A car lease transfer is the process of passing a car lease between two individuals. This allows the original lessee to exit the lease they may not be able to pay for and transfer the car to another person who is looking to lease a car for a shorter amount of time.
To map the lease transfer and its true remaining cost, we reviewed the Automobile Protection Association’s lease-takeover guidance, the Financial Consumer Agency of Canada’s lease-disclosure guidance, Ontario’s vehicle registration and insurance guide, and Ontario’s permit and licence-plate guide.
Learn how to transfer a lease, what are insurance implications, how to calculate the true cost of the remaining lease, and how to inspect your vehicle before transfer.
How Do You Transfer A Car Lease In Ontario?
The current lessee is responsible for the vehicle and lease payments until the leasing company has processed the lease transfer. Call the leasing company to find out if they allow transfers, the criteria and credit requirements for a new lessee, any transfer fees, taxes, and required documents.
Make sure you receive written notice of the lease transfer date and whether you have been released from future obligations. The leasing company must approve the new lessee.
Your auto insurance does not transfer with the vehicle, so make sure the new lessee has Ontario auto insurance in effect as of the lease transfer date.
Car Lease Transfer In Ontario, Step By Step
How Much Does A Lease Takeover Cost?
The car-lease transfer fee varies by lease agreement. Ask the leasing company for written details of any transfer fees. Then you can work out the total amount left to pay, including assignment, inspection, registration, tax, and other fees.
| Cost or credit | Where to verify it | Who may pay |
|---|---|---|
| Transfer, administration, and credit-application fees | Current lessor transfer package | Either party may cover these costs if permitted by the lessor. |
| HST or other tax on payments and fees | Lease disclosure and lessor’s written calculation | As the documents require |
| Remaining monthly payments | Current lease statement | Incoming lessee after the effective transfer |
| Outgoing cash incentive | Written agreement between the parties | In a lease takeover, payment is made from the outgoing lessee to the incoming lessee. |
| Excess-kilometre exposure | Contract rate and handoff odometer reading | The person responsible at the end of the lease generally pays, depending on the terms of the lease assignment. |
| Wear, repairs, maintenance, and inspection | Inspection and lease-return standards | Confirm responsibility in the lease and assignment documents before signing. |
| Registration, plates, and insurance | Ontario and insurer requirements | The parties should agree in writing who will pay, subject to the lessor’s requirements. |
Calculate The Effective Remaining Monthly Cost
Add up the total monthly payments (including tax), the cost of the transfer and registration, anticipated charges for excess kilometres and wear and tear, and the cost of insuring the car for the remainder of the term. Subtract any incentive. Divide the amount by the number of months left on the lease. Once you’ve done this calculation, you can more accurately compare the cost of this vehicle with another lease or a used-car purchase.
(remaining payments including tax + transfer and registration costs + expected excess-kilometre and wear costs + insurance over the remaining term − cash incentive) ÷ months remaining
Read More: Compare Leasing and Financing Costs in Canada
Advantages And Disadvantages Of A Lease Takeover
| Possible advantage | Condition that must be checked | Possible downside |
|---|---|---|
| Shorter remaining commitment | The remaining term suits the time you need the vehicle. | A lease takeover could mean that you have to make that decision again sooner than you’d like. |
| Existing payment may be attractive | Don’t go by the advertised payment; determine effective cost instead. | Extra costs related to a lease takeover, such as insurance, kilometre limits, and wear and tear, can offset savings. |
| Outgoing lessee may offer an incentive | Put the amount, timing/schedule for payments, and terms of an refunds in writing. | Check the vehicle’s condition and remaining kilometre allowance. |
| Vehicle history is available | Check maintenance records, collision history, recall records, and previous repairs. | The incoming lessee can inherit end-of-lease condition exposure. |
| Lease-end buyout may be useful | Check the residual value. Look over the lease takeover terms to see who can buyout the vehicle. | A lease takeover doesn’t necessarily mean that you’ll have a good buyout or resale value on the car. |
Confirm The Written Release Before Handoff
Transferring a lease does not necessarily transfer all lease obligations. The Automobile Protection Association advises outgoing lessees to ask the leasing company for written confirmation that they’re released from the lease. Ask who’s responsible for any outstanding balance or pre-transfer damage, kilometre charges, traffic tickets, and tolls. Also find out what happens with the personal guarantee if the new lessee doesn’t pay.
Incoming lessees should read the written lease assignment. Find out exactly when the new lease will take effect, the car’s residual value, payment dates, where the car will be returned, and end-of-lease charges. Check which optional products continue. Remember that a salesperson’s verbal comments can’t modify a contract.
The Existing Insurance Does Not Transfer With The Lease
The incoming lessee must get their own insurance. The lessor may have insurance requirements, such as loss-payee provisions, liability limits, comprehensive, collision, deductibles, replacement, or shortfall protection. Check the lease agreement for requirements and compare various insurance companies’ options against what’s available through the dealer. Insurance endorsements and dealer protection products may provide different coverage.
The outgoing lessee shouldn’t cancel insurance until the car has been transferred, per the effective date given by the lessor. But the outgoing lessee shouldn’t keep the policy in effect indefinitely without checking with the insurer either. Everyone should be on the same page about the transfer effective date.
Read More: See How Financing or Owning a Vehicle Can Affect Insurance
Add Insurance To The Lease-Takeover Calculation
Our data indicates that insurance premiums are about 20.0% higher for leased vehicles than non-leased vehicles in a comparable group. For example, the average annual auto insurance premium for leased vehicles in Ontario is about $2,815, while the average annual auto insurance premium for non-leased vehicles in Ontario is about $2,345.
Keep in mind, the lease itself may not explain the difference because leased cars are typically newer and more expensive, which can lead to higher premiums. Your lessor will also have specific coverage requirements.
So before you sign on the dotted line with a lease takeover, be sure to get a quote. Add the required coverage, deductibles, and annual premium to your lease takeover calculation, along with the remaining lease payments.
Read More: Compare Car Insurance in Ontario
Final Checks For The Incoming Lessee
- Make sure the VIN is correct on the car, the lease agreement, the inspection, the insurance binder, and the registration. If there are outstanding recalls, check with Transport Canada or the manufacturer. Confirm who will arrange unpaid warranty work.
- Take pictures of everything, such as odometer reading, wheels, glass, interior, exterior, keys, charging cable if applicable, accessories, and any existing damage.
- Ask for a copy of the lessor’s guidelines for returning a car in normal wear and tear.
- Check how many kilometres you have remaining and assess whether this will meet your needs. Allow some wiggle room for changes in commuting patterns and long-distance travel.
- Ask the lessor whether a final inspection should be scheduled early enough to address disputed damage.
- The parties can negotiate who pays transfer fees, subject to the lessor’s requirements.
Read More: Review When Full-Coverage Car Insurance May Be Appropriate