car back early and negotiate a lease penalty? 

Is there any other avenue besides a lease takeover she can take? (Only because her payments are $450 a month and no one is going to pay that for the vehicle she's driving).


Any thoughts, opinions or feedback would be helpful.


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## sags (May 15, 2010)

Let me guess...........Cars On Credit?

There are a couple of scenarios available.

She can maintain the payments and keep the car until the final payment. The lease buyout will be rolled over into extended payments. On top of the $2000 remaining balance........they will add the taxes, administration charge and interest. Likely she would continue to pay the $450 payment for another 6 months or more. Once completed, they will mail her the ownership slip and she will have to change the ownership into her name. In Ontario, that would require a safety check, etesting......and the purchase of a history "package".

The other scenario is she can continue to make the payments, and when the final payment is made, tell them to keep the car. If the car isn't worth the cost of safety checking it.........that is an option.

The last scenario is to make the payments and sell the car when it can be sold for what is owed.

Bottom line...........she will have to continue to make the payments to fulfill the contract, unless she can borrow the money from somewhere else at a cheaper rate and pay them off.


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## sags (May 15, 2010)

I should add............that a lot of people don't understand how "leases" work.

When you lease a vehicle.........you don't own it.

The ownership belongs to the lender, and when the lease is up there is a buyout payment or you can turn the car back in. You will also be required to maintain "collision" insurance on the vehicle.....even if it doesn't make sense to do so.

If you buy out the car.........it will require everything that used car would require when first bought.

If you turn in the car..........they will go over it with a fine tooth comb looking for any damage. They will bill for any damage or extra kilometers.

Leasing only makes sense for a business in most cases, but some of the used car loan subprime lenders have started to "lease" cars because it is more profitable for them........with multiple administration charges, extended monthly payments at high interest etc.

If you plan on leasing............read the fine print.

In these "everyone approved" types of used car lots..........a car they bought for $1000 from an auction or a new car dealer..........is sold for $5,000 and earns a total of $12,000 when all is said and done.

They claim the 35% a year interest is because of the default rate, but when they installed GPS units in the cars they claim in their company papers (publicly traded company like Carfinco) the default rate dropped right down.

The default rate declined drastically..........but the interest rates stayed the same.


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## alingva (Aug 17, 2013)

The 3d option is to re-lease the car to someone else


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## Letran (Apr 7, 2014)

alingva said:


> The 3d option is to re-lease the car to someone else


 Typically these type of vehicles do not get lease transferred, unless they have a gun to your head. The lease transfer fees alone is probably higher than what the vehicles are worth. These are sub-prime leases that only credit challenged people will enter.

At least the type of leases sags was referring to in his post above


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## sags (May 15, 2010)

You are right Letran...........

I am assuming that with only a $2000 "buyout" at the end of the lease, it isn't a lease for a new car.

A new car lease at 0% (if you can get that rate) is a different scenario........but it is still owned by the company and transfer must take place at the end of the lease, or it can be turned in.........or someone might take up the lease payments if the original deal was good enough, or people may pay down some of the lease costs, to interest a buyer.

I have assumed leases in the past, which were a good deal........although usually for short duration.


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## carverman (Nov 8, 2010)

sags said:


> The last scenario is to make the payments and sell the car when it can be sold for what is owed.
> 
> Bottom line...........she will have to continue to make the payments to fulfill the contract, unless she can borrow the money from somewhere else at a cheaper rate and pay them off.


She cannot sell a leased car. The leasing company puts a lien against it that will show up when she tries to sell and has to provide the lien papers (MOT) to the prospective buyer.
I had a friend that went through a leasing arrangement with a GM dealer. She was able to arrange for an early termination with a 2 month penalty as there was only 2 months left on her lease.
However, she had to pay the equivalent of 2 months of lease and the leasing dealer also told her, they would go over the car to see if any wear and tear items need to be replaced..brakes/tires
at extra expense to her. Not only that but any scratches or dents would have to be repaired as well at any extra cost.

This is one of the caveat emptors that you find out in the leasing agreement that you sign, when you turn the car back in after the lease.


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## carverman (Nov 8, 2010)

alingva said:


> The 3d option is to re-lease the car to someone else


You cannot do this without approval from the leasing company. Otherwise, any damage to the vehicle could end up costing you PLENTY!


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## sags (May 15, 2010)

You used to be able to have someone assume a GM lease, as I have done it several times.

GM does require they approve the transfer with a credit check and there will be a transfer fee.

The new leasee assumes the responsibility for scratches and dents at the end of the lease, and can buy out the vehicle if they wish.

I leased a Yukon one time from GM............and they paid me $1200 in cash, gave me a $500 gas card, and unlimited mileage.

There was a period of time in the "Company car - employee "tag" program" (GM corporate cars with less than 5,000 miles on them) when GM was overvaluing the "residual value" of SUV and Cadillac vehicles after one year........and with all the discounts to employees, the residual value of the vehicle was higher than the lease, or high enough to greatly reduce the lease payments.

GM employees were leasing Cadillac STS for $200 a month for 36 months.

Nice deal.........and it would have been real easy to transfer "that" lease. 

It doesn't usually happen that way.........but sometimes a GM employee leases a car at a big discount and it is much cheaper for someone to assume than to get one themselves.

It happens.....and is more widely known about in the Oshawa, Ontario area.

Pretty well all GM corporate vehicles are sold or leased through one St. Catherine's dealership.

A lot of the dealers in other places..........don't even know about the program........or pretend they don't.


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## carverman (Nov 8, 2010)

sags said:


> GM does require they approve the transfer with a credit check and there will be a transfer fee.


Isn't that what I said? You have to do the lease transfer through the dealer/GM and they will check out the person you want to transfer the lease to.

[/quote] A lot of the dealers in other places..........don't even know about the program........or pretend they don't.[/QUOTE]
It depends on how the lease is done..through GM or the dealer leasing from their stock.


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## Westerncanada (Nov 11, 2013)

sags said:


> I should add............that a lot of people don't understand how "leases" work.
> 
> When you lease a vehicle.........you don't own it.
> 
> ...




Thank you for all the responses guys.. I told her that after i did my math, it would be cheaper to borrow the money to pay out the car now 100% Plus the $2K buyout and then sell it for FMV vs waiting until the end of 2015 when its further depreciated and you'll have still paid the same but sell for much less..


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## alingva (Aug 17, 2013)

Letran said:


> The lease transfer fees alone is probably higher than what the vehicles are worth. These are sub-prime leases that only credit challenged people will enter.


Are you sure (i do not know)? I am considering to take over someone's lease now, so it is not a good idea? I do not want to lease a brand new car


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## Letran (Apr 7, 2014)

alingva said:


> Are you sure (i do not know)? I am considering to take over someone's lease now, so it is not a good idea? I do not want to lease a brand new car


alingva, to be clear. MOST Lease transfers from regular (Prime=Normal or Good credit) usually leased sponsored by the vehicles manufacturers themselves are okay. The leases that sags was addressing in his posts are sub-prime leases. THOSE are almost NEVER transferred

Being a good idea or not will depend on the lease details as well as your personal reasons for taking over a lease as oppose to starting a new one. 

Things to consider:
1. Is starting a new lease with a new vehicle about the same or maybe cheaper than the one you are taking over?
2. Is there enough kilometers left in the lease that you are not going pay over mileage which is almost always not adviseable.
3. Do you intend to buy the vehicle after the lease? Then residual amount might matter.
4. Condition of the vehicle; there are chargeable damages that you might be on the hook for. Is it still under warranty? Tire thread is important to consider and even the right kind of tires.

If you know what to look for some are steals, if not you might be left with lease charges you were not expecting. 

My personal opinion do not take over a lease from FinancialLinx they are terrible. I think they are dead or bought out by GM but certainly not a pleasant company to deal with.

Hope that helps.


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## alingva (Aug 17, 2013)

thanks!


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