How do car lease takeovers work?

What is a car lease takeover?

A vehicle lease is essentially a long-term car rental contract. Once someone has leased a vehicle, they’re locked into that contract for the duration. Vehicle lease agreements usually last between two and five years; four years is the most common lease term.²

A lease takeover (a.k.a. lease transfer or lease assumption) is one way that a lessee can get out of their lease contract early. It requires finding someone else who’s willing to take over the lease. Once the transfer is complete, the original lessee is absolved of their commitment. The new leaseholder must abide by the contract terms, like payments and mileage limits. They take possession of the car, but it still belongs to the financial institution that arranged the lease.

How does a lease takeover work?

A lease takeover feels like buying a used car, but it’s not that — the vehicle’s actual ownership stays with the lessor. The new lessee must return the vehicle at the end of the contract, unless the agreement provides a way for them to buy the vehicle after the lease is over.

The lease takeover process

1. The original lessee decides that they want to get rid of their lease. They may list it on online marketplaces, arrange a listing through the dealership, or let people know via word of mouth.
2. Once an interested party appears, they fill out an application with the lessor to ensure they qualify.
3. Before signing, the buyer and seller of the lease can negotiate terms. The lease agreement itself can’t change, but the seller may offer some bonus cash or agree to cover the transfer fees.
4. The new lessee buys their own car insurance policy for the vehicle.
5. The two parties complete the lease transfer paperwork.
6. The buyer takes over the vehicle, the monthly payments, and all the other terms of the lease agreement.

Requirements

Not just anyone can take over a lease. Whoever assumes the contract has to qualify first. That means applying to the lessor. The qualifications for taking over a lease are like those for signing it in the first place. After all, the new lessee is taking over the very same contract.

The original lessee will have to meet a few requirements before their lessor allows them to transfer the lease. Those may include:

• No outstanding payments on the lease
• The vehicle remains in good condition
• The vehicle hasn’t exceeded the given mileage limits

The new lessee will have to satisfy other requirements, which can include:

• An adequate credit score
• Providing proof of income
• A valid driver’s licence

The application will include a hard credit check. This would result in a small, temporary decrease in the applicant’s credit score.

Documentation

The new lessee may need to provide proof of income, typically in the form of a paystub. They’ll also need to show proof of car insurance before taking possession.

Other documents that either party might need include the vehicle registration, or maintenance and repair records. And, of course, the lease transfer paperwork. The lessor or dealership will take care of that, and let you know what else they need to complete the transfer.

Fees

There is a cost to transferring a lease, known as the lease transfer (or takeover) fee. Each car manufacturer decides how much of a fee will be charged when one of its vehicles is transferred. The amount varies, but is generally between $500 and $1,000.

Commonly, the payment of this fee is part of the negotiation between the original lessee and potential new lessees.

There may be other fees associated with a lease transfer. That could include turn-in fees, wear and tear penalties, and more. Make sure you’re clear on the specifics before you sign the paperwork (whether you’re giving or receiving the lease).

How to find a lease takeover

Finding potential lease takeovers isn’t all that different from shopping for used cars. There are basically three places to search for potential lease takeovers (or list them, if you’re on the selling side):

• Online. You may find car lease takeovers listed on places like Facebook Marketplace or craigslist. There are also dedicated online marketplaces for lease takeovers; LeaseBusters is the most popular of these.³
• Dealerships. Some (not all) car dealerships offer lease takeover services. Such listings may be more limited, but the upside is that they can streamline the process.
• Word of mouth. As with any second-hand purchase, sometimes you find the best deals through your personal connections. Ask around to see if someone knows someone who wants out of their lease.

Pros and cons

Before you take over a lease of your own, make sure you’re aware of the benefits and risks:

Pros of assuming a car lease

• Shorter contract length. New lease contracts are typically at least two years long, and usually more like four or five years. When you assume an existing lease, the clock doesn’t reset — you’ll be able to take over a lease with only a short time remaining on it, if that’s what you need.
• Lower monthly payments. Long lease contracts tend to have smaller payments than short contracts. Taking over a lease can be a good deal, because you get those smaller payments with some of the longer term having already passed.
• Little to no setup cost. There are several upfront costs when you sign a new lease, including setup fees, security deposits, taxes, and so on. It’s possible to make a down payment as well, though this isn’t usually required. When you assume a lease, these fees have already been paid.
• Motivated sellers. Someone wishing to offload their lease is often doing so out of necessity. Depending on the circumstances, many lease sellers offer a cash incentive to someone willing to assume their lease, as it would be cheaper than the penalty for simply ending the contract.

Cons of assuming a car lease

• Set terms. When you set up a new lease, you can choose and negotiate certain terms. That’s not possible when you assume an existing lease — those terms have already been decided.
• Payments.You inherit the original lessee’s payment obligations. Even if you have better credit (or negotiating skills) than they do, you’ll pay what they agreed to — and suffer the consequences of any missed payments.
• Wear and tear. If the original lessee didn’t take proper care of the vehicle, you could be on the hook for wear-and-tear fees at the end of the lease.
• End-of-lease costs. Maybe the setup costs will be taken care of, but there are other potential fees at the end of a lease, such as disposition (turn-in) fees. Some leases require you to pay the difference if the vehicle’s residual value is higher than its actual value.⁴ Make sure you know what will happen at the end of the lease before you assume it.
• Commitment. Once you assume the lease, you’re responsible for the car, including the requirement to insure it. If the car gets totalled and the settlement is less than the outstanding lease value, you may need to pay the difference. Insurance products like depreciation waivers or GAP insurance can help with that.
• Vehicle return. If you buy a car, you own it (after your loan is paid). On the other hand, when your lease is up, the car still belongs to the lessor; you’ll have to pay if you want to keep it. You have the option of walking away or leasing another vehicle, but you have no equity in the vehicle you leased.

Insurance considerations

All vehicles need car insurance, whether they’re leased, financed, or owned outright. When you take over a lease, however, you won’t get the previous lessee’s car insurance policy.

You will have to apply for a car insurance policy of your own, and you’ll have to do it before the lessor agrees to turn the vehicle over to you. Most car insurance providers can easily accommodate this. Often, you can even buy car insurance online right from the dealership.

Lessors usually require that leased vehicles have both comprehensive coverage and collision coverage; these are otherwise optional. Just keep in mind that you’ll have to maintain the lessor’s stricter insurance requirements for the whole lease term.

Commonly asked questions

What happens if you miss a car lease payment?

Missing a lease payment usually incurs a fee. The lease agreement will specify what those fees are. Repeated missed payments will result in termination of the lease, meaning you’ll lose the car (and still owe the money). Missed payments can also hit your credit score.

If you’re going to miss a lease payment, get in touch with the lessor as soon as possible. They may or may not be able to help, but it will definitely be better than simply missing the payment.

Why do people transfer car leases?

Car leases are a firm commitment, and there are financial penalties for breaking them early. Nevertheless, people’s circumstances can change suddenly. Job losses, other financial challenges, family changes, and plenty of other events might require someone to get out of their lease. After all, the average monthly cost of a new car lease in Canada is $760 — it’s easy to see how a lease could suddenly become unaffordable.¹

Transferring a lease is usually better than breaking it. Even if the lessee has to pay someone an incentive to take their lease, it usually ends up cheaper than simply breaking it.

Can you sublease a car?

You can’t sublease a car, at least in the same way that you sometimes may sublease an apartment. The lessor decides who may drive a leased vehicle, and almost no lease agreement permits subleasing.

You can usually lend your leased car to someone else. But, there’s no way for you to transfer your contractual obligations to another party except with a lease transfer arranged through the lessor. In that case, you’re not subleasing — you’re transferring the whole contract.

How do you get out of a car lease?

There are only a few ways to get out of a car lease early: buying your way out, trading in the vehicle, or transferring the lease. Your options may differ depending on the terms of your contract.

If you buy the lease out, you’ll pay an early termination fee. You may still owe your remaining monthly payments. Similarly, you may be able to buy the car outright. The cost of this is generally all your remaining payments plus the predetermined purchase price in the agreement.

You can also trade in the vehicle for a new one, which involves a dealer buying out your existing lease and rolling the costs or credits over into a new one.

The cheapest way out of a lease is a lease transfer, but it does require a party willing to take on the lease (and lessor approval).

Who can take over my lease?

Anyone who meets the lessor’s requirements can take over a vehicle lease. The requirements will be similar to those you met when you originally signed the lease: an adequate credit score, a valid driver’s licence, a demonstrable ability to pay for the car, and so on.

Sources

1. Canadian Auto Dealer. “J.D. Power’s February auto market metrics reveal some small changes.” Canadian Auto Dealer, 12 Mar. 2025, canadianautodealer.ca/2025/03/j-d-powers-february-auto-market-metrics-reveal-some-small-changes/.
2. Diaz, Jorge. “Most Popular Lease Term among Canadians: 36, 48 or 60 months?” leasecosts, 20 Apr. 2021, www.leasecosts.ca/en/articles/most-popular-lease-term-among-canadians-36-48-or-60-months.
3. Tchir, Jason. “Is there a way to end my car lease early without owing thousands in payments?” The Globe And Mail, 28 Jan. 2024, www.theglobeandmail.com/drive/mobility/article-is-there-a-way-to-end-my-car-lease-early-without-owing-thousands-in/.
4. People’s Law School. “Leasing a car.” peopleslawschool.ca, www.peopleslawschool.ca/leasing-car/. Accessed 5 Mar. 2025.

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